The great wealth transfer

The great wealth transfer in the UK is a monumental shift of financial assets to pass from the Silent Generation (1928 – 1945) and the Baby Boomers (1945 – 1965) to younger generations like Millennials (1981 – 1996) and Gen Z (1997 – 2012) over the next few decades. 

The Baby Boomers are poised to pass down a staggering £5.5 trillion of wealth over the next two decades. This wealth includes property assets, businesses and farms, pensions and other financial investments, mainly concentrated in London and the South East.

Every year, in England and Wales, 1m to 1.2m homes are sold to buyers paying either with a mortgage or cash. But there are about 130,000 transactions where no money changes hands as these properties are either passed down or gifted to family members. In 2023, there were as many as 152,000 such gifts, and it is estimated that as many as 220,000 homes were gifted away in 2024.

The great wealth transfer has been accelerated by some recent and upcoming tax reforms such as:

• Education costs – VAT on private school fees and rising university costs may prompt grandparents to gift earlier to support the education costs of their grandchildren. 
• IHT on pensions – From April 2027, unspent pension pots will be subject to Inheritance Tax (IHT), potentially leading to double taxation (IHT as well as income tax), with combined rates possibly exceeding 70%. Considering planning strategies earlier to enhance gifts to the next generation becomes more important. 
• Business and Agricultural Relief Changes – From April 2026, only the first £1 million of business/agricultural assets will be IHT-free; amounts above will be taxed at 20%. There is a very narrow window of opportunity to undertake some planning now under the current rules (before 5 April 2026) and several business and agricultural property owners are actively considering these planning strategies. 

How can you prepare for this great wealth transfer?

• Early and open communication – it is best to initiate conversations about wealth transfer sooner rather than later. A discussion of financial goals and personal values can prevent misunderstandings and align expectations among family members. 
• Comprehensive estate planning – seeking professional advice from your tax and legal advisers is crucial. We, as your trusted advisers, can help you build a comprehensive estate plan which carefully considers your objectives and desires, as well as careful drafting of your Wills.
• Tax efficiency – Tax can be a significant cost if the gifting of assets is not carried out carefully. We can help you devise tax-efficient strategies to enable the passing down of assets whilst considering asset protection for the long-term benefit of the family.  Structures like Trusts, Family Investment Companies being a couple of options.  A financial / investment adviser will also be involved in matters like pension planning or considering life insurance to manage certain liabilities such as IHT.
• Educating your beneficiaries – linked to open communication is to prepare your heirs to manage the inherited wealth responsibly by providing them with appropriate financial education, support from trusted advisors and sharing your experiences with them.
• Review your plans regularly – life is dynamic and tax laws can change over time. A regular review of your estate plan is essential and we can assist you with ongoing reviews over your life time to ensure that your desired objectives are continued to be met. 

No one size fits all, and the estate planning is very much bespoke to your personal circumstances. 

Please speak with us for further advice on how to manage the estate planning and the gifting process.