Explained: Financial Advice When Leaving Money for the Next Generation

Posted on 12th May 2023

Financial advice is one of the most crucial components to consider when it comes to managing your finances. This is especially true when it comes to your inheritance, and how you plan to leave your money for the next generation.

In this article, you’ll learn some of the reasons why financial advice is important when leaving an inheritance, and how it can help you achieve a successful outcome.

Read on to find out more.

Unique guidance for your financial situation

A core benefit of using financial advice when leaving an inheritance is that you can receive unique guidance on how to best approach your estate.

Your financial adviser will ensure they fully understand your financial situation, so they can tailor their advice to best suit your needs.

You may have specific requirements, including which assets you want to leave in your inheritance, the number of beneficiaries you want to leave it to, and what outcome you want regarding tax efficiency and the total inheritance figure.

Your modern wealth manager will help you achieve each of these goals, in a manner that aligns realistically with your situation.

Maximising tax efficiency with your inheritance

Another reason why you need an adviser when leaving an inheritance is because they can help you maximise tax efficiency when leaving your money.

Your adviser will make you aware of all the tax rules that might apply to your inheritance and the ways in which this could impact your wealth.

They’ll help you fully understand inheritance tax (IHT), which is the tax charge that applies to any value of your inheritance that surpasses £325,000 – as of the current tax year 2023/2024.

This means that any money you leave below this amount will be sheltered from tax, but any value that exceeds it will be taxed at a rate of 40%, with varying rules for family and timings.

Your adviser will be experienced in how IHT works, and ensure you shelter as much of your money from tax when leaving it to the next generation.

Understanding different ways to leave your estate

As well as helping you understand IHT, your adviser can also help you explore the many options when it comes to what assets you leave and how you do this.

They’ll take into account every aspect of your financial situation, and help you find the best approach that’s suited to your circumstances, while also providing optimal tax efficiency.

For example, they might discuss with you the benefits of leaving your estate to a spouse or civil partner, which may result in funds being exempt from IHT.

Also, if you plan accordingly, there’s the option for gift giving, where you can offer some of your assets to beneficiaries while you’re still alive. There are many considerations with this, and your adviser can help you navigate them – including how long you can give gifts before you die, what counts as a gift, gift allowances, etc.

Consider ongoing advice for your inheritance

As with any type of financial plan, you may want to consider ongoing financial advice from your wealth manager, to help ensure a successful financial outcome for both you and your beneficiaries.

There are many things which could impact your wealth as you carry out your inheritance plan, such as changes in tax rates, additional beneficiaries, personal goal changes, or the evolving value of your assets, for example.

An adviser can continuously review your plan and assets, and make the necessary changes as you go along to ensure you remain on target for achieving your financial goals – for both you and your family.

An adviser can also offer guidance on how your family can invest your inheritance after you die, to ensure they have wealth resilience and security for their futures.

Now you know the importance of financial advice when leaving money, be sure to speak to your modern wealth manager to formulate the right approach for you and your beneficiaries.

Please note, the value of your investments can go down as well as up.