The Great Wealth Transfer

The Great Wealth Transfer, which began in 2020 and is predicted to grow in 2025, has caused a significant change to how assets are distributed and inherited.

Traditionally, assets were once inherited after the death of a loved one, however it is now increasingly typical for the older generation to depart from this method and create new estate planning strategies. Many baby boomers are now leaving their wealth to loved ones whilst they are still alive.   

What is the Great Wealth Transfer?

People who were born between 1946 and 1964, often referred to as Baby Boomers, represents 16.8 million people in the UK. Due to favourable financial conditions when they were younger, they have become the wealthiest generation in history. It is estimated the baby boomer generation hold 80% of the UK’s wealth.

Due to current economic challenges, millennials and Gen Zs are having a tough time making ends meet on their own. Due to soaring food and housing costs and the cost-of-living crisis, today’s young adults face financial challenges their parents and grandparents did not.

Therefore, many baby boomers are now distributing their estate to younger generations whilst they are still alive and are not waiting until their death for their assets to be distributed. This is the more commonly referred to as the “Great Wealth Transfer”.

How to prepare of the Great Wealth Transfer

The Great Wealth Transfer presents opportunities and challenges for both beneficiaries and estate owners. The aftermath of the 2024 Budget will bring greater focus and action on succession and estate planning in 2025.

To successfully navigate the Great Wealth Transfer, estate owners need to be prepared to address a wide range of issues, including estate and retirement planning.

Planning the distribution of your estate may feel morbid and uncomfortable. You may also struggle to decide how your assets should be disbursed. This can be even more complicated if there are vulnerable people involved. This is why specialist legal support should be sought.

An important part of any wealth transfer plan is to decide what it is you are aiming to achieve.  Is it to reduce any inheritance tax liability, or to limit what your children might receive, particularly if it is a large sum?  You may be worried about spoiling or demotivating your children or have concerns regarding divorce or bankruptcy.

Some people take pleasure from seeing their loved ones benefit from their inheritance, whilst they are still living.  Lifetime gifts can be made for house deposits, special holidays or going to university, for example.

When approaching the distribution of assets, you should have consideration to:

Conflict – Beneficiaries may disagree with the proposed plan for asset distribution, trusts, or succession structures, or have descendants they feel require additional support. Seeking legal advice can help create a suitable estate plan and can advise you on dealing with potential conflict.

Generation Divide – Baby boomers tend to be more reserved about discussing financial matters. Millennials and Generation Z are more comfortable with digital communication but may lack the experience to navigate face-to-face discussions about complex family financial dynamics. This could create potential communication barriers and further conflict.

Tax Planning – Wealth transfers have potential tax burden on beneficiaries. There could be significant tax implications to any decisions made when distributing an estate.

Cross Border Estates – If assets are held overseas, this can create complications due to cross border inheritance laws, and legal precedent across jurisdictions.

Digital Assets – The rise of digital assets, such as cryptocurrency, has introduced new complexities in estate planning. Issues around access, ownership transfers and valuation of assets create increasing challenges.

Proper estate planning during the Great Wealth Transfer, including a well-drafted Will, and consideration of your wider estate planning options whilst you are still alive is crucial to avoid legal battles and ensure assets are distributed according to the estate owners wishes and when you want your beneficiaries to inherit. This is particularly important when complex family structures are at play.

Why you need a Will

Research shows that around 67% of UK adults either don’t have a will or have one that’s out-of-date, and half of over 55’s living in the UK don’t own one.

If you have made a Will, your assets will be distributed according to your wishes, meaning who you want to inherit, will. However, it is important that you keep you Will up to date and review it at every major life event or every five years.  

Lindsey Rawson, head of our Wills, Trusts & Probate department, can help you create an estate plan, help draft a Will and get all your affairs in order ready for retirement. She specialises in Wills, trusts, powers of attorney, probate and inheritance tax planning.

Lindsey acts for clients in South Yorkshire and beyond and can be contacted by calling 0114 2743 481 or emailing [email protected]