Written by James Wadsworth, Chartered Financial Planner, PenLife Associates
If one of your top priorities as a parent or grandparent is to provide opportunities for the next generation, you are not alone.
A March 2023 Royal London survey of Financial Planners revealed that 55% said their clients are more worried about their families’ financial wellbeing than their own, and 25% of recent requests from clients have been about releasing money for their adult children.
In the next few years, you could plan to pass wealth to your children or grandchildren for any of the following reasons:
Helping them onto the property ladder
Supporting them in their early career years
Paying for a wedding, honeymoon, or another milestone
Putting funds into a pension or trust on their behalf.
While these are admirable goals, it is crucial to assess your own financial situation before you help others.
Releasing capital for your children now might provide them with amazing opportunities, but without proper planning, you could damage your future financial viability – especially if you are retiring soon or are already retired.
One of the first, and perhaps most important, steps to take before offering wealth to the next generation is to check that you can afford it.
Here at PenLife, we use cashflow forecasting. Cashflow forecasting, also known as “cashflow modelling”, is a tool used to look at your current wealth along with your income and expected outgoings. It allows us to analyse what potential your wealth and income might have to support you in the future.
While nothing is ever set in stone, working with a Financial Planner and using cashflow modelling could make all the difference when planning to give wealth to the next generation. With this professional outlook, you may be able to confidently pass wealth on now without worrying about your financial viability down the line.
Another important step to take when giving funds away to loved ones, is to be open and honest with them about your plans. So, once you have reviewed your circumstances with a Financial Planner and understood what is affordable, it could be wise to chat with the beneficiaries of the funds well before a wealth transfer. Whatever your situation, being frank about what you can offer, and over what timeline, is essential and helps to avoid unnecessary conflicts down the line.
A PenLife Financial Planner can work with the whole family to produce a gifting plan that works for everyone. For help with passing wealth to loved ones without compromising your own future, email us at enquiries@pen-life.co.uk, or call 01904 661140.
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