High net worth (HNW) parents are increasingly donating more to charity due to a rising inheritance tax (IHT) burden and worries about the impact of leaving too much wealth to their children, according to Rathbones.

The wealth management firm’s study of parents with estates valued over £1m found three quarters (75 per cent) believed that leaving an inheritance too large can be a ‘curse’ on their children’s lives and were considering ways to avoid the problem.

Nearly two thirds (61 per cent) were concerned that any money left to children would be used irresponsibly, while 57 per cent felt their adult children already had enough money and there were more important uses for their assets.

More than half (53 per cent) had increased their charitable donations over the past two years, with an increase in income and wanting to contribute to making the world a better place cited as the top two motivating factors.

“Our analysis shows many wealthy parents, already concerned about IHT, fear the impact of too big an inheritance on their children’s aspirations and drive,” said Rathbones head of charities distribution, Gemma Gooch.

“It is therefore no surprise that more are increasingly turning their attention to charitable giving.

“Incorporating charitable giving into financial planning allows parents to create a meaningful legacy, support causes close to their heart and potentially pass on a greater share of their estate to their chosen beneficiaries, rather than the taxman.”

Rathbones also found that 65 per cent of HNW parents planned to make inheritance access conditional on achievements, such as qualifications.

Over one in 10 (13 per cent) planned to leave money directly to grandchildren, and a further 26 per cent were considering it.

More than half (52 per cent) of those looking to skip a generation cited concerns that their children would misuse the funds, while 41 per cent were motivated by tax efficiency.

“We’re seeing more clients aiming to strike a balance between reducing their IHT burden, supporting good causes, and leaving an inheritance that doesn’t dampen their children’s ambition,” commented Rathbones financial planning director, Olly Cheng.

“For those concerned about the latter, contributing up to £2,880 a year into a child’s pension - topped up to £3,600 with tax relief - could be a good option. The funds remain locked until retirement (age 55, rising to 57 from 2028), allowing decades of tax-free growth.

“For those wanting more control over how and when wealth is passed on, a trust could be worth considering. Trusts can stagger access to funds, reducing the risks of sudden wealth undermining ambition.

“While more about control than tax efficiency, they remain a valuable option - especially for blended families. Professional advice is essential to find the right solution.”

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