Older generations shift towards early inheritance gifting

Older generations are rethinking about they pass on wealth, with gifting becoming increasingly popular rather than waiting to leave inheritance in wills, analysis from The Private Office (TPO) has found.

The chartered independent financial advice firm highlighted that annual financial gifts across the UK had risen to £17bn, with £9.6bn going directly towards helping first-time buyers.

Its survey found that 81 per cent of over-45s believed parents or grandparents should help younger relatives financially during their lifetime, rather than leaving an inheritance after death.

Around the same proportion (83 per cent) felt younger generations were more reliant on family support than previous generations.

Despite the shift, the timing of gifting had not kept pace, with a freedom of information request made to HMRC showing that, in 2022/23, people aged 85 and over accounted for almost 60 per cent of all estates that included gifts.

They also accounted for the largest share of the total value gifted, which TPO said suggested that gifting remained largely an end-of-life decision.

Nearly two-thirds (64 per cent) of over-45s said they would feel comfortable giving a large sum of money to family members during their lifetime.

However, barriers remained, with 37 per cent citing running out of money later in retirement as an obstacle to gifting.

This was followed by future care costs (16 per cent) and worries that money would not be used responsibly (12 per cent).

While 11 per cent cited inheritance tax (IHT) concerns, only 15 per cent of estates that included gifts paid IHT on them in 2022/23, according to HMRC data.

Around one in seven (15 per cent) of respondents said they had no concerns about early gifting.

"What this research makes clear is that the Bank of Mum and Dad has also become the Bank of Grandparents,” said TPO partner, Daniel Blandford.

“We're seeing a genuine shift in how people think about wealth, away from the traditional inheritance model and towards active giving during their lifetime.

"The figures on housing are particularly striking. When almost all respondents say it's difficult for young people to buy without family support, that's no longer a peripheral concern, it's become a structural feature of the property market.

"What our clients tell us is that the desire to give is often held back by anxiety about their own future security.

“The question isn't always should I give, it's how much can I safely give. That's exactly where good financial planning makes a difference.

“With the right advice, families can transfer wealth in a way that supports the next generation without compromising their own retirement."

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