08 March 2018

A recent report by the Resolution Foundation assessed the role that inter-generational family transfers, i.e. gifts and inheritances, will play in addressing the living standards challenge that Britain faces.

The report found that the Baby Boomers (born between 1946 and 1964) are in a completely different financial situation to their children if they are Millennials (born in the 1980s and 90s). The Foundation, which comments and campaigns on social and financial issues, has pointed to that disparity and has recommended that steps be taken to tackle it.

Financially, Baby Boomers have done relatively well. They may have had a job which they kept for life. Their income climbed as the years went by. They often bought a house when they were cheap, and that house is worth a lot now. They may even have a final salary pension.

Over half of Britain's wealth - house values and savings - is in the hands of Baby Boomers.

Millennials have done less well. Many are stuck with only a modest salary, and for others wages have stagnated. Those who went to University have the burden of educational debt. If they bought a home, they did so when they were expensive. In fact, for Millennials, owning their home at the age of 30 is half as likely as it was for their parents. Most will have only modest pension provision.

The Resolution Foundation is a non-partisan thinktank which aims to improve the living standards of those in Britain on low to middle incomes. Given the issues set out above, they wish to influence policy decisions to alleviate the disparity of wealth between the generations. They are not suggesting that every Millennial’s solution is to wait for a gift or inheritance from their parents and not all will have parental wealth in any event. But they are suggesting that with the Baby Boomers living until they are in their 80s or 90s, by the time the Millennials inherit this wealth, it will be long past when they actually need it, i.e. they will have already struggled passed the years when they get on the housing ladder and bring up their children.

If you are in the Baby Boomer category, the answer may well be to gift on assets during your lifetime, but is this the right thing for you to do? Your own financial security is obviously of paramount importance. But it may be worth taking professional advice to see if there are opportunities to make tax effective gifts during your lifetime. There are a variety of inheritance tax (IHT) reliefs which may be relevant for your circumstances, including ‘regular gifts out of income’, utilising your £3,000 annual exemption and gifts on marriage.

If you would like to have a discussion on IHT planning then please contact Christine Butterfield 01305 216205