Planning for the next generation

By Lynda Lennox, Financial Planner at Tilney

This example case study shows the ways Tilney's financial planners and investment managers often help real clients to provide for the children in their lives.

Mr and Mrs Smith are a married couple in their 60s with two adult children and total assets of around £2.5 million. They would like to pass on some of their wealth to their children but they have hesitated to do so as they are concerned they will run out of money in later life.

The first step was for their financial planner to create a cashflow model that would forecast their future finances. The model showed that, based on their current assets and future spending, they could reduce their level of investment risk, split a one-off £500,000 gift between their two children and then give the children annual gifts from surplus income without affecting their standard of living.

As well as helping out their children, their financial planner explained that the gift should reduce the size of the couple's estate and therefore reduce their future Inheritance Tax bill. To cover the existing Inheritance Tax liability, they set up a Whole of Life insurance policy with premiums being paid from surplus income. The policy is held in a discretionary trust and will pay out a lump sum which could be used to pay the Inheritance Tax liability without the need for the children to sell the family home or any other assets if it needed to be settled with HMRC before Confirmation is granted.

The couple's financial planner created a new strategy for taking income for their living expenses. Rather than drawing on their pensions, the couple would use other assets to fund their lifestyle. This would gradually reduce their total estate value to below £2 million, saving the couple Inheritance Tax in two ways - by reducing the value of their estate above their nil rate bands, and by ensuring that the couple will qualify for the residence nil rate band (which disappears for bigger estates).

On top of this, by leaving their pensions untouched, the couple can pass this money on to their children when they die without any Inheritance Tax (and potentially no Income Tax depending on their age at death).

After completing this work, the Tilney financial planner then met with both children. They discussed their own financial circumstances and objectives, and advised them on how best to use their share of the gifts from their parents in order to achieve these goals.

Tilney is an award-winning financial planning and investment company with a long history of working with private client professionals and their clients. Our areas of expertise include:

  • Pensions and retirement planning
  • Estate and Inheritance Tax planning
  • Family wealth succession planning
  • Financial gifts and philanthropy
  • Life-changing events such as divorce and long-term care
  • Discretionary investment management
  • Investment management for US clients
  • Financial planning for business owners
  • Investment services for charities

If you'd like to learn more about inter-generational planning and how we work with other professionals and their clients, please contact us on 020 7189 9918 or email


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