A significant majority of wealthy individuals aged 45 and older express a preference for distributing inheritances to their children and grandchildren while they are still alive. New research suggests that four out of five individuals in this demographic wish to transfer wealth before their passing.
The primary motivation for early inheritance is often to assist family members in purchasing property. Among those who have already provided an 'early inheritance,' half did so specifically to help their children get on the housing ladder. Across all surveyed individuals, both those anticipating an inheritance and those considering lifetime gifts, 88 percent indicated they would consider helping children or grandchildren acquire a home.
The difficulty for younger generations in affording housing is a widely recognized issue. A substantial 97 percent of survey respondents believe it is currently very difficult for young people to buy a home without family support.
The research, which surveyed over 2,100 subscribers to a newsletter from the independent financial advice firm The Private Office, revealed that respondents were predominantly older, asset-rich homeowners. This demographic aligns with those most likely to be contemplating inter-generational wealth transfer.
An increasing number of affluent individuals are reportedly spending or gifting their assets during their lives, partly as a strategy to mitigate inheritance tax. Financial gifts are generally tax-free if the donor survives for seven years following the transfer. Should the donor die within this seven-year period, inheritance tax is applied on a sliding scale, reaching the full 40 percent rate if death occurs within the first three years.
Changes are also on the horizon for pension pots. From spring 2027, unspent pension funds will become subject to inheritance tax, impacting plans for individuals who had saved with the intention of passing these assets tax-free to beneficiaries. Data from HMRC indicates a rise in pension withdrawals in the 2025-2026 tax year, potentially influenced by these impending tax rule changes.
Currently, approximately 4-5 percent of estates incur inheritance tax at a 40 percent rate on assets exceeding certain thresholds. These thresholds begin at £325,000 per person, or £500,000 if a home is left to direct descendants, with couples able to combine these allowances.
Speculation exists regarding potential reforms to inheritance tax, particularly in light of Andy Burnham becoming Prime Minister, with some anticipating overhauls to fund social care initiatives, which could affect a larger number of estates.
Beyond property purchases, lifetime gifts have been utilized for other purposes. The Private Office survey found that while just over half of respondents made gifts for housing, 20 percent provided general living support, 8 percent aided with education costs, 5 percent contributed to weddings, 4 percent helped with debts, and 2 percent assisted with student loans.
Research from estate agent Savills indicates that 52 percent of first-time buyers received family assistance in the previous year, with an average contribution of £55,572. The Private Office survey revealed that 64 percent of potential donors would feel comfortable making a significant financial gift during their lifetime.
However, concerns about future financial security are a primary reason for hesitation among those considering lifetime gifts. Thirty-seven percent cited the fear of running out of money in later life, while 16 percent worried about care home costs, and 12 percent were concerned the money might not be used responsibly.
Other reservations included inheritance tax concerns (11 percent), economic uncertainty (5 percent), and potential family disputes (2 percent). Conversely, 15 percent of respondents reported having no concerns about making lifetime gifts.
Daniel Blandford, a partner at The Private Office, observed a shift in how wealth is perceived and transferred. 'The Bank of Mum and Dad has also become the Bank of Grandparents,' he stated. '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.'
He further commented on the housing market implications: '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.'
Blandford added that a common barrier for clients is 'anxiety about their own future security. The question isn't always should I give, it's how much can I safely give.'