A lasting impact

Passing on prosperity

For most legacy begins with family. Passing wealth to the next generation goes beyond gifting money – it’s about providing security, opportunities and a foundation for the future. This could mean:

•    Setting up trusts to ensure children or grandchildren benefit responsibly
•    Planning for education funds, property gifting or financial support at key life changes
•    Creating a will that clearly communicates your wishes

Gifting has long been a staple in financial planning, thanks to attractive tax incentives and the feelgood factor that comes with leaving a legacy for our loved ones. However, gifting is a complex business, as Daniel explains. “Following the measures announced in last November's Autumn Budget, we’ve seen more of our clients explore alternative avenues for their wealth. These include trusts through which they can maintain some income, control or access to capital whilst still allowing some funds to be left behind following their death,” he says. 

Regardless of who you want to support, careful planning is key and there are many factors to consider before committing your finances for the future. “Central to a financial legacy, there should be a plan that will help your beneficiaries and future generations, but equally enable you to meet your own goals and objectives,” Daniel says. 

“It’s important not to get too obsessed over what you’re leaving behind. First and foremost, people need to make sure that they’re in a good place and have the means to enjoy retirement. And that’s where careful planning can actually meet both goals, as opposed to just one of them.”

Daniel stresses that balance is key. “Leaving a legacy is a delicate matter, because it involves not only giving up access to the capital but the income this provides," he says. “A decision also needs to be made as to when the beneficiary will receive the funds, and this is where strategic planning tools come in.” 

It’s all about finding a happy medium. Tools like cashflow modelling can help to make informed decisions and can provide a clear long-term view of your financial situation. This helps you understand how gifts may affect your ability to maintain your lifestyle, support your family and achieve your goals.

It’s not just the very wealthy who are looking to provide for their loved ones. Almost a third (32%) of grandparents currently contribute towards their grandchildren’s university or school costs [1], and with the application of VAT to private school fees, this is set to continue. 

Tax incentives are a big driver in this, as Daniel explains. “Everyone needs to be aware of the allowances and the planning tools that are available to them. Allowances such as the nil-rate band have been frozen for quite some time, and the Government has committed to maintain this until 2030. From April 2027, most unused pension funds and death benefits will form part of people’s estates. Add to pension funds the capital made from property and savings, and the number of people who could be impacted by inheritance tax is widespread.”

The role of philanthropy

While family may be at the heart of legacy planning, philanthropy could be another avenue for consideration. Charitable giving allows you to make an impact in the areas you care about – whether it’s education, healthcare or the environment. Philanthropy has the potential to add another dimension to your legacy, ensuring your wealth creates a broad and lasting impact beyond your immediate family circle. 

Beyond the emotional rewards of giving back, charitable gifting in the UK can also offer financial benefits – gifting money or assets like shares and property to charity, individuals are able to reduce their Income Tax, Capital Gains Tax and Inheritance Tax (IHT). For some people, charitable giving could form an important part of their wider estate planning. 

Daniel explains, “If you leave more than 10% of your estate to a qualifying charity, the IHT rate applied to the rest of your estate can be reduced from 40% to 36%. Any gifts to charities are entirely exempt from IHT meaning they won’t count towards the taxable value of your estate.” 

As with any gifting, Daniel stresses it is important to sit down and think through how much you can afford to give away. “Before making any decisions, ensure you have the confidence and resources to sustain the lifestyle you want and meet the needs of your loved ones.” 

A financial legacy is about more than passing down money – it’s a way to express what matters most to you. Whether that’s providing security for your family or friends or supporting charitable causes. By taking the time to consider how you want to make a lasting impact, you can create a plan that balances your financial priorities with what you hold dear.

[1] paragonbankinggroup.co.uk/news/news-releases/a-third-ofgrandparents-contribute-financially-to-the-education-of-theirgrandchildren