Experts are advising families to consider giving inheritance early, as many children may not receive their inheritance until they are in their 50s or even 60s. With people living longer, the Bank of Mum and Dad is already playing an increasingly important role in helping younger generations cope with high housing costs and wider cost-of-living pressures.
Some of that money would have achieved more if it had been passed on 20 or 30 years earlier, experts say. One expert told Newspage families should be thinking about the benefits of giving while they are still around to see the difference it makes.
Giving with Warm Hands vs Cold Hands
Rakhee Wood, founder and Independent Financial Adviser at Butterfly Financial Planning, said: "There is a lot to be said for giving with warm hands rather than cold hands. The problem is that many people do not know their numbers.
"They do not know how much they need for their own future, so they hold on to everything just in case. Good financial planning can give people clarity around what they genuinely need. Once you know that, you can make much more confident decisions about what you can afford to give away.
"That might mean helping children or grandchildren with a first home, childcare or starting a business, at a time when the money can make a real difference. And you get to see the benefit of it.
"This is one of the highlights of my job. I get great pleasure from seeing the happiness my clients get from gifting during their lifetime. For me, this is about much more than tax. It is about having enough for yourself first, then using your money in a way that has the greatest impact. Tax matters, but it should not drive the decision."
Security First in Lifetime Gifting
However, Scott Gallacher, Chartered Financial Planner at Leicester-based Rowley Turton, said this did not mean people should simply start giving their money away. Any lifetime gifting should begin with ensuring that the donor retains sufficient resources for their own retirement, longevity and potential care costs.
He said: "Inheritance tax planning often starts with the question, 'How can we reduce the tax bill?' I think the better starting point is, 'How can this money do the most good?' As we live longer, there is a real risk that substantial inheritances arrive too late.
"Receiving £50,000 at 60 is obviously welcome, but for many people the same £50,000 at 30 or 35 could be transformational. It might provide a deposit for a first home, allow a family to extend rather than move, provide financial breathing space during maternity or paternity leave, or help someone start a business.
"That doesn't mean parents should give away money they may later need themselves. Their own financial security, including the possibility of living to 100 and needing care, has to come first. But once genuine affordability has been established, I think we should be asking whether leaving the largest possible inheritance on death is really the best outcome for you and your loved ones."
Consider Grandchildren in Planning
One adviser urged grandparents to look to their grandchildren, rather than waiting until their own children are in their 50s or 60s to pass on the cash.
Martin Rayner, financial adviser at Compton Financial Services, said: "The problem with traditional inheritance planning is that the money often arrives when it is least needed. We typically see people passing on wealth in their 70s or 80s, meaning their children are already in their 50s and may be financially established. That is why planning should be genuinely intergenerational, including grandchildren.
"A grandparent can fund a bare trust for a grandchild and, if they have little or no other income, the child could potentially receive up to £18,570 of savings income tax-free each year, using their £12,570 Personal Allowance, £5,000 starting savings rate and £1,000 Personal Savings Allowance, plus their £3,000 CGT exemption.
"We often see this used for education or university costs rather than building a large house deposit. The important catch is that the money belongs to the child and they can take control at 18, which understandably may make grandparents wary of building up too large a sum."
April 2027 Pension Changes
There is now another reason for families to consider the timing of wealth transfers. From April 6, 2027, most unused pension funds and pension death benefits will be brought within a deceased person's estate for inheritance tax purposes.
Nouran Moustafa, practice principal and IFA at Roxton Wealth, said money could have a greater impact when you are younger.
She added: "Inheritance is often most powerful before someone becomes financially comfortable. £50,000 at 35 could be the difference between renting and buying, starting a business or not, or taking proper parental leave.
"The same £50,000 arriving at 60 may still be welcome, but it may not change someone's life in the same way. The pension inheritance tax changes from April 2027 make the timing conversation even more important, but tax should never be the only reason to gift.
"The first question is always: can the donor genuinely afford to give the money away? Longevity, future care costs and financial independence come first. After that, I think inheritance planning should focus less on dying with the smallest possible tax bill and more on using wealth at the point it can create the greatest impact. Good estate planning is not just about what you leave. It is about when you let it go."
One expert believes families should not let the tax changes push them into making gifts they could later regret.
Harvey Dhillon, founder and CEO at Zmartly, said: "The pension change is a good reason to review lifetime gifts, but it shouldn't hurry anyone into giving. For deaths from April 6, 2027, most unused pension money counts in the estate for inheritance tax, so some estates that owed nothing before could face a bill.
"The biggest risk in giving sits outside inheritance tax. In England, if avoiding care charges was a significant reason for a gift, the council can charge as if the money were still yours, and there's no fixed time limit, so living for years after the gift doesn't make it safe.
"A key test is whether a need for care could reasonably have been foreseen when the gift was made, so a parent who gives while fit and healthy is on far firmer ground. Nobody knows how long they'll live or what care will cost, so a gift should only come from money you could never need to call on. On the tax side, if you stay on without paying a full rent in a home you've handed to a child, it stays in your estate however long you live."
