When is a good time to give a living inheritance?

If you plan to give money to children, or will receive some from parents one day, Becky O’Connor explains what to consider.

There are few subjects as difficult to broach with family members than inheritance. That’s because the subject is intertwined with complicated emotions and often upsetting thoughts around death and bereavement, which means thinking about the financial implications can seem a little cold and insensitive.

That said, rites of passage such as buying a home, getting married and having children now come with such high price tags that many younger adults muse on whether they can afford a conventional life at all.

Meanwhile some, but not all, parents will be in receipt of decent pensions and have had the benefit of strong house price growth.

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This is not another polemic on intergenerational unfairness, but it is by way of explaining the reasons that more parents are considering how they can help their adult children out with living inheritances, at the point they would most benefit from a lump sum, rather than the more traditional route of waiting to ‘give’ when they die, by which point, the adult children may be approaching or in retirement themselves.

It’s also to introduce the subject of this month’s fascinating Mind & Money podcast from interactive investor, in association with Oxford Risk, in which I interview Greg Davies, a behavioural finance expert, about what both givers and receivers need to consider when going down the living inheritance route.

It is about a lot more than inheritance tax. It strays into parenting, how to manage difficult family conversations around money and why leaving inheritance tax leaflets around the table on Christmas Day isn’t the best strategy. So it’s well worth a listen, even if you aren’t thinking about such matters right now, but expect that at some point in your life, you will either give some of your money to children, or receive some from your parents.

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We know from last year’s Great British Retirement Survey that leaving a legacy is hugely important to those in or approaching retirement and gifting money to children is one thing that no one who responded to the survey said they regretted.

What’s it all for, after all, if you can’t help those you love the most a little with the fruits of your decades of hard work?

But with the rising cost of living for younger and older generations taking its toll, as well as less generous pension schemes and higher house prices eating away at our ability to create and maintain meaningful wealth, there are more pressures on our assets to work as hard as possible.

The podcast covers:

• When should you gift your adult children money?
• Should you gift in stages?
• Why the personality of your child/children really matters
• Why you have to ‘give some rope’ to your children, allowing them to make some mistakes with money
• Why adult children must respect the emotion attached to financial gifts

And while you are there, why not take part in this year’s Great British Retirement Survey, now live? There are prizes worth up to £1,000 to be won bit.ly/GBRS202

Rebecca O’Connor is head of pensions and savings at interactive investor.