Succession Planning: How to Pass Your Wealth on to the Next Generation

Passing wealth on to the next generation involves more than writing a Will.

Wealth succession planning is about deciding what should happen to your wealth, when it should happen and how your wishes can be achieved in a way that works for you and your family.

This could involve lifetime gifting, trusts, investments, pensions and estate planning. It also means thinking about the people who will eventually receive your wealth and whether they are prepared to manage it.

In this guide, we look at the key things to consider when creating a wealth succession plan.

Why is wealth succession planning important?

Without a clear plan, it can be difficult for your family to understand what you intended and how your wealth should be managed.

Starting early can give you more time to:

• Understand the value and structure of your wealth
• Consider potential Inheritance Tax liabilities
• Decide what you want to pass on during your lifetime
• Review your Will and other arrangements
• Prepare the next generation
• Consider how different family members should benefit
• Make changes as your circumstances develop

Tax is an important consideration, but it should not be the only one.

Your wealth succession planning should balance your financial needs, your wishes and the future needs of your family.

How can you pass wealth on to the next generation?

There are several ways to approach wealth succession planning. The right strategy will depend on your circumstances, the type of assets you own and what you want to achieve.

1. LIFETIME GIFTING

You may decide to give some of your wealth to family members during your lifetime.

This can allow you to see your family benefit from your wealth while you are still here. However, gifts can have tax implications, and some gifts may remain relevant for Inheritance Tax if you die within seven years.

The rules can be complex, so it is important to understand the potential consequences before making significant gifts.

For a real-life example of how gifting and trusts can form part of wider wealth planning, read Nigel’s story.

2. TRUSTS

Trusts can be used in some circumstances to hold and manage assets for beneficiaries.

They can provide a structure for deciding how and when certain wealth should be passed on, rather than giving beneficiaries immediate and unrestricted access.

Whether a trust is appropriate will depend on your objectives, family circumstances and the assets involved.

3. INVESTMENTS AND OTHER ASSETS

Different types of wealth can have different tax and planning considerations.

For example, the way you structure investments, property and other assets can affect how they are treated as part of your estate.

Looking at your wealth as a whole can therefore be more effective than making decisions about individual assets in isolation.

4. Pensions wealth & inheritance tax

Pensions are another important part of the succession conversation.

From 6 April 2027, most unused pension funds and pension death benefits will be brought within the estate for Inheritance Tax purposes. This means pension arrangements and beneficiary nominations should form part of your wider estate and wealth succession planning.

With the rules changing from April 2027, it’s important to understand how your pension could be affected. Read our guide to Inheritance Tax on pensions to find out more.

Preparing the next generation for family wealth

Passing on wealth is not just a financial decision. It is also about preparing the people who will receive it.

Talking openly about wealth can help your family understand your intentions and what you hope your wealth will achieve.

Depending on your circumstances, this could involve:

• Introducing children or other family members to financial planning
• Explaining how investments and other assets are managed
• Discussing your wishes before they become relevant
• Setting expectations around future inheritance
• Helping beneficiaries develop the skills and confidence to manage wealth responsibly

These conversations do not need to happen all at once.

Gradually involving the next generation can help make the transition of wealth feel more manageable and give everyone a clearer understanding of what is expected.

If your family’s wealth includes a family business, there can be additional considerations around ownership, succession and preparing the next generation. Our guide to planning for the future of a family business explores some of the key issues to consider.

What role does tax play in wealth succession planning?

Tax should be considered as part of your wider wealth succession strategy.

For example, the standard rate of Inheritance Tax is currently 40%. The nil-rate band is £325,000, while the residence nil-rate band can provide an additional allowance of up to £175,000 where the relevant conditions are met.

However, these allowances do not mean that every estate above £325,000 will automatically pay Inheritance Tax. Other factors, including exemptions, reliefs, transfers between spouses or civil partners and the residence nil-rate band, can affect the amount due.

The treatment of lifetime gifts, trusts and pensions can also affect the overall position.

This is why it is important to look at the whole picture rather than focusing on one tax rule in isolation.

What are the common wealth succession planning mistakes?

Even with the best intentions, succession planning can be overlooked or left until later in life.

Some common mistakes include:

1. Leaving it too late
   The earlier you start, the more options you may have available.
2. Assuming a Will is enough
   A Will is essential, but it may not address every aspect of your wider wealth strategy.
3. Focusing only on tax
   Reducing a potential tax liability should not come at the expense of your own financial security or your family’s needs.
4. Operating in secrecy
   Keeping everything private can sometimes create uncertainty or misunderstandings later.
5. Forgetting about pensions and other assets
   Your Will may not cover every aspect of how your wealth passes to beneficiaries, so your wider arrangements should be reviewed together.
6. Treating it as a project, not a process
   Your wealth, family circumstances and tax rules can all change. Your succession plan should change with them.

How can AAB Wealth help with wealth succession planning?

Wealth succession planning can involve a number of moving parts. From lifetime gifts and trusts to investments, pensions and Inheritance Tax, there are a number of factors to consider.

Starting early can give you more time to make informed decisions and create a plan that reflects your family’s circumstances.

AAB Wealth can help you understand your options and build a succession plan around your wealth, your wishes and your family.

If you have any queries about ensuring your wealth is passed on to the next generation successfully please do not hesitate to get in contact with Michael Aitken or your usual AAB Wealth contact.

Important information: This article is for general information only and does not constitute financial, tax or legal advice. Tax rules can change, and their effect depends on your individual circumstances. The value of investments, and any income from them, can fall as well as rise, and you may get back less than you invest.