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All Groan Up

By November 5, 2018April 26th, 2019ELEVATION BLOG

Publicly reviled, misunderstood, entitled, arrogant…. No, I’m not referring to Donald Trump! I am, in fact, talking about the Millennial generation, also known as Generation Y.

The dub ‘Millennial’ categorises those born in the 1980’s and 90’s and they make up 14% of the UK population. Yes, that means there are 8.4m young trendy selfie taking, technology embracing, impatient ‘I-want-it-nowers’ with the world quite literally at their fingertips.

Thanks to a Government study based purely on the Millennial generation, the analysis has shown that, of this cluster of youngsters, 40% of them are graduates. Nevertheless, 47% of these graduates are actually working in non-graduate positions.

Further statistics and studies have summarised that 59% are renting not owning, and a further cohort analysis shows that the generations born between the late 70’s and 80’s significantly lag behind the generation born in the 60’s in terms of proportionate time-weighted wealth accumulation. When you factor in the concept that pretty much all final salary pensions are now closed, it all paints a rather frustrating picture for those looking ahead and who are starting to settle down and focus on families of their own.

The foundations of sensible financial planning involve repayment of debt, saving for the future and carefully protecting themselves and their family from life’s sudden nasty surprises. However, prioritising these goals get somewhat rattled when there are difficult factors that negatively impact millennials’ planning. There is the concept of student debt repayment (often stretched out over decades), the effect of paying rent each month in order to live in closer proximity to higher paid jobs and the fact that property values have risen far more than the rate that wages have grown. Saving for a deposit on a property is becoming harder and harder.

The above trends are not anticipated to perform any sudden U-turns any time soon, regardless of what government policies that might be brought into force.

Having probably painted a slightly overdramatic and rather gloomy picture of ‘yuppie’ life, I shall now focus on the purpose of this blog. That is, to focus on the importance of intergenerational planning and ensuring that one generations’ fortunes can benefit another’s struggles and challenges.

The aging baby boomer population are predominantly in their 60’s and 70’s today, with a life expectancy which is approximately around the mid-late 70’s. With this in mind, statistically speaking, by approximately 2030 the baby boomers in the UK and US are expected to pass down around £3 trillion to the next generation. This singular passing of wealth positions millennials to become the richest generation ever before. But this doesn’t come without its risks and complications, namely death duties on estates.

Now, there is no easy legal way to mitigate Inheritance Tax. The main drawbacks of IHT planning to name but a few include high costs and charges, increased risk, loss of control and timing issues such as the infamous 7 year gifting clock.

So what’s the solution? Well, we have one. I’m talking about starting a new family trend that provides a protected legacy of wealth for generations to come. One where your Children, Grand-Children, Great-Grandchildren and ongoing relatives can benefit from your long-lasting wealth preservation planning.

The fundamentals of this product enable you to leave assets to your beneficiaries in the same way you have otherwise planned to, with the small difference being that the funds pass into a trust on death before then being loaned out to the beneficiaries via a loan agreement on a favourable basis.

The funds are theirs to spend as they please, or to be spent under the trustees’ careful watch based on your specified expression of wishes. However, the key aspects of the proposed structure mean that the funds loaned out are protected against death, divorce, separation and bankruptcy since they remain protected under the loan agreement as a debt to the individual’s estate.

These products may not be suitable for all, although we feel that they could benefit many. For these reasons I would urge you to contact myself or one of our other estate planning specialists at Elevation to discover how we can tailor this type of legacy planning around your individual needs and circumstances.