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Multi-Generational Wealth Planning: Strategies for Family Wealth Transfer

· 18 min

Executive Summary

The confluence of three significant regulatory shifts demands a fundamental reassessment of multi-generational wealth planning strategies. The residence-based inheritance tax regime, operational since 6 April 2025, replaced the longstanding domicile-based system with a long-term UK resident test requiring ten years of residence within the previous twenty tax years.1 Pension death benefits enter the inheritance tax estate from 6 April 2027, affecting an estimated 10,500 estates with new liabilities.2 Agricultural property relief and business property relief reforms from April 2026 introduce a combined allowance now standing at GBP 2.5 million for 100 per cent relief.3 These changes coincide with a projected GBP 5.5 trillion wealth transfer from Baby Boomers to younger generations over the next two decades, yet only 26 per cent of families have comprehensive transfer strategies in place.4 This article provides an integrated framework for advisors navigating these concurrent reforms whilst establishing multi-generational client relationships.

1. The Multi-Generational Planning Imperative

Scale of the Wealth Transfer Opportunity

The United Kingdom stands at the threshold of an unprecedented intergenerational wealth transfer. Industry research indicates that approximately GBP 5.5 trillion will transfer from Baby Boomers to Millennials and Generation Z over the coming twenty years, with more than GBP 1 trillion transferring by the end of 2025 alone.4 Baby Boomers currently control 52.5 per cent of total UK wealth, estimated at approximately GBP 5.1 trillion as of 2020.5 High net worth individuals represent a concentrated portion of this transfer, with GBP 127 billion expected from approximately 36,000 HNW individuals and GBP 200 billion from approximately 770 ultra-high net worth individuals.4

This transfer activity is already generating substantial and rapidly increasing inheritance tax revenue. Receipts for 2024/25 reached GBP 8.2 billion, representing approximately a GBP 0.8 billion increase year-on-year.6 Current annual inheritances exceed GBP 100 billion and continue rising, whilst 76 per cent of HNW individuals report providing financial support to adult children, with average annual gifts of GBP 5,560 to children and GBP 4,056 to grandchildren.5

The concentration of wealth among older generations creates both planning imperative and commercial opportunity for wealth managers. Families with accumulated wealth spanning property, pensions, investments, and business interests require coordinated strategies that traditional single-product advice cannot deliver.

The Planning Gap

Despite the scale of wealth in motion, comprehensive planning remains the exception rather than the norm. Industry research consistently identifies a significant preparation gap: surveys suggest that fewer than three in ten families have a comprehensive wealth transfer strategy, while approximately half feel underprepared despite a clear majority viewing intergenerational transfer as extremely important.7 Only 17 per cent of Baby Boomers have a formal inheritance plan, and 41 per cent of younger generations report discomfort discussing wealth transfer with parents.5

This gap extends to the advisory community itself. Research indicates that 69 per cent of advisors lack a plan to address the great wealth transfer, suggesting significant scope for practitioners who develop multi-generational capabilities.5 Traditional siloed planning approaches, addressing pensions, investments, and property separately, prove inadequate given the cross-cutting nature of recent regulatory changes.

The disconnect between perceived importance and actual preparation reflects several barriers: family reluctance to discuss mortality and money, complexity of the planning landscape, and insufficient integration between professional advisors serving different aspects of the family's financial life.

Defining Multi-Generational Planning

Multi-generational wealth planning encompasses the coordinated structuring of assets, governance frameworks, and transfer mechanisms across two or more generations. This extends beyond tax-efficient asset transfer to incorporate family governance, values alignment, successor development, and the maintenance of client relationships through generational transitions. The regulatory changes now operational create both imperative and opportunity for advisors to position themselves as architects of integrated family-wide strategies.

The approach requires understanding not merely of technical planning tools but of family dynamics, communication patterns, and the differing priorities across generations. Younger family members may prioritise sustainability and impact investing whilst older generations focus on wealth preservation. Effective multi-generational planning bridges these perspectives within coherent structures.

2. The New Regulatory Landscape

Residence-Based Inheritance Tax Regime

The Finance Act 2025 fundamentally altered the basis for determining inheritance tax liability on non-UK assets. From 6 April 2025, the long-term UK resident test replaced the domicile-based system for excluded property purposes.1 An individual qualifies as a long-term UK resident if tax resident in the United Kingdom for at least ten of the previous twenty tax years. Individuals who have been non-UK resident for ten consecutive years within the prior nineteen years are excluded from long-term resident status.1

The legislation includes specific provisions for young persons, applying a scaled lookback period calculated as half of the years the individual has been alive. Settled property treatment depends on the settlor's long-term resident status, not the beneficiaries, requiring advisors to trace settlor residence history when assessing trust structures.1

For internationally mobile families, the tail provisions warrant particular attention. HMRC guidance confirms that departing long-term residents remain within inheritance tax scope for their worldwide assets during graduated tail periods.8 Those with ten to thirteen years of prior UK residence face a three-year tail, scaling progressively: fourteen years attracts a four-year tail, fifteen years a five-year tail, and so forth to a maximum ten-year tail for those with nineteen or more years of prior residence.8 Individuals who held deemed domicile status on 30 October 2024 receive only a three-year tail regardless of residence duration.8

The shift from domicile to residence creates planning opportunities for some clients whilst imposing new constraints on others. Individuals who could establish non-UK domicile under the previous rules may now face extended UK inheritance tax exposure based purely on residence duration.

Pension Death Benefits from April 2027

The second major reform brings unused pension funds and death benefits into the inheritance tax estate from 6 April 2027.2 Personal representatives bear liability for reporting and paying inheritance tax on pension assets, with pension beneficiaries potentially becoming jointly or solely liable in certain circumstances. HMRC will have mechanisms for directing pension administrators to withhold and pay inheritance tax directly.2

Government impact assessments project that 10,500 estates will have new inheritance tax liability from this change, with 38,500 estates paying increased amounts. The average liability increase stands at GBP 34,000 per affected estate, based on 213,000 estates with inheritable pension wealth in the 2027-28 tax year.9 Key exclusions include death in service benefits from registered pension schemes and dependants' scheme pensions from defined benefit or collective money purchase arrangements. Benefits to surviving spouses, civil partners, and charities retain existing exemptions.2

The 22-month lead time before implementation creates a restructuring window for clients with significant defined contribution pension wealth. Advisors should assess whether pension drawdown, lifetime annuity purchase, or accelerated gifting strategies may preserve more estate value than pension retention under the new rules. The interaction with annual allowance constraints and the money purchase annual allowance adds further complexity to withdrawal strategies.

Agricultural and Business Property Relief Reforms

From 6 April 2026, agricultural property relief and business property relief operate under a reformed framework. A combined allowance of GBP 2.5 million, increased from the originally announced GBP 1 million following the December 2025 announcement, applies for 100 per cent relief, with 50 per cent relief applying above this threshold.3 The allowance is transferable between spouses or civil partners, allowing up to GBP 5 million in qualifying assets to pass without inheritance tax liability.3

Forestalling rules apply to transfers from 30 October 2024 where death occurs on or after 6 April 2026. Trusts receive a GBP 2.5 million allowance on ten-year anniversary and exit charges, with allowances divided where multiple trusts were established by the same settlor after 30 October 2024.3 Shares designated as not listed on recognised stock exchanges attract only 50 per cent relief regardless of allowance availability.3

These reforms particularly affect family businesses and agricultural enterprises where ownership transitions had relied on full relief availability. Families with qualifying assets exceeding the GBP 2.5 million threshold must now incorporate inheritance tax into succession planning that previously assumed full relief.

Frozen Thresholds and Fiscal Drag

The nil-rate band remains frozen at GBP 325,000 and the residence nil-rate band at GBP 175,000 until April 2031.10 This extended freeze, confirmed in the Autumn Budget 2025, represents a further year beyond the April 2030 endpoint established by Autumn Budget 2024. In conjunction with asset price inflation, the freeze continues to draw more estates into inheritance tax liability and increases the absolute tax payable on larger estates. For married couples and civil partners, the combined transferable allowance remains at GBP 1 million where residence nil-rate band conditions are satisfied, but the residence nil-rate band taper at GBP 2 million estates reduces available reliefs for wealthier clients.10

The prolonged freeze compounds the effect of property price appreciation. Estates that fell below the threshold a decade ago increasingly attract liability, whilst estates already subject to inheritance tax face higher absolute charges as values increase against static reliefs.

3. Lifetime Transfer Strategies

Potentially Exempt Transfers and the Seven-Year Rule

The potentially exempt transfer mechanism remains the cornerstone of lifetime giving for inheritance tax purposes. Under the Inheritance Tax Act 1984 section 3A, a gift to an individual becomes exempt if the transferor survives seven years.11 Failed potentially exempt transfers, where death occurs within seven years, become chargeable transfers. Advisors must emphasise to clients that the seven-year period runs from the date of transfer, not from any subsequent notification or registration.

Taper relief applies to potentially exempt transfers made three to seven years before death, but its operation is frequently misunderstood. The relief reduces the applicable tax rate, not the transfer value.12 The full 40 per cent rate applies to gifts made zero to three years before death. Gifts three to four years before death are taxed at 32 per cent (80 per cent of the full rate), four to five years at 24 per cent, five to six years at 16 per cent, and six to seven years at 8 per cent.12

The fourteen-year cumulation rule adds complexity for clients making substantial lifetime transfers. Potentially exempt transfers within seven years of death may affect the tax calculation on immediately chargeable transfers, such as gifts into trust, made up to seven years earlier than the failed potentially exempt transfer.13 This fourteen-year lookback period requires comprehensive gift records and careful sequencing of lifetime transfers.

Annual and Small Gifts Exemptions

The annual exemption permits transfers of GBP 3,000 per tax year free from inheritance tax, with unused allowance carrying forward for one year only.14 Small gifts of up to GBP 250 per donee per year are exempt, with no limit on the number of recipients, though the annual exemption and small gifts exemption cannot both apply to the same donee.14

Marriage and civil partnership exemptions provide additional scope: GBP 5,000 from a parent, GBP 2,500 from a grandparent, and GBP 1,000 from any other person may be transferred on marriage or civil partnership formation.14

Normal Expenditure Out of Income

The normal expenditure out of income exemption under section 21 of the Inheritance Tax Act 1984 represents a potentially unlimited planning tool that remains underutilised in practice.15 Three conditions must be satisfied: the gift forms part of the transferor's normal expenditure, the gift is made out of income (not capital), and after the gift the transferor retains sufficient income to maintain their usual standard of living.15

When properly documented and structured, this exemption can facilitate substantial regular transfers. Common applications include regular premium payments on life insurance policies held in trust, grandchildren's school fees, regular deposits to Junior ISAs, and ongoing support for adult children. HMRC guidance emphasises the pattern of giving: a single gift cannot establish normal expenditure, but a pattern of gifts over time can retrospectively qualify earlier payments in the series.15

The exemption requires meticulous and comprehensive record-keeping. Advisors should encourage clients to maintain documented income and expenditure analyses demonstrating that surplus income exists and that gifts derive from that surplus rather than accumulated capital.

Integration with Residence Tail Provisions

For internationally mobile clients, the interaction between lifetime transfer strategies and residence tail provisions requires careful analysis. A client departing the United Kingdom after fifteen years of residence faces a five-year tail during which worldwide assets remain within inheritance tax scope. Potentially exempt transfers made during the tail period start the seven-year clock, but if the transferor leaves the United Kingdom entirely before the tail expires and the seven-year period completes, complex jurisdictional questions arise regarding enforcement and asset recovery.

Advisors should carefully model multiple scenarios considering residence intentions, tail duration, and gift timing to optimise transfer strategies for mobile families.

4. Trust Structures for Multi-Generational Wealth

The Relevant Property Trust Regime

Since the Finance Act 2006 reforms, most new trusts fall within the relevant property regime, subject to entry charges, ten-year anniversary charges, and exit charges.16 The entry charge applies at the 20 per cent lifetime rate on values exceeding the settlor's available nil-rate band. Given the frozen nil-rate band of GBP 325,000, substantial settlements attract immediate tax liability.16

Ten-year anniversary charges are calculated on a notional lifetime transfer basis, with a maximum effective rate of 6 per cent.17 Exit charges are proportionate to the time elapsed since the last ten-year anniversary. Certain trusts remain outside the relevant property regime, including immediate post-death interests, disabled person's trusts, and trusts for bereaved minors, providing opportunities for targeted planning where client circumstances align.16

The interaction between relevant property trust charges and the new APR/BPR reforms requires particular attention. Where trust assets include qualifying business or agricultural property, the GBP 2.5 million trust allowance operates separately, with allocations shared across trusts created by the same settlor after 30 October 2024.

Family Investment Companies

Family investment companies offer a mechanism for transferring value whilst retaining control. The typical structure involves founders holding voting shares with nominal value whilst next generation members hold growth shares capturing future value appreciation. Dividends can be directed to any share class, providing flexibility in income distribution.18

The tax treatment involves corporation tax at the main rate of 25 per cent, compared with personal income tax rates up to 45 per cent. Dividends received from UK companies are generally exempt from corporation tax. However, several limitations warrant consideration: no personal capital gains tax allowances apply, business property relief is unavailable as the company holds investments rather than conducting trade, public filing at Companies House removes privacy, and HMRC scrutiny of family investment companies increased through 2025.18

Family investment companies typically suit families with investable assets exceeding GBP 2 million where control retention is paramount.18 The double taxation risk, with corporation tax on company profits followed by income tax on dividends extracted, means the tax advantage depends on distribution patterns and holding periods.

Deeds of Variation

Where estate planning opportunities were missed during the deceased's lifetime, deeds of variation under section 142 of the Inheritance Tax Act 1984 provide post-death flexibility. A variation must be executed within two years of death and contain a written statement that the parties intend section 142 to apply.19 The variation cannot be made for consideration, and where it increases inheritance tax liability, personal representatives must join as parties.19

A deed of variation is treated as if the deceased had made the varied disposition, enabling surviving beneficiaries to redirect assets to reduce overall family tax liability or to achieve planning objectives the deceased had not implemented.

5. Family Governance: Beyond the Technical

Governance as Wealth Preservation

Technical planning structures address asset transfer mechanics but cannot resolve the human dynamics that frequently dissipate family wealth. STEP guidance emphasises that family governance structures are essential, not optional, for multi-generational wealth preservation.20 Research suggests family wealth typically dissipates by the third generation, often attributable to communication failures, unaligned values, and inadequate successor preparation rather than tax inefficiency.

Only 47 per cent of UK family offices have formal succession frameworks in place, indicating substantial governance gaps even among the most sophisticated wealth holders.21 For families below the ultra-high net worth threshold, governance structures need not replicate family office complexity but should establish clear decision-making protocols and communication expectations.

Practical Governance Frameworks

Effective family governance typically incorporates several elements. A family council provides a forum for structured dialogue on wealth matters, meeting regularly with defined agendas and decision-making protocols. Participation typically extends to adult family members, with graduated involvement for younger members as they mature.20

Values documentation captures the family's philosophy regarding wealth stewardship, philanthropic priorities, and expectations of family members. This documentation guides trustees and advisors in exercising discretionary powers and helps younger generations understand the context and responsibilities accompanying inherited wealth.20

Next generation development programmes prepare successors for their future roles, covering financial literacy, investment principles, family history, and the responsibilities accompanying wealth. STEP recommends engaging next generation members in appropriate governance roles from their twenties, building capability before significant wealth transfers occur.21

Communication protocols establish clear expectations for information sharing, meeting frequency, and dispute resolution. Many families benefit from engaging professional facilitators for governance discussions, removing the burden from family members of managing potentially contentious conversations.

6. Implementation Framework for Advisors

Multi-Generational Client Assessment

Developing multi-generational relationships requires systematic assessment beyond individual client circumstances. Key diagnostic questions include: which family members currently receive advice, what is the total family wealth across generations, what existing structures are in place, what governance arrangements exist, and what are the family's values regarding wealth transfer?

Understanding family dynamics, including relationships between generations, differing expectations, and potential conflicts, enables advisors to position themselves as trusted counsellors rather than product distributors. The ability to facilitate difficult conversations across generations often proves as valuable as technical expertise.

Coordinated Planning Approach

The regulatory changes now operational demand coordinated rather than siloed advice. A client's pension position affects their inheritance tax planning, which interacts with their residence status, which may determine trust treatment. Advisors maintaining separate files for pensions, investments, and estate planning risk missing critical interactions.

Regular and structured planning reviews should assess all regulatory touchpoints simultaneously. For the 22-month period before April 2027 pension changes take effect, every client review should explicitly address pension death benefit strategy alongside other planning elements.

Specialist Referral Protocols

Multi-generational planning frequently exceeds the competence boundaries of individual advisors. Establishing referral protocols with solicitors specialising in trust and estate matters, tax advisors with international expertise, family governance facilitators, and specialist life insurance brokers enables comprehensive client service without overstepping professional boundaries.

Clear documentation of referral rationale and outcomes protects advisors against future claims that planning was inadequate or that specialist input should have been obtained.

Review Triggers and Monitoring

Beyond scheduled periodic reviews, advisors should establish triggers for ad hoc planning reviews: significant regulatory changes (already occurring), family events (births, deaths, marriages, divorces), substantial asset transactions, and residence changes. For internationally mobile families, annual residence reviews are essential given the cumulative counting under the long-term resident test.

Documentation of planning discussions, advice given, and client decisions protects advisors and provides continuity as client relationships transition between generations.

Conclusion

The concurrent implementation of residence-based inheritance tax rules, pension death benefit inclusion, and agricultural and business property relief reforms creates an unprecedented planning environment. Advisors who develop integrated multi-generational frameworks, combining technical precision with family governance capabilities, will be best positioned to capture the GBP 5.5 trillion wealth transfer opportunity whilst delivering genuine value to client families.

The 22-month window before pension changes take effect provides immediate impetus for client engagement. The transition from domicile to residence-based rules demands reassessment of existing structures for internationally mobile clients. And the recognition that only 26 per cent of families have comprehensive transfer strategies highlights the scope for advisors who can bridge the planning gap.

Effective multi-generational planning requires advisors to position themselves not merely as technical specialists but as trusted counsellors to families across generations. Those who achieve this positioning will retain assets through generational transitions rather than losing clients to competing advisors cultivating relationships with next generation members.

CPD Declaration

Estimated Reading Time: 20 minutes Technical Level: Advanced Practice Areas: Estate Planning, Wealth Management, Trust Structuring, Tax Planning

Learning Objectives

Upon completing this article, practitioners will be able to:

  1. Apply the long-term UK resident test to determine inheritance tax liability for internationally mobile clients, including calculation of tail provision durations
  2. Evaluate the impact of pension death benefit inclusion from April 2027 on existing client estate structures and identify restructuring priorities
  3. Distinguish between taper relief on rates versus taper relief on values when advising clients on lifetime transfer timing
  4. Assess family investment company suitability against alternative structures, considering corporation tax, business property relief unavailability, and HMRC scrutiny factors

SRA Competency Mapping

  • A2: Maintain a current understanding of the law applicable to the delivery of legal services
  • A4: Apply legal knowledge to the provision of services to clients
  • B6: Keep client matters confidential and manage information about clients

Reflective Questions

  1. How would the residence tail provisions affect advice to an internationally mobile client considering UK departure after sixteen years of residence?
  2. What changes to pension drawdown strategy might be appropriate for clients with significant defined contribution pension wealth ahead of April 2027?
  3. How might formal family governance structures be introduced to existing HNW client families who have historically avoided such conversations?

Professional Disclaimer

The information presented reflects the regulatory and legislative position as of 2026-02-06. Regulations, tax rules, and professional guidance are subject to change. Readers should independently verify all information before acting and seek advice from appropriately qualified solicitors, financial advisors, or other professionals for their specific circumstances.

Neither WUHLD nor the author accepts liability for any actions taken or decisions made based on the content of this article. Professional readers are reminded of their own regulatory obligations and duty of care to their clients.

Footnotes

Footnotes

  1. Finance Act 2025 Part 2 Chapter 4 (March 2025). https://www.legislation.gov.uk/ukpga/2025/8/part/2/chapter/4 ↩ ↩2 ↩3 ↩4

  2. GOV.UK: Inheritance Tax on unused pension funds and death benefits (October 2024, updated October 2025). https://www.gov.uk/government/publications/inheritance-tax-unused-pension-funds-and-death-benefits/inheritance-tax-unused-pension-funds-and-death-benefits ↩ ↩2 ↩3 ↩4

  3. GOV.UK: Agricultural property relief and business property relief changes (October 2024, updated December 2025). https://www.gov.uk/government/publications/changes-to-agricultural-property-relief-and-business-property-relief/agricultural-property-relief-and-business-property-relief-changes ↩ ↩2 ↩3 ↩4 ↩5

  4. Find a Wealth Manager: The UK's Generational Wealth Transfer 2025 (January 2025). https://www.findawealthmanager.com/knowledge/the-uks-generational-wealth-transfer-2025/ ↩ ↩2 ↩3

  5. Brooks Macdonald: The great wealth transfer (2025). https://www.brooksmacdonald.com/resources/insights/great-wealth-transfer-financial-shift ↩ ↩2 ↩3 ↩4

  6. HMRC Tax Receipts Statistics (April 2025). https://www.gov.uk/government/statistics/hmrc-tax-and-nics-receipts-for-the-uk ↩

  7. Aberdeen Adviser: Intergenerational Wealth Transfer Research (June 2025). https://www.aberdeenadviser.com/en-gb/insights/intergenerational-wealth-transfer-research-different-attitudes ↩

  8. HMRC IHTM47020: Long-term UK residence test (April 2025). https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm47020 ↩ ↩2 ↩3

  9. GOV.UK: Inheritance Tax on unused pension funds and death benefits - Impact statistics (October 2024, updated October 2025). https://www.gov.uk/government/publications/inheritance-tax-unused-pension-funds-and-death-benefits/inheritance-tax-unused-pension-funds-and-death-benefits ↩

  10. GOV.UK: Budget 2025 Overview of tax legislation and rates (November 2025). https://www.gov.uk/government/publications/budget-2025-overview-of-tax-legislation-and-rates-ootlar/budget-2025-overview-of-tax-legislation-and-rates-ootlar ↩ ↩2

  11. Inheritance Tax Act 1984 section 3A (1986, as amended). https://www.legislation.gov.uk/ukpga/1984/51/section/3A ↩

  12. HMRC IHTM14611: Taper relief - when the relief applies (December 2024). https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm14611 ↩ ↩2

  13. HMRC IHTM14514: Cumulating transfers more than seven years before death (December 2024). https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm14514 ↩

  14. HMRC IHTM14180: Small gifts exemption (December 2024). https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm14180 ↩ ↩2 ↩3

  15. HMRC IHTM14231: Normal expenditure out of income - introduction (December 2024). https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm14231 ↩ ↩2 ↩3

  16. HMRC IHTM42000: Relevant property trusts - contents (2024). https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm42000 ↩ ↩2 ↩3

  17. HMRC IHTM42081: Ten year anniversary - introduction (2024). https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm42081 ↩

  18. Hunters Law: Family Investment Companies (FICs) and HMRC scrutiny in 2025 (January 2025). https://www.hunterslaw.com/insights/family-investment-companies-fics-and-hmrc-scrutiny-in-2025-what-uk-high-net-wo/ ↩ ↩2 ↩3

  19. Inheritance Tax Act 1984 section 142 (1984, as amended). https://www.legislation.gov.uk/ukpga/1984/51/section/142 ↩ ↩2

  20. STEP: Governance of Family Wealth Across Generations (2024). https://www.step.org/web-event-library/governance-family-wealth-across-generations ↩ ↩2 ↩3

  21. STEP Journal: Strategic advice for the modern family (2025). https://journal.step.org/sponsored-content/step-journal-issue-2-2025/strategic-advice-modern-family ↩ ↩2

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