Case Study: Intergenerational Planning – Retirement Planning & Gifting to Adult Children


Client Overview:

This case study explores the journey of a couple who came to us for help planning their upcoming retirement after spending time living overseas for work. As part of his retirement package, the husband received an unexpected windfall from his employer, which significantly impacted their financial situation. They needed to determine how much they required to meet their retirement goals and how much they could sensibly gift to their adult children.

Their two adult children were both in university and had no experience with investing. The potential sums involved in their parents’ gifts were more than £300k each, so the children felt out of their depth. They sought help managing these funds for the foreseeable future and wanted to understand the long-term benefits and options for this money..

The Challenge:

Generation #1 (Parents):

Having lived overseas, the couple held assets across three countries, requiring a comprehensive “stock take” of their finances before retirement. They needed a strategy to move their assets back to the UK, where possible, and determine which assets to draw on first to ensure a tax-efficient retirement income.

They also wanted to understand how much they could afford to gift to their children without compromising their comfortable financial position. Their concerns included the potential inheritance tax (IHT) liability when they both passed away, and they wanted to be proactive in mitigating this risk.

Generation #2 (Children):

Neither of the children planned to use the funds received from their parents until they were well-settled in their careers (particularly geographically settled, as both career paths could take them anywhere). However, both planned to use the funds eventually to purchase a property, with one child likely purchasing in 5-10 years.

They sought guidance on managing their financial gifts during this period to ensure the funds were optimally invested.

Understanding Our Client’s Needs:

We initiated a comprehensive process to understand our client’s situation, which included:

Financial Inventory:

A thorough review of all assets (both UK-based and overseas), involving liaising with various providers and reviewing accumulated paperwork.

Values and Goals Identification:

  • Generation #1: Discussions focused on long-term financial priorities, lifestyle desires, and the capacity to fund future care needs potentially.

  • Generation #2: Clarifying short, medium, and long-term financial goals, particularly homeownership and career aspirations.

Cashflow Planning:

  • Generation #1: Cashflow planning was critical in determining how much they could comfortably afford to gift while maintaining their lifestyle in retirement.

  • Generation #2: Cashflow planning helped illustrate various scenarios for the gifted funds, including realistic house deposits and long-term planning for pension contributions.

Consolidation and Clarity:

The couple’s existing pensions, ISAs, investment pots, and direct equities were scattered across various providers. We meticulously reviewed each investment, analysing performance and associated costs. Their desire for a simpler, consolidated financial situation led us to implement a management strategy that provided a clear view of their total wealth without burdensome ongoing administration.

Investment Strategy and Ongoing Support:

Generation #1:

We built a medium-risk, well-diversified investment strategy that considered the couple’s overseas equities. Our strategy involved gradually reducing exposure to these equities over several years, mindful of tax implications.

Generation #2:

  • Child 1: As this child hoped to achieve homeownership in the next few years, we identified an appropriate house deposit amount and formed a cash management strategy for these earmarked funds, ensuring maximum interest was earned.
    We also created a lower-risk, well-diversified investment strategy for the remainder of the funds, aiming for real growth and providing a buffer for the property purchase.

  • Child 2: This child was further from homeownership, so we created a medium-risk strategy aligned with their goals and risk tolerance.
    We recognised their lack of investment experience and anxiety about market movements, so we included educational materials and regular presentations in our meetings to build their investment knowledge and confidence.

Relationship with the Next Generation

Once the parents’ financial situation was organised, we met with each child separately to discuss the upcoming gifts and form an appropriate plan for them. This included an onboarding process for each child, with discovery and investment plan meetings.

By connecting with the next generation, the parents were more comfortable making large financial gifts, knowing their children would be supported in making sound financial decisions and that the funds would not be squandered.

Outcome:

This case study demonstrates Ifamax’s commitment to guiding clients through intergenerational financial planning. By prioritising connection, understanding, clear communication, and strategic planning, Ifamax assisted two generations of clients in achieving their financial goals.


If you’d like to learn how we can help you, contact us or book a free initial consultation with a member of our Bristol office.

Disclaimer: This case study is for informational purposes only and should not be considered financial advice. Please consult with a qualified financial advisor for personalised guidance based on your specific circumstances.