Wealthy parents have been giving more to charity over the past two years due to rising Inheritance Tax and worries about leaving too much money to their children.
A warning has been issued for millions of parents leaving inheritances to children. Wealthy parents have been giving more to charity over the past two years due to rising Inheritance Tax and worries about leaving too much money to their children.
Three in four high-net-worth (HNW) mums and dads with average wealth over £3m believed that leaving too much inheritance could be a curse for their children. Three in five were concerned their children might use the money irresponsibly, too.
60 per cent said their children already had enough money, and over half of parents increased their charitable donations in the last two years. Gemma Gooch, head of charities distribution at Rathbones, said: “Our analysis shows many wealthy parents, already concerned about inheritance tax, fear the impact of too big an inheritance on their children’s aspirations and drive.
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“It is therefore no surprise that more are increasingly turning their attention to charitable giving.
“Incorporating charitable giving into financial planning allows parents to create a meaningful legacy, support causes close to their heart and potentially pass on a greater share of their estate to their chosen beneficiaries, rather than the taxman.”
Olly Cheng, financial planning director at Rathbones, said: “We’re seeing more clients aiming to strike a balance between reducing their IHT burden, supporting good causes, and leaving an inheritance that doesn’t dampen their children’s ambition.
“For those concerned about the latter, contributing up to £2,880 a year into a child’s pension – topped up to £3,600 with tax relief – could be a good option.
“The funds remain locked until retirement (age 55, rising to 57 from 2028), allowing decades of tax-free growth.”
Cheng added: “For those wanting more control over how and when wealth is passed on, a trust could be worth considering.
“Trusts can stagger access to funds, reducing the risks of sudden wealth undermining ambition. While more about control than tax efficiency, they remain a valuable option — especially for blended families.
“Professional advice is essential to find the right solution.”
