The Bank of Grandparents Is Open — But Families Need More Than Good Intentions
There has been a fundamental change in the way families think about inheritance.
For generations, the traditional model was straightforward: build wealth during your lifetime, preserve it, and pass it to the next generation through your Will. That model is changing.
New research from The Private Office suggests that 81% of people aged 45 and over believe parents and grandparents should help younger family members financially during their lifetime, rather than waiting until death. And the sums involved are significant. Around £17 billion is now being gifted by families each year, with an estimated £9.6 billion being used to help first-time buyers onto the property ladder.
The "Bank of Mum and Dad" has very clearly become the Bank of Grandparents. But behind those figures lies a much more important estate-planning question. The problem is not whether families want to give. It is knowing how much they can safely give.
The research found that 64% of respondents would be comfortable making a substantial lifetime gift. Yet the principal reason many do not is equally understandable. 37% are concerned about running out of money later in life, while another 16% are worried about the potential cost of future care.
That tension sits at the centre of modern legacy planning. Parents and grandparents may have substantial wealth on paper, particularly through property, but that does not necessarily mean they feel financially secure enough to start giving it away.
And simply transferring capital because "we may as well give it to the children now" is not a financial plan. It is a transaction. Those are two very different things.
Families say they want to give earlier — but many still leave it very late
Perhaps the most revealing finding is the gap between what people say and what they actually do. Some 71% believe financial support should be provided earlier in life, when it can make the greatest difference. Yet HMRC data cited in the research shows that people aged 85 and over accounted for almost 60% of estates reporting gifts in 2022/23.
In other words, families increasingly understand the benefit of lifetime giving, but much of that giving is still happening towards the end of life. That matters.
A gift towards a first home at 30 may completely change a child's or grandchild's financial trajectory. The same money inherited at 60 may simply arrive too late to achieve anything like the same impact.
Modern legacy planning therefore needs to ask a different question: Not simply "what do I want my family to inherit?" but "when would my wealth be most useful to them?"
But gifting is not automatically estate planning
There is another side to this. Lifetime gifting can be extremely effective, but only where it is properly considered and properly completed.
The research refers to an estimated £336 million of inheritance tax collected by HMRC over the past five years from gifting arrangements subsequently found not to have been fully completed. That is an important warning.
Calling something a gift does not necessarily make it one for tax purposes. Families can run into difficulties where arrangements are informal, records are poor, ownership is unclear, or the person making the gift continues to enjoy or control the asset in a way that undermines the intended planning.
And once substantial sums, property or investments are involved, the consequences of getting that wrong can be considerable.
The iTrust view
At iTrust121, we believe the move towards lifetime legacy planning is entirely sensible. Waiting until death to transfer everything is increasingly at odds with the financial reality facing younger generations. But the answer is not indiscriminate gifting.
A properly constructed legacy plan should consider three things together:
what the family can afford to transfer;
when that transfer will provide the greatest benefit; and
how the arrangement can be made without unnecessarily compromising the older generation's own financial security.
That last point is critical. A parent or grandparent should not create tomorrow's financial problem in an attempt to solve today's inheritance tax problem.
The strongest planning therefore rarely begins with the tax. It begins with the family. What assets exist? What income is required? What provision may be needed later? Which family members need help now? What assets need protecting? And what should remain available to the person who created the wealth in the first place?
Only once those questions have been answered should the tax and legal structure follow.
The growth of the Bank of Grandparents is therefore not simply an interesting social trend. It is evidence that inheritance itself is changing.
Increasingly, the most valuable legacy may not be the cheque someone receives after a funeral. It may be the deposit that allowed them to buy their first home 30 years earlier.
James Berkeley
Senior Counsel
iTrust121 Ltd
Legacy planning should not simply determine who receives your wealth. It should consider when they receive it, how they receive it, and whether doing so leaves you properly protected as well.