Wealthy parents are increasingly donating more to charities amid concerns over rising inheritance tax bills and the impact of leaving too much money to their children.
A study by Rathbones of high-net worth parents with an average wealth of more than £3 million found 75% believe that leaving too big an inheritance can be a curse on their children’s lives and are considering ways to avoid the problem.
Over three fifths (61%) are concerned that any money left to children will be used irresponsibly, while 57% say their adult children already have enough money and there are more important uses for their assets.
Nearly two-thirds (65%) say they would make inheritance access conditional on achievements, such as qualifications.
Meanwhile, 13% plan to leave money directly to grandchildren, with another 26% considering it, with more than half (52%) of those skipping a generation citing concerns their children would misuse the funds, while 41% are motivated by tax efficiency.
Rathbones said the number of parents increasing their charitable donations over the past two years had reached 53%. A surge in income and a desire to contribute to making the world a better place were cited as the top two motivating factors behind their generosity.
With nil-rate bands frozen and pensions set to be included in estates from April 2027, Rathbones warned more families face rising IHT bills. Charitable donations can ease this burden, as gifts to charity are IHT-free and leaving 10% of your estate to charity cuts the IHT rate from 40% to 36%.
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.
“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.”
Main image: marcos-paulo-prado-83JZupwXfhU-unsplash
