Gen X will get a bumper inheritance – but their parents could cause them a massive headache

Generation X is set to inherit reams of wealth from their affluent parents and a massive headache, a report says.

A cocktail of potential financial blunders means this transfer of intergenerational wealth will be anything but smooth, new research has found.

Elderly parents have their financial admin in such a state of disarray that it risks an administrative and monetary headache for their loved ones, according to saving and investing platform Prosper, which polled 1,100 people.

Those age 46 to 62 – also known as Generation X – are in line to inherit thousands of pounds from their parents in what’s been dubbed the ‘great wealth transfer’.

This term was coined to mark the unprecedented shift of assets to their children and grandchildren from the so-called silent generation, born between 1925 and 1945, and baby boomers, born 1946 to 1964.

Generation X, which stretches from 1965 to 1980, covers a broad sweep of those aged 45 to 61, who may either be in the midst of family life themselves or eyeing up their own retirement.

But Prosper says a combination of poor financial administration and households where one person is the ‘sole controller’ of money matters will spell trouble for their beneficiaries when it comes to sorting out estates – and could mean bigger inheritance tax bills. 

Gen X struggled: Older parents less likely to have a financial adviser or savings for care

Many in the baby boom and silent generations have benefitted from sturdy house price growth, fruitful final salary pensions and lucrative wage rises, which means they are now sitting on sizeable assets.

This is particularly the case for those who live in parts of the country with high house prices and who have built up substantial savings, investment and personal pension pots. 

The transfer of wealth will be a welcome boost to squeezed ‘sandwich’ middle-aged couples, those looking after their children and helping their parents. Some of whom will be financially supporting adult children who cannot find jobs or are low-paid, while assisting ailing parents who need care.

But while Generation X is set to see a boom in its wealth, it faces a series of financial mistakes made by their parents that could eat into their inheritances and spell good news for the taxman.

There’s a host of death admin someone must do to prep for their own death – and the main financial action includes making sure your next of kin knows about your assets and is well prepped to take over the running of the finances.

Meanwhile, families are failing to plan adequately for inheritance tax despite many more estates being pulled into its net. A situation that will get worse when unspent pension pots are included from April 2027. 

The financial mistakes being made

Generation X’s parents are exposed to the sole-controller risk – where only one spouse controls all of the finances, has details about assets and knows key passwords for vital financial accounts.

This means that the surviving spouse is left in a financial black hole when their partner dies.

Of the older couples that are sole-controller households, some 37 per cent would not be able to manage the finances alone if the partner died, according to Prosper.

This means that adult Generation X children will be clobbered with an administrative nightmare before they can inherit that money.

But their adult Generation X children won’t be able to step in easily. More than half of adult children have no third-party bank mandate, which means that meaning they cannot legally step in to help with banking in a crisis.

Prosper found that Generation X is most affected by the sole-controller risk as almost half of their parents (48 per cent) rely on a single person to manage their money.

This pales in comparison to the 32 per cent of Millennials (age 29 to 45) who say one of their parents.

And that’s not the only risk that faces middle-aged couples.

Nick Perrett, founder and chief executive at Prosper, says: ‘We know that this era is set to be one of the biggest transfers of generational wealth between older couples and their families, but they are not set up to ensure that happens properly.

‘Gen Xers in particular are facing a series of monetary migraines – as their parents have created a uniquely dangerous combination of risks: the highest rates of sole financial control, the lowest IFA usage and a severe lack of care funds.’

Care costs are spiralling, with residential care costs reaching £67,496 a year on average. But 70 per cent of Generation X’s parents don’t have a designated care fund set up for pay for their needs. This means their estate could rapidly dwindle as assets are used to pay for care if needed.

Plus, some 62 per cent of the parents of Generation X are do not use a financial adviser. It means that middle aged familied will be left to untangle the death administration alone.

Plus, those who pay for advice grow their pensions and assets by almost £48,000 more, on average, than those who do not have advice, according to Unbiased.

It means that while Generation X are set to inherit booster pots, the sum could pale in comparison to the expected amount if their parents paid for advice.