Now that infection figures are falling and the vaccine programme appears to be having an effect, the COVID-19 pandemic’s ripple effect on business will truly start to show.
While some businesses will get up and going quickly again, others will take their time. That in turn will limit the opportunities for the next generation to join an established company either after graduation or moving on from other short-term jobs.
Grandparent power
This is where you as a retired parent or grandparent can really make a difference. In the past, you may have helped your children get their foot on the property ladder. In post-pandemic Britain, you might consider giving the next generation a leg-up onto the business ladder instead.
And you won’t be alone. The coronavirus (COVID-19) pandemic has led to more people supporting younger family members financially. New research shows that 5.5 million older family members expect to provide additional financial support to younger members as a direct result of the pandemic.
Gifting financial help
According to the research, older family members provide on average £113 a month, collectively giving £372 million to loved ones each month in the form of regular gifts. In the survey, 31% say they use monthly gifts to help the younger generation save for ‘big ticket’ items like a housing deposit.
Gifting money can be complicated. HM Revenue & Customs stipulates you must be able to maintain your current standard of living from your remaining income to take advantage of tax exemptions. What’s more, there are tax implications for anything gifted over the £3,000 annual allowance.
If you want to gift monies, and are unsure of the implications, call us to discuss your income and tax positions before promising or transferring any funds.
Gift what you can afford, not what you need
The majority (62%) of parents and grandparents who give away money do so knowing they can afford to maintain their current lifestyle. However, the research suggests that over a third (38%) of those who gift money to family members have made sacrifices in order to do so. While many (31%) reported cutting back on some day-to-day spending in order to gift money, a fifth (21%) admitted they struggled to pay some bills having helped out a loved one.
Most parents and grandparents will gladly help out when they can. However, don’t over-stretch yourself in order to do so. Giving money to a family member has the potential to be a special experience, but the key is not to lose sight of your longer-term plan. If you both end up short of money, that helps nobody in the long run.
The priceless gift of advice
Many younger people will be tempted to start their own business post-pandemic. Young people often have the energy and the enthusiasm for this - but rarely the experience. Some may be highly creative, but poor with figures or financial matters.
The gift of your time, wisdom and experience can help them set up a business properly, and consider all the “less-fun” stuff such as accounts, payroll, stock control, tax, sales strategies and ROI.
Just be careful to be open-minded and current in your thinking when giving advice. Be businesslike and focused yourself. Nothing switches off a young entrepreneur more than well-intended advice that starts with the words “In my day…” Listen, encourage and dissuade if required, rather than instruct and dictate.
The gift of a job
If you own a family business, or still have a controlling stake, your estate planning should always include business succession planning. Again, here is an opportunity to give a younger relative a chance to experience working for the business. Whilst in the past your children may have been keen to make their own way at first, the reality of post-pandemic Britain will be rising unemployment and inevitably, fewer opportunities for your grandchildren. So that first, significant job on the CV will become particularly important.
Now is the time to offer a position IF your business can afford it, and especially if you wish family members to take your business on once you retire. Consider it a ‘dry run’ for your family business succession plan, and if it doesn’t work out, at least you know and can make other arrangements before you retire!
The family and your business LPA
There is another advantage to getting family members on board in your business. Should you become ill and unable to run your business, your business LPA will kick into place. By giving the next generation a chance to experience working with you, you’ll know who is best suited to help should the LPA be required. Again, if family members are unwilling to do this or not suited to the role, you can put other measures in place instead.
Not sure how to help the next generation?
Talk to us. We can look at your estate planning and identify tax-efficient ways for you help financially through gifts, trusts and more.