Parents secretly plan to give their children a MUCH bigger inheritance than they expect, but only one in five families will discuss plans
- People expect an inheritance of an average of £ 78,000 from their parents
- Parents say they want to pass an average of £ 124,000
- Only a fifth of British adults discuss the legacy within their family
Parents are left with much more wealth than they admit to their children, who greatly underestimate what they might inherit.
People expect an inheritance of an average of £ 78,000 from their parents, much less than the £ 124,000 they are likely to receive.
According to the research by asset manager Charles Stanley, the average amounts that parents want to leave behind are much larger among older age groups.
Heredity: People expect to receive an average of £ 78,000 from their parents
Some parents may also overestimate their wealth, as recent government statistics show that the average inheritance is £ 11,000, but £ 33,000 under the age of 55-64 and £ 20,000 among the over-65s.
The house price hike of the past few decades means that later generations might be able to pass larger amounts than the previous ones when they die, but health care bills can also deplete their belongings more than they now realize.
Separate research has shown that many people “gamble” because they have fallen into a great inheritance to fund themselves in retirement, despite the risk that it will never or never happen or be smaller than they hope.
The Charles Stanley survey also found that only a fifth of adults in the UK discuss the inheritance within their family, meaning they are more likely to be taxed with a higher inheritance tax (see box below).
Meanwhile, 29 percent already have or believe they will receive some of their inheritance early, a figure that could increase as many households suffer financially during the Covid-19 crisis and may need additional support.
Charles Stanley surveyed just over 2,000 adults in February and found:
– People aged 54-74 expect to leave £ 174,000 on average to their children and the over-75s £ 275,000
– About 17 percent of people don’t know if they will inherit something
– Only 14 percent rely on receiving an inheritance and have already mentally ‘spent’ it
– After receiving an inheritance, 26 percent will put it into a savings account, 18 percent will pay off debt, 17 percent will use it to retire, 17 percent to get a mortgage, and 12 percent to buy a home .
Alex Price, director of financial planning at the company, says, “Adults in the UK are queuing for an unexpected stroke of luck as a significant gap is revealed between expectations and the amount to go their way.
“When it comes to significant amounts, it’s important to talk to your loved ones early about your intentions and your desires, and not doing so can come at a price.
“In addition to potentially reducing inheritance taxes and helping families build wealth in their long-term planning, many families could now transfer their wealth early by talking.”
How does inheritance tax work?
If you’re queuing for a big inheritance, you may also have to consider a significant tax bill.
Inheritance taxes were originally designed as a levy on the very affluent but triple real estate inflation since the 1980s has drawn more ordinary families in expensive areas to the net.
Only 5 percent of people leave estates large enough to hold their beneficiaries liable for inheritance taxes.
However, the real estate boom of recent decades means that this figure is expected to rise, with the heirs in house price hotspots bearing the greatest financial burden.
In essence, you should be worth £ 325,000 if you are single, or £ 650,000 jointly if you are married or in a civil partnership so that your loved ones have to take on the death duties.
But with a new private housing allowance – known as the zero-rate residence allowance – you can pass on more.
If you have a partner, own a property and plan to leave money to your immediate descendants, the threshold is now a combined £ 1 million.
If you are worth more, your heirs will have to donate 40 percent of your assets above that level to the government.
10 ways to avoid inheritance tax: Read more here.