PENSIONS | 4 MIN READ

Passing on wealth to the next generation

content writer
Written by Sally Dempsey
Passing on wealth to the next generation

Research[1] has highlighted how millions of Britons say they want to plan to pass on wealth to their children and grandchildren in a Will – but fewer than half have written one.

Failing to plan, write a Will or complete estate planning could potentially lead to a significant Inheritance Tax (commonly called IHT for short) bill being levied on a person’s estate when they die.

Anything that isn’t exempt will be taxed

IHT is a tax that may be paid on your estate (your money, possessions and your share of any property) when you die, reducing how much value will ultimately pass to your beneficiaries.

The starting point for IHT in the current 2022/23 tax year is £325,000. When the value of an estate exceeds this amount, anything that isn’t exempt will be taxed at 40%.

The tax year runs from 6 April to the following 5 April. So, the tax year 2022/23 started on 6 April 2022 and finishes on 5 April 2023.

Rising number of people could unexpectedly face IHT bills

Recent rises in houses prices mean the estates of a rising number of people could unexpectedly face IHT bills.

The research found that 30 million (88%) people with children say they plan to leave money to their children and/or grandchildren in their Will but only 41% have written one. Twenty million (59%) parents do not currently have a Will.

Although over half (57%) of people with children are considering seeking professional financial advice about the best way to pass on wealth, only 13% have done so.

More than half (56%) of people with children say they are considering writing wealth into trust but only 12% have actually done so.

How parents plan to pass on wealth

  • Leaving it in a Will 88%
  • Bank transfer/cash 67%
  • Consulting financial adviser 57%
  • Writing wealth into trust 56%
  • Putting money into investment 53%
  • Putting money into a pension for their children 43%

Minimising the amount of IHT you could be liable for

The research identified that mass affluent consumers – those with assets of between £100,000 and £500,000 excluding property – are more likely to have their affairs in place to pass on an inheritance.

More than half (51%) of mass affluent parents have a Will in place. 20% of mass affluent parents have put money into an investment for their children or grandchildren (compared to 12% of all parents).

17% of mass affluent parents have obtained professional financial advice to discuss the best way to pass on wealth. And 13% of mass affluent parents have written wealth into trust for their children. The average amount written into a trust was £184,000 while more than one in five (21%) wrote more than £250,000 into a trust.

Source data:
[1] LV= surveyed 4,000 nationally representative UK adults (of which at least 500 were mass affluent) via an online omnibus conducted by Opinium in December 2021.

Whatever your thoughts, to ensure you take account of the full range of available options, we would always recommend you consider obtaining professional financial advice.

Follow F3 Wealth on Twitter

TAX TREATMENT DEPENDS ON THE INDIVIDUAL CIRCUMSTANCES AND MAY BE SUBJECT TO CHANGE IN FUTURE.

 

This content is for your general information and use only, and is not intended to address your particular requirements. The content should not be relied upon in its entirety and shall not be deemed to be, or constitute, advice. Although endeavours have been made to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No individual or company should act upon such information without receiving appropriate professional advice after a thorough examination of their particular situation. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of the content. Thresholds, percentage rates and tax legislation may change in subsequent Finance Acts. Levels and bases of, and reliefs from, taxation are subject to change and their value depends on the individual circumstances of the investor. The value of your investments can go down as well as up and you may get back less than you invested. All figures relate to the 2018/19 tax year, unless otherwise stated.

Recent Posts

F3 Wealth