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Don’t bank on your inheritance – start planning now

Date: 09 November 2020

If you expect an inheritance to come your way some time in the future, or you’re thinking about leaving money to someone, now could be time to start planning for it.

We often think about inheritance in the traditional sense – the assets and financial legacy passed down to the next of kin when someone dies. But sharing wealth between generations could and should be something we talk about throughout our lifetimes.

For beneficiaries, having a realistic idea of what they will receive can allow them to plan and make arrangements for how to use it. This is particularly  important if money is passed on to younger family members who may benefit from time to make informed decisions about how best to use an inheritance effectively over the long-term.

For those thinking of passing on assets, discussing it with their family could help them understand how and when their loved ones could make best use a wealth transfer and express their own views about how they think inheritance could be used to support future prosperity for their family. The best way to find out what you’ll get and make a plan is with the help of a financial adviser.

 

You need to talk about money

Starting a conversation about inheritance planning means family members can understand what they stand to receive, and how they can use it. Sadly, families often leave it too late to start planning how they pass on assets.

Inheritance could be one of the biggest financial transactions you’ll ever encounter in your lifetime and requires careful planning. Yet it is still something of a taboo, and many families don’t discuss what assets they plan to leave for their family. Recent research from the Institute for Fiscal Studies shows that, for someone born in the 1980s, the typical inheritance will equal as much as 14% of their lifetime earnings, so it’s a huge amount of money and something every family should think carefully about.

 

Passing it on to younger generations

Data from the Office for National Statistics shows that we tend to receive an inheritance between age 55-65, although for many people this will be too late in life for it to be of most value. Quilter’s own research shows that around one in five baby boomers who received a cash lump sum inheritance gave it straight to younger relatives, indicating they were left money they didn’t need, and that planning was lacking.

By beginning the conversation early, many families will find they can start gifting money now. This could help family members pay for their studies, or get on the housing ladder, instead of being the recipient of their parent’s entire estate in their 50s and 60s.

We also know that while there is a huge amount of family wealth set to cascade through the generations in the coming decades, particularly as wealth accumulated by the baby boomers passes on to their family. Not everyone will receive what they expected. Some people do overestimate their future inheritance, and it’s risky to bank on receiving a sizeable inheritance unless you’ve been told what will be left to you in someone’s will.

 

An adviser can make broaching the subject easier

It’s not always easy to discuss money matters with family, especially when it involves what will be passed on after death. A financial adviser can not only help you to put an accurate figure what you may be due, but also make it easier to hold an objective conversation with the whole family.