A recent survey shows that 18% of adults aren’t planning to leave an inheritance to their children, and reveals that further declines are to be expected.
The survey, conducted by Opinum shows that 7% will instead leave their estates to grandchildren, or other family members, to avoid monies being subject to inheritance tax twice.
But further studies have also revealed that most adults will rely on inheritances to fund retirement and pay off debts, with 1 in 5 beneficiaries planning to use their inheritance to pay off mortgages and 16% planning to supplement retirement funds with inheritance payouts.
In a report published earlier this year, the Institute for Fiscal Studies also found an increasing reliance on inheritance in younger generations to help them get on the property ladder, along with findings that those born in the 1980s will have saved around £16,000 less at the age of 45 than previous generations.
“Relative to other sources of income, inheritances are likely to be about twice as important to the generation born in the 1980s as they were for those of us born in the 1960s. That trend looks set to continue”,
commented The Times reporter, Paul Johnson, earlier this year. But this doesn’t come as a “great surprise”, said Johnson, due to increasing divergence in fortunes between the wealthy baby boomer generation and their struggling children and grandchildren.
Added to this are the effects of the Covid-19 pandemic and housing boom, which experts predict will impact diminishing inheritance amounts even further.
Recent reports suggest the Government will increase the current 40% inheritance tax (IHT) rate to help cover the cost of the pandemic. Although by how much is currently an unknown, surveys conducted in the last few months show that 54% fear the Government is set to hike the IHT rate to 50%, with 1 in 7 predicting that it could even rise to 70%.
The latest housing boom and its soaring property prices are also pushing more estates into IHT-liable territory, again reducing the amount of cash that beneficiaries will actually see. Properties in London are already averaging at £487k and by 2025 house prices are expected to rise to £548k in London and £394k in the South East, all way over the current £325k IHT threshold which, the Government says, will be frozen until 2026.
So the chances are that, when, and if, families receive an inheritance, a quick property sale may be needed to ensure that debts are paid off, retirement funds topped up, and children are given a leg-up on to the property ladder, as was the case for some recent clients of Probate property specialists Proffered.
The property itself was a three-bed terraced house in South-East London valued at £500,000 which had been languishing on the market for five months, with very little interest. The five beneficiaries were all keen for a quick sale and fast grant of probate for several reasons. One was experiencing financial difficulties, and another wanted to gift a deposit to their son to help him buy his first home.
The beneficiaries, not having much luck with the traditional estate agency route of selling the property, decided to reach out to Proffered to see if the process could be speeded up. Following a physical valuation, an offer was made to the beneficiaries four days after their initial enquiry. Aside from the quick administrative turnaround offered to the beneficiaries, the valuation provided was accurately produced using multiple data points, and in consultation with several local estate agents.
The offer was accepted, and upon the executor’s request, the sale competed three days later. This meant that the beneficiaries received the funds of sale quickly, within two weeks of their initial enquiry. The final proceeds that each individual beneficiary received equated to an amount 1.1% below the market value, which by all accounts was an extremely small price to pay for such a quick sale. But it’s not just monetary values that are important to consider in deals such as this one, beneficiaries often talk of the sense of relief that quick financial and emotional closure on probate properties bring.
For more information about Proffered and how they can help your clients, please contact Adam Bonner adam@proffered.co.uk
This article was submitted to be published by Proffered as part of their advertising agreement with Today’s Wills and Probate. The views expressed in this article are those of the submitter and not those of Today’s Wills and Probate.
