Children’s inheritance – spend it or surrender it?
Nearly two thirds of under 35s expect inheritance from their parents and over half want it before they reach the age of 40 – what an impatient lot. Should we be spending their inheritance or giving them a helping hand?
Research from Skipton Financial Services has found that children and parents have some very different ideas when it comes to inheritance.
While many are expecting inheritance soon, the over-50s (i.e. their parents) have different ideas. Over half of them expect to live off their children’s future inheritance to fund their own retirement and more than one third are admitting that passing money on will put their own finances under strain.
The key question here is should parents (who, lest we forget, have earned the money over the years) actually enjoy spending it while they are healthy or should they make sure that a hefty sum is passed on to their kids when they die? The truth is probably somewhere in the middle and parents will often help out where they can, contributing lumps sums towards various requirements or when the kids get in a fix.
The kids aren’t alright
Kids are struggling – and it’s often parents who have to bail them out. Whether it’s money to put together a deposit for a property, putting them up while they go to uni, student debt, cash for a wedding or help through a period of unemployment, it’s usually to the Bank of Mum & Dad that youngsters turn to.
There’s also the spectre of Inheritance Tax (IHT). It sometimes makes sense to pass on wealth before it officially becomes an ‘inheritance’ as gifts made more than seven years before death are exempt from IHT.
Is early inheritance the answer?
The report found that one in five adults has already received all or part of their inheritance. It makes sense when you consider that, at the moment, IHT applies at a rate of 40% on estates worth more than £325,000 per individual (£650,000 for couples).
But handing over your hard-earned cash too early might scupper retirement fun. My mother is in her mid-60s and is still pretty healthy. Over the last year she’s travelled to Canada, Portugal and France. She’s able to have a comfortable retirement and spend the money earned by my dad during his working life to make sure these trips are affordable. Isn’t this the way it should be?
As the son of a ‘baby boomer’ I’ll arguably be in a good position to both receive some money and, hopefully, in turn, pass on an inheritance to my kids to give them a sound financial footing. But I might change my mind when I retire and trips to the Kensington Oval in Barbados beckon.
So, is this just another manifestation of the ‘I want it now’ generation or are there good reasons to give your children a ‘pre-inheritance’ now to help them navigate life’s increasing challenges?
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