8th July 2014
Parents are following in the footsteps of Bill Gates and aren’t planning to leave all of their wealth to their children, a study by Skipton Financial Services has revealed.
As many as one in four parents intend to leave just a percentage – or even none – of their estate to their offspring because they ‘want them to stand on their own two feet’ or don’t believe it is deserved.
More than one in five also said their children have already had their fair share of their inheritance to help towards buying a house, paying off debts or getting through university. But this could come as a blow to almost half of the nations under 40s who admit they are banking on a large inheritance from their parents to get them on the property ladder, boost their savings or fund their retirement, despite less than a quarter ever having a conversation about what they are likely to receive.
The key findings of the research, which examined the financial health of 1,000 under 40s and 1,000 over 50s, were:
Just three quarters of parents intend to leave everything they own to their children. Instead, 14 per cent are planning to leave some of their estate to them, while one in ten admit they won’t be leaving anything.
Of those who aren’t going to transfer everything to their children, 24 per cent want to enjoy the money themselves by going on holidays, buying new cars or just living life to the full.
More than one in ten want their children to stand on their own two feet instead of receiving money for nothing, while 12 per cent reckon their children have no need for the money so will leave it to their grandchildren or great-grandchildren instead.
15 per cent of parents don’t think their children deserve an inheritance fund, because they are poor at managing money, will squander it or have had enough help already.
Of the 23 per cent who have already handed over all or some of their children’s inheritance, typically by the time their children are 30 and averaging almost £15,000, with more than half doing so to see them enjoy it now rather than when they are gone.
Another 33 per cent realise their children have financial restraints, while 42 per cent say it makes sense to do it now while they have the money. A forward-thinking 17 per cent did it to reduce the potential inheritance tax.
22 per cent those who aren’t planning to leave everything to their children admit their decision is likely to cause arguments within the family, with more than one in 20 claiming it is making them question whether to go ahead with their intentions. One in 20 also admitted they had pressure from their children to hand the inheritance over sooner rather than later.
Almost half of Brits under 40 are expecting to receive a large inheritance from their parents, with one in five banking on it to get them onto the housing ladder.
17 per cent are relying on it because they have no pension set up, with other reasons for banking on the inheritance windfall including not having a well-paid job, to start a family, or even to retire early. More than one in ten simply expects to receive the cash because they believe they are ‘entitled to’ or ‘deserve’ it.
If their parents decided to leave them little or no inheritance, 15 per cent would be upset; one in twenty would be annoyed while seven per cent would just be outright angry. More than one in 20 even admitted they would be ‘gutted’.
Andrew Barker, managing director of Skipton Financial Services, which commissioned the research said: “Traditionally your entire financial wealth and any assets would all be inherited by your children after your death. But it seems this is becoming a thing of the past as people want to use the ‘would-be’ inheritance fund to enjoy their own well-earned retirement or even because they feel their children have already had their fair share. While Bill Gates’ children are still in line to receive a tidy sum if they get even 1 per cent of his estate, more than most Brits could ever dream of, the sentiment behind the decision is the same – wanting their children to ‘stand on their own two feet’ and not rely on a windfall to come their way one day to save the day to pay for their financial future.
‘’As well as that, we are living longer than ever before, so it’s not realistic for young people to rely on their inheritance to fund their retirement. Whilst 86 per cent think their children deserve an inheritance, it’s entirely possible your parents could still be with you way after you start collecting your pension so they will need their hard-earned money to fund their own life in retirement, something over four in ten said. But with so many assuming their parents will leave everything to them, there could be a large number of disappointed and financially troubled Brits in years to come.
“’The other interesting thing our research found is that there is a perception that inheritance tax doesn’t affect most people so they won’t have to pay it when the time comes. The average property value of those surveyed was almost £270,000 which tallies with the latest house price figures. The threshold limit – the point at which you start paying inheritance tax – is £325,000 for single or divorced people, making a £650,000 allowance for married couples or those in civil partnership. If you’re widowed, it is up to £650,000 depending on how much allowance was used when your partner passed away.”