Posted on 22.2.16 by Tasoula Addison
Fascinating new research suggests that middle-aged parents in the UK are seeing their potential inheritance diminish as their elderly parents spend the money or give it away. It’s been reported that such parents in their 50s are to lose out financially, which isn’t strictly true, it is their parent’s hard earned money after all and they are entitled to do with it as they wish. It seems that more and more elderly parents, up to 69%, are helping out their relatives whilst they are alive and seeing their money put to good use, instead of giving it all away as inheritance when they are no longer around.
The report conducted by the Social Market Foundation surveyed 2,101 adults in regards to inheritance and family dynamics. According to the report, 20% of middle-aged adults expect to be left an inheritance, but nearly half of those over 65 are worried about care costs as they get older and an even larger 75% of over 55s are not sure if they’ll be able to leave an inheritance due to the cost of social care. Exacerbating this problem is the fact people are living longer and longer.
Almost 1 in 10 parents are now giving life-time gifts rather than leaving an amount in their Will; this is up from 6% in the early 2000s. A major reason for this is that the cost of living is increasing much faster than most peoples’ wages. The Social Market Foundation found that 4 in 10 grandparents believe their grandchildren are in need of more financial help than their own offspring, hence the idea of this ‘skipped middle’ generation potentially missing out. In particular, grandchildren are finding it increasingly difficult to get onto the housing ladder without help from family members with the average UK home now costing £288,000. Compare this to an average cost of £186,000 in 2005 and you can see why the problems exist and why grandparents are handing out more in-life gifts.
All these factors considered, planning for later life is becoming even more important. Some adults now in their 60s are thinking on four fronts: their own, their elderly parents’, their childrens’ and their grandchildrens’. Being organised and thoroughly planning how you intend your wealth to be used will be the best and most efficient use of your time.
One way to plan is by making a Will. This vital document will set out your exact wishes in the event that you are no longer around. You can specify who you want to benefit, how much you want them to benefit by and what assets you leave to whom. Your Will can also include trusts. Trusts are a way of protecting assets, for example for children under 18 or for disabled beneficiaries. If you have business assets that qualify for “business property relief”, trusts can also be used to help reduce your eventual inheritance tax liability.
Another way to ensure your wishes are fulfilled is by making a Lasting Power of Attorney (LPA) document. Drafting an LPA gives someone you trust the legal power to look after your affairs, whether it is financial or welfare or both, if you for some reason become incapacitated in the future.
To learn more about Planning for Later Life, we are hosting a free all-day event on Tuesday 1st March where a number of local organisations will be in attendance giving expert talks to help you plan better and more efficiently. Find out more about this free event by clicking here.
To book a place give us a call on 0161 930 5117.