Do you bet on a big heritage? Many hope that a generous legacy will support them in old age
- Almost one in five adults expect to receive a large sum
- Young and middle-aged are more likely than those over 55 to expect a large legacy
- Plan not to get an inheritance in case of disappointment, warns Hargreaves
Numerous researches reveal that many people “bet” on an important inheritance to finance their retirement.
Some 17% of adults plan to get a large sum, and almost two-thirds of them expect it despite the risk that it will materialize late or never, or be smaller than they hope.
Young and middle-aged people are more likely than those over 55 to expect a generous bequest, according to the Hargreaves Lansdown survey.
Generous Families: Millions Could Play To Get Legacy To Make ends meet, Survey Finds
Government statistics show that the average inheritance is £ 11,000, but among 55-64 year olds it is £ 33,000 and for those over 65 it is £ 20,000.
Meanwhile, the Resolution Foundation think tank estimates that today’s 20-35 year olds will receive an inheritance at an average age of 61.
Some 22% of 18-34 year olds and 23% of 35-54 year olds expect an important inheritance, Hargreaves discovered in its survey of 2,000 adults last month.
“The average age to inherit is around 61, but 13,000 people were living beyond their 100th birthday in 2018. This means that their offspring could be well past their 70th birthday by the time they inherit” , personal finance analyst Sarah Coles warns.
It also says that the situation of the person you expect to inherit may well change.
Variables include what they spend on their own retirement, whether they will have to pay for care and gifts for life to friends and family.
Another risk is that the wishes of someone to whom they leave their money could change, due to their relationships with potential beneficiaries, or they meet someone they want to prioritize, or they decide to help an association. charity, according to Coles.
“If the legacy has never been discussed, then you may be barking the wrong tree.” They may not have the assets you expect or may not intend to leave you anything.
“Even if you get the inheritance you expect, unless you do the math, it may not go as far as you expect.”
“You need to have a clear idea of the type of return you can expect when converting a lump sum into income – whether investing and taking the income or buying an annuity.”
>>> What about inheritance tax? See the box below
Coles says millions of people are leveraging an inheritance to make ends meet, but that is not a reasonable basis to build your retirement, and the last thing you want to do is tie it to someone’s death expensive.
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She suggests planning to avoid inheritance with the following three measures.
1) Cover your essential expenses by other means: “The best approach is to have a guaranteed income that will cover these costs – in the form of a combination of state pensions, defined benefit pensions and annuities.”
2) Have a plan B: “If your pension savings are insufficient without inheritance and you are obliged to take them into account, you need a solid plan B which you are ready to use. This could include things like reducing the size of your home or working part-time in retirement.
3) Talk to your family: “If an inheritance is likely to play a role in your retirement income, you need to be as sure as possible that you will get one.
“It may seem like a gruesome conversation to have with your loved ones, but you cannot base your planning on a vague and crossed-fingered assumption. You may even find that they are happy to give gifts for life, so you can be sure what you will receive – and when.
How does inheritance tax work?
If you are online for a large inheritance, you may also need to consider a large tax bill.
The inheritance tax was originally intended as a levy on the very wealthy, but triple-digit property inflation since the 1980s has drawn more ordinary families living in expensive areas into its net.
Only 5% of people leave areas large enough for their beneficiaries to be liable for inheritance tax.
However, the housing boom of the past few decades means that this figure is expected to increase, with those inheriting housing price hotspots bearing the greatest financial burden.
Essentially, you must be worth £ 325,000 if you are single, or £ 650,000 jointly if you are married or in a civil partnership, so that your loved ones have to pay inheritance tax.
But a new clean housing allowance – known as the zero residence rate bracket – allows you to pass on more than that.
If you have a partner, own property and intend to leave money for your direct descendants, the threshold is now £ 1 million.
If you are worth more than that, your heirs will have to hand over 40% of your assets above these levels to the government.
10 ways to avoid inheritance tax: Find out more here.
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