Prudential research has found that parents want to keep control over how any money they leave after they die is spent by their children.
Rising property prices and pension wealth mean that many of the baby boomer generation plan to pass on significant assets to their heirs and 77% of over-55s have indicated that they want to have some control of how their legacy is spent.
26% of parents are concerned that part of an inheritance could end up being given to spouses of their children in the event of a divorce. 30% say they don’t want their wealth to be squandered by their children, and the same number want to ensure that grandchildren benefit from an inheritance.
12% of parents want to specify what their legacy is used for and a similar number (13%) have already sought, or intend to seek, financial and legal advice to help ensure that their legacy is used wisely. One in 10 want to stipulate that their children must receive professional financial advice on receiving their inheritance.
Estates liable for inheritance tax (IHT) in the UK face an average bill of nearly £175,000 each, but 67% of over-55s are unaware of what the national average inheritance tax bill is. Only 4% of UK adults correctly guessed that the average bill was within the range of £100,000 and £200,000.
Despite more than a third of over-55s (35%) being concerned about having to pay inheritance tax on their estate, less than a fifth (19%) have actually taken action to reduce their potential tax bill. Just 9% are seeking financial advice, making gifts to family members (6%) and/or setting up trusts (4%).
Les Cameron, tax spokesperson at Prudential, said: “Record house prices are one reason why inheritance tax receipts are rising fast. In 2012/13 fewer than 18,000 estates had an IHT bill but the government says that there will be 41,000 taxpaying estates in 2015/16 and that IHT receipts will hit £6.2bn by 2021/22.
“Reducing inheritance tax bills is relatively straightforward. People need to strike the right balance between giving their wealth away during their lifetime to reduce the size of their estate, and maintaining some form of control after their death over who can access it and when.
“With two in five marriages ending in divorce, it is easy to understand why the problem of keeping wealth within their family is a growing concern for the bank of mum and dad when they’re planning to leave money to children and grandchildren.
“To help ensure efficient inheritance tax planning, obtaining financial and legal advice should be money well spent.”
