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The Young Are Set To Inherit

View profile for Richard Eastwood
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A report by the Institute for Fiscal Studies has pointed out that the younger generation are set to inherit more wealth than their predecessors, both in absolute terms and relative to their other sources of wealth.

Ranking current pensioners by total lifetime income (excluding inheritance), those in the top 20% have inherited four times as much as the bottom 20% on average. Among younger generations, those with higher incomes are significantly more likely to expect an inheritance than those with lower incomes.

The so called bricks and mortar wealth, helped out by a housing boom, has meant that between 2002–03 and 2012–13, the wealth of elderly households (those in which all members are 80 or older) increased by 45%, mostly as a result of higher home ownership and rising house prices. In addition 72% of these households now expect to leave an inheritance, up from 60% a decade ago, with a particularly sharp increase in the proportion expecting to leave a large inheritance.

"It is therefore more important than ever that correct inheritance planning is put in place,” warns Richard Eastwood, Financial Planning and Wealth Management Partner at Pearson Solicitors and Financial Advisers.

“From April this year families will also be able to pass on more property wealth tax free via Transferable Main Residence Allowance and the proposals are that this will increase gradually until 2021; where the total tax free Nil Rate Bands for a married couple or civil partnership will be £1million. However, whilst that may seem a huge amount of tax free allowances, when taking into account properties and investments, they too can grow in value quite a lot over the same period and can soon add up,” adds Richard.

Younger generations look much more likely to inherit than their predecessors. Of those born in the 1970s, 75% have received or expect to receive an inheritance, compared with 61% of those born in the 1950s and less than 40% of those born in the 1930s.

The largest inheritances tend to go to those who are already well off. Among current pensioners, more than half of those with families well enough off to leave them more than £250,000 in inheritance are in the richest 20% of the population.

Among younger generations, higher-income individuals are more likely to expect an inheritance. Looking at those born in the 1970s, 9 in 10 of the top-income fifth have received or expect to receive an inheritance, compared with 6 in 10 of the lowest-income fifth.

But both low- and high-income households in younger generations are more likely to inherit something than their predecessors. In fact, the lowest-income fifth of those born in the 1970s are more likely to have received or expect to receive an inheritance than the highest-income fifth of those born in the 1930s.

Please note that the information and opinions contained in this article are not intended to be comprehensive, nor to provide legal advice. No responsibility for its accuracy or correctness is assumed by Pearson Solicitors and Financial Advisers LLP or any of its members or employees. Professional legal advice should be obtained before taking, or refraining from taking, any action as a result of this article.