Parents’ secrecy on inheritance plans leaves children facing unexpected tax burdens
Parents are choosing not to tell their children about their inheritance plans, leaving them at risk of being slapped with unexpected tax bills, new research has found.
According to investment manager Charles Stanley, more than a third of Brits have an alarming lack of knowledge of how their parents plan to pass down wealth, despite advisers expecting billions of pounds of assets to be transferred to the younger generations over the next few decades.
In particular, Gen X, who are the first in line to inherit Baby Boomers’ wealth, are often left in the dark, with 36 per cent having no idea of their parents’ plans.
Nearly a quarter had never discussed the topic with their parents.
Meanwhile, 27 per cent of Millennials were unaware of any inheritance intentions.
No will, no idea
However, a fifth of Baby Boomers admitted to not having a will in place, ultimately leaving loved ones scrambling to manage their financial affairs after they have passed away.
Additionally, failure to write a will prevents assets being split according to personal wishes, leaving them instead to be distributed according to the rule of intestacy, where the law decides who inherits a person’s property and assets.
Lisa Caplan, director of CSD advice and guidance at Charles Stanley, said: “Not everyone is in the loop when it comes to inheritance planning.”
“This leaves the door open to families finding themselves having to settle unnecessarily large or unexpected tax bills, or even jeopardising hopes to pass on wealth to their loved ones.”
IHT changes
Many will also find themselves subjected to looming inheritance tax changes, and a lack of clarity surrounding their parents’ plans could lead them to inheriting even less.
Pension assets are set to be included in estates from 2027, with the government estimating the decision will raise a total £1.5bn by 2030, and bring in roughly 1.5 per cent more estates on top of the current 4 per cent.
Caplan said: “The number of families finding themselves having to pay IHT on their loved ones’ estate is set to grow sharply.”
“It’s critical that people understand the value of their estates, have plans in place for how they will pass wealth on, and, importantly, communicate this with their family.”