Is “inheritance” a dirty word? 3 reasons you should be discussing your estate with your adult children

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If you are approaching your later years, you could spend a lot of time thinking about what the future holds.

This stage in your life is the perfect opportunity to renew your goals. You may wish to help your loved ones onto the property ladder, spend time looking after grandchildren, or tick amazing travel experiences off your bucket list.

Of course, as you age, you could also spend some time thinking about what might happen when you pass away. You could already have put your will in place – perhaps with the help of your financial planner – and have decided who will inherit your estate when the time comes.

Sadly, a study published by MoneyAge has found that 57% of parents have never discussed their will with their adult children. What’s more, the Guardian reports that some parents find it harder to talk about inheritance than about sex!

Avoiding the topic of inheritance could have detrimental effects down the line. Here are three reasons why “inheritance” is not a dirty word, and why you should be using it more often in your conversations with loved ones.

1. Inheritance is about opportunities, not death

One of the main reasons why some individuals struggle to discuss inheritance, wills, or estate planning is that the subject of death is the elephant in the room.

Naturally, it is difficult to reckon with your own death, and you could be worried about upsetting your loved ones if you raise the conversation.

Fortunately, by reframing the lens through which you look at inheritance, you can see it as a discussion about opportunities, not mortality.

When you pass an inheritance on to your adult children, you are giving them an incredible gift. They could use these funds for:

  • Buying their own home
  • Paying school or university fees for your grandchildren
  • Saving for their retirement
  • Supporting a career change later in life
  • Building a business from scratch.

So, approaching the conversation by focusing on these positive possibilities, rather than the doom-and-gloom surrounding the subject, could be a great place to start.

2. Talking about passing down your wealth can lighten the tax load

You may be surprised to learn that simply talking about the subject of inheritance with your family could actually have financial benefits, not just emotional ones.

Usually, the money and property you pass down will be subject to Inheritance Tax (IHT) if the value of your estate exceeds the nil-rate bands. The nil-rate band stands at £325,000 as of the 2022/23 tax year, and the residence nil-rate band (applying to property you pass down to the next generation) is £175,000. These have been frozen until 2028.

Luckily, there are ways to mitigate an IHT bill while you are still alive – but this involves discussing inheritance with your beneficiaries and formulating a plan together.

Strategies to reduce IHT can include:

  • Writing funds into trust, which are usually not subject to IHT
  • Making gifts early, as gifts you make more than seven years before your death will not usually be subject to IHT
  • Making smaller, tax-efficient cash gifts of up to £3,000 a year while you are alive
  • Taking your retirement income from investments and savings before your pension, as when your pension is inherited it generally does not form part of your taxable estate.

By opening up the conversation on inheritance now, not later, you can make a tax-efficient plan as a team – rather than leaving things unsaid and incurring a high tax bill when you pass away.

3. Your children deserve to know what to expect

From your children’s point of view, having an honest chat about the subject of inheritance could bring invaluable peace of mind.

This conversation could be particularly useful when it comes to looking at the specifics. A 2019 study from Just Group, published by MoneyAge, found the average UK adult significantly overestimates their expected inheritance. The research reveals that, while the average inheritance between 2017 and 2019 stood at £50,000, those between 18 and 54 expected to receive around £150,000.

Talking honestly about how much you anticipate each child will receive can help them plan for the future, and may instil confidence in them as they move through their adult years.

Working with a financial planner can put everyone’s mind at rest

If you feel concerned about approaching the subject of inheritance with your loved ones, we can help.

Talking things through with a financial planner to mediate the conversation can help answer any questions you and your family may have.

In addition, having the “inheritance” conversation with a professional present can help you feel more confident about staying on track to meet your financial goals.

Get in touch

For inheritance planning advice, or for a discussion about any other financial matter, email us at [email protected], or call 01273 076 587.

Please note

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

About the author
Picture of Oliver McDonald
Oliver McDonald
Oliver is the managing director and independent financial adviser at Engage Wealth Management.
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