Whilst not strictly personal injury related, occasionally we will post legal blog pieces on our website written by our lawyers and solicitors. The following blog post regards a decline in inheritance, and how it could affect more and more people in the future. If you have any comments then please do leave them, or alternatively contact us if you would like to contribute to our blog and news section with your own content.
People who are middle-aged can no longer rely on an inheritance from their parents or other older relatives – they will be almost of retirement age before they receive any money.
Analysis of official data has shown that the age at which adults in the UK received an inheritance was around the age of 60. Experts stated that this analysis marked “end of the traditional inheritance” for people in middle age.
Furthermore, with a large proportion of the population living into their nineties, much of the money that would be inherited has already been spent. Bills for care homes and even expenses for living for 30 years after retirement means that often very little is left to bequeath to children.
In addition, many pensioners see that their children have established jobs and have adequate income and thus choose to bypass their children in favour of leaving their remaining money to their grandchildren. This leaves a generation of those in their forties and fifties without any additional income from inheritance.
Ros Altmann, the Government’s older workers’ tsar, said:
“The way things are going, the whole concept of the inheritance is under threat. It’s in the national psyche that at least the family home and perhaps some savings pass on to the next generation, but these are the financial consequences of the good news that people are enjoying longer retirements.”
What Effect Will This Have on the Middle-Aged?
Going back 25 years to 1999, the average age for receiving inheritance was 53. Any inheritance received could help pay off a mortgage and allow the beneficiary to begin saving for their own retirement, or be used to help see their children through university or onto the property ladder.
John Lawson, head of retirement at insurer Aviva, who conducted the research, said:
“In the past, people were accustomed to receiving inheritances earlier in middle-age, providing parents with money to help their children fund the cost of university education or buying a first home. But that is all changing, and with the age gradually rising towards 60 many parents will find these costly years have already gone by when an inheritance arrives.”
Although an inheritance windfall later in life could help with retirement planning and add to any inheritance of their own to be left behind, longer retirements mean there is now very little left behind.
Ashley Seager, co-founder of the Intergenerational Foundation, said:
“We’ve been observing this trend for a number of years and we do believe it spells the end of the traditional inheritance for middle-aged people. Wealth is cascading up the generations, but today’s retirees are spending more and living longer, meaning they have less to pass on.”
This trend was deciphered from analysis of data from the Office for National Statistics.
Generally, pensioners have been living living around three months longer every year. Women on average are outliving men with female life expectancy having risen to 83 years and four months. A whole two years longer since the year 2000.
A further contributing factor is that the average age of mothers giving birth fell between 1917 and 1931. This is generally when the parents of those who would receive inheritance in 2014 were likely to have been born.
The effect of these combined factors has been to delay several years the date at which inheritances are being left to beneficiaries.
The average age of mothers in the UK for 2013 was 30, highlighted by the ONS data.
What Does This Mean for Wills and Inheritance Planning?
Experts have stated that the elderly are choosing to bypass their children and bequeath inheritance to their grandchildren, the experts said:
“Elderly people are skipping a generation when they pass money down the family, as young adults as a generation are much worse off than their middle aged parents and therefore more in need of the money.”
Whilst children may be able to challenge a will that denies them inheritance that they perceive they are entitled to, they are unlikely to do so if it is going to their children or is not for a great amount.
This means that those who are currently middle aged cannot rely on receiving inheritance from their parents for their retirement, or plan to leave much to their children themselves in their will.
Ms Altmann said: “There is no guarantee that parents will have much if anything left over to pass on to younger generations because increasing numbers of older people live long enough to need care.”
The aging population may also mitigate how much the elderly are likely to give away to avoid inheritance tax.
Under UK inheritance tax rules, gifts of up to £3000 per year can be given inheritance tax free alongside many other provisions which allow a person to mitigate their inheritance by giving money away to those who would stand to inherit once they passed away.
However, as the elderly are living longer, they may be reluctant to give money away in case they need it to cover extra unexpected years of life or care costs.
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