Intergenerational Planning: Preparing to leave or receive an inheritance

Tony Larkins from Beacon Wealth Management (Image: Archant)

The Government, however, expect to receive around £5.4 billion in tax on estates above their allowance.

This raises three real questions:

1. Why are so many people not bothering to take advice to reduce the size of the tax bill on their death?

2. What are people in their 60s doing with a large inheritance, which for many will be considerably more than £300,000?

3. Why are people not spending or gifting more during their lifetime?

The answers to all three questions will be varied, just as our individual circumstances are. However, it is very clear that the bank of mum and dad is now in strong demand, for not only house deposits, but often private education, nursery fees and general living.

Houses today cost around eight times the average salary, when they used to be around four times.

It is true that interest rates are now considerably less, but after many years of being very low, they are expected to increase as inflation hits nine per cent and the base rate goes up to try and slow future increases.

The Sunday Times rich list has just been published and it is amazing to see just how many people are seeing their wealth grow really fast, thus widening the gap between those that have and those that do not.

That said, we had someone out to fix our lack of hot water, and he said that he was very busy and that more people appear to be continuing to spend a lot on their home improvements, something I concur with having seen clients withdraw funds over the last three years.

For many, their wealth is mainly their home and their pensions, but others have investments in ISA’s, unit trusts and bonds, as well as direct share holdings.

The idea of using these investments at this time for many is worrying, just look at the stock exchange data published on 22nd May for the last 12 months:

Hang Seng down 30 per cent, DOW down 15 per cent

NASDAQ down 29 per cent CIAC down 15 per cent

S & P 500 down 19 per cent DAX down 14 per cent

FTSE 250 down 18 per cent

For those investing in alternatives, BITCOIN is down a whopping 57 per cent, and of the FAANG (Facebook, Apple, Amazon, Netflix and Google) Apple has done best but is down 18 per cent and Netflix the worse down 69 per cent.

Some Financial Companies have seen shares slide with Hargreaves Lansdown down 49 per cent, Virgin Money down 35 per cent, Barclays down 30 per cent and St James Place down 29 per cent. Other family favourites have been hit with Coca Cola down 39 per cent and Ocado down 64 per cent.

The world Stock Markets have really taken a tumble from their peaks in the last 12 months, which have affected diversified portfolios.

With inflation hitting nine per cent and the next move expected to be upwards, and an average pay increase being just 2.3 per cent, I think Intergenerational Planning will become more focussed at an earlier stage.

For most we know Inheritance Tax is optional, and that the seven year, two years and now one day rules mean planning is rarely too late.

The Government want wealth to cascade down through the generations, and probably the sooner the better, as it gets spent quicker which helps the economy.