Adults in Wales are set for an unexpected inheritance boom, as many significantly underestimate the funds they are likely to inherit, according to new research from wealth manager, Charles Stanley.
The study, undertaken to coincide with its ‘Conversation Starters’ initiative to help families talk about money and plan ahead, found that parents in Wales intend on passing down £100,000 to their children. This is 61% more than what consumers say they expect – averaging £62,000. Parents based in Cardiff plan on passing around £109,000 – 98% more than what children believe they’ll inherit, averaging £55,000.
Despite the significant sums involved, less than a quarter (23%) of adults admitted that their family discusses inheritance. Failure to discuss money and wealth transfer within the family is helping to create this inheritance gap, and although people may receive more than they thought, it means they are not making the most of it. Almost one in five (18%) don't know if they will inherit anything at all.
Discussing future wealth and planning early could avoid families paying too much inheritance tax (IHT). And for those struggling, particularly as a result of the global pandemic, there may be an opportunity to alleviate financial issues by tapping into inheritance early, but only if these conversations are happening.
Two in five (41%) have or believe they’ll receive some or part of their inheritance early. Of those that have already received some of their inheritance, 20% admit it was to help them financially, as they needed support, which may be more relevant than ever in Covid-19 times.
Alex Price, Director of Financial Planning at Charles Stanley, which has an office in Park Place, Cardiff, said:
“Adults in Wales are in line for an unexpected inheritance windfall, as a significant gap is revealed between expectations and the amount that is due to head their way.
“When significant sums of money are involved, it’s important to speak to your loved ones about your intentions and your wishes early, and not doing so can come at a price. Having the ‘money talk’ with children is the ‘grown-up’ version of the birds and the bees talk. You might not want to have ‘the talk’, but not having it could mean you and your family lose out unnecessarily. The earlier you plan, the more options you have.
“In addition to potentially reducing inheritance tax bills and helping families build wealth into their long-term planning, talking now could see many families passing down wealth early. People all over the country have been impacted in one way or another by the pandemic, some may need support; trickling down wealth early could be an option to alleviating immediate money worries now, while reducing inheritance tax liability in the future.”
The research also revealed that one in eight (13%) are relying on receiving an inheritance and have factored it into their future and have already mentally “spent” their inheritance before receiving it. A third (32%) have earmarked it for their savings account, 22% will pay off debts, and 16% will use the windfall to fund their retirement. More than one in ten (11%) will use it to pay off their mortgage.