Inheritance Planning Is Changing

A recent report on retirement suggests that the shape of inheritance planning is changing, with economic and social pressures making the over-55s reluctant to make provision for after they die when they could be spending the money now.

The report revealed that more than a fifth of this age group are using money they planned to set aside as a legacy to help younger family members in financial difficulty.

Of course, giving money to beneficiaries while a person is alive can be a shrewd move because of the inheritance tax benefits but it appears that the current spate of giving is more through necessity than because of financial planning.

However, older retirees, aged 65 and over are more traditional in their approach, with almost 20 per cent of those aged 75 and older planning on leaving an inheritance rather than providing support now.

In addition, it is not just calls from family members that are causing the pre-retirement 55 to 64 age group to spend their children’s inheritance while they are alive. Almost 30 per cent of them still have a mortgage on their home, meaning that they will have to spend savings once they give up work.

This group is also keen on maintaining their lifestyle at the expense of leaving money to the children, with only 7 per cent saying that they would forego going out to eat instead of lending money to the younger generation.

By contrast, almost two-thirds of those surveyed said that they planned to leave the family home to their heirs, although the recent financial crisis could mean that this will be worth less when they die than they had originally thought, plus a good proportion may have to opt for equity release.

The report concludes that in order to enjoy retirement and be able to leave something for future generation, people need to plan for their later life and manage the money they have saved.

Marc Stemmer offers financial planning advice to businesses and individuals; helping them to achieve their financial goals.

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