17 January 2023
As you age, the chances are you have considered the unthinkable more than once.
Although it’s not helpful to dwell on morbid subjects, over the past few years you may have wondered what might happen if you were to pass away unexpectedly. You may ask yourself the question: “could my family afford to sustain their lifestyle without my income?”
Yet despite being aware of these worries, you may still find it challenging to talk about them with anyone – especially your adult children.
If you struggle to open up about the subject of your passing away, and the financial circumstances that surround it, you aren’t alone.
Research published by MoneyAge reveals the majority (57%) of parents have never discussed their will with their adult children. Though an understandable avoidance, evading this conversation can lead to unnecessarily challenging circumstances down the line.
So, here’s why you should put the subject of inheritance on the table this year, along with tips on how to open up the conversation.
Research shows many beneficiaries overestimate the amount they will inherit
From your children’s point of view, knowing how much they should expect to inherit can provide immeasurable peace of mind. Your adult children may have no idea how much they could inherit when you pass away, preventing them from planning accurately for their futures.
Worryingly, a 2019 study from Just Group, published by MoneyAge, found the average UK adult overestimates their expected inheritance – by a long shot. The research reveals that, while the average inheritance between 2017 and 2019 stood at £50,000, those between 18 and 54 expected a windfall of around £150,000.
By refusing to discuss inheritance matters with your adult kids, you could be setting them up for disappointment.
Inheritance factors your adult children should be made aware of in the coming years include:
- The Inheritance Tax (IHT) they may pay on what you pass down, payable at a rate of 40% as of the 2022/23 tax year
- The estimated value of any properties you plan to leave
- The estimated value of any cash, investments, and other wealth you plan to pass down
- How your estate will be split, for example, between your spouse, children, and grandchildren.
Making your children aware of these details, and updating them with any changes as the years go by, could benefit them as they plan their own wealth in the coming years.
Inheritance disputes are on the rise, but you can help avoid one
According to a report from Today’s Wills and Probate, more than 2,300 will disputes have been heard by the High Court in the 10 years to September 2022. This marks a substantial increase in disputes, many of which could be attributed to miscommunications between the benefactor and their beneficiaries.
If your will is unclear, or your beneficiaries receive less than they expect, these errors of communication could lead to a costly and emotionally strenuous will dispute.
So, being open about the subject of inheritance could be a positive move for everyone involved. Your beneficiaries could move forward with the peace of mind that, in a time of grief, they would not face an additional, difficult dispute.
2 simple but effective ways to start a conversation about inheritance
If you find it challenging to talk about money, specifically inheritance, you are not the only one. Unfortunately, finances can still be a “taboo” subject among families – but breaking the cycle is important if your family craves peace of mind surrounding their inheritance wishes.
Here are two simple ways to open up the conversation around inheritance.
1. Focus on the positives
When discussing inheritance with your loved ones, there is one difficult subject that lingers: death. However, inheritance conversations don’t need to be bleak – there are plenty of positives to focus on.
As you approach the conversation, it could be helpful to discuss the benefits of the inheritance you will pass on to the next generation, including:
- Paying school fees for their own children
- Saving towards their retirement
- Starting a business
- Travelling the world
- Paying off their mortgage more easily.
These positives can help ease any heaviness that comes with the inheritance conversation.
2. Enlist a professional to mediate the conversation
If you are nervous about discussing inheritance with your adult children, or you simply don’t know where to start, we can help.
Asking a financial planner to mediate the conversation between you and your beneficiaries can help you get the message across appropriately. It can also help your adult children understand the tax implications of their inheritance well in advance.
Ultimately, structuring the inheritance conversation within a professional environment can mean everyone’s questions are answered by an expert, and can open up a dialogue around the subject for the years to come.
Get in touch
For help discussing your inheritance with your adult children, updating your will, or any other financial matter, contact us today. Email firstname.lastname@example.org or call 0161 8080200.
This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.
This article is for information 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 Financial Conduct Authority does not regulate estate planning, tax planning or will writing.