If you’re born in the 80s and 90s you’re known as Generation Y. I’m almost in that bracket (born 1976), and it means we don’t all have secure investments to fall back on. The baby boomers (our parents and grandparents to our children) tend to have more of a nest egg to rely on and to leave future generations. Research carried out by Safestore has revealed that 41% of grandparents aged 55 and over would consider leaving the contents of their will to grandchildren in order to give them a head start financially. It used to be called the bank of mum and dad, but this is slowly being replaced by the bank of Grandma and Granddad. The gulf between wages and house prices seems to be increasing and the fluctuating interest levels from banks haven’t helped. If you aren’t on the property ladder by now you will seriously struggle to get on it, as it proves harder than ever to get a mortgage, and renting is so expensive. My 7 year old son wants to stay living with us forever, but in reality this may happen! If not forever, certainly a good while until he can save for a deposit.
March is Free Will Writing Month, which means that throughout March, members of the public over the age of 55 are able to have simple Wills written or updated free of charge by using participating solicitors. The organisation, freewillsmonth.org.uk, works with charities to offer free Will writing services to promote the importance of leaving a Last Will and Testament. Please do check it out if you qualify.
Inspired by this, the self storage company discovered that surprisingly, a quarter of grandparents would consider skipping a generation when it comes to distributing their wealth in the event of their death. In total, 26% of all people aged 55 and over said that they would consider leaving their estate to grandchildren. Overall, 28% said that the most likely reason for doing this would be if they felt that their children were financially secure (compared to grandchildren who need more help financially), and 10% said that even if they were estranged from their children they’d still want their grandchildren to benefit.
“Generation skipping is a valuable tool in Inheritance Tax planning, which is about getting as much of your assets down to your descendants as you can. Leaving assets to children, especially those who are financially secure and therefore don’t need them, means they are likely to be taxed again before they reach your grandchildren, who are more in need of the funds. Leaving assets to your grandchildren, rather than your children, increasingly makes sense.
With people living longer, by the time there is an inheritance it will be the grandchildren who are in greater need financially. If they have to wait for their parents to leave it to them in turn, the assets will be taxed twice before they reach them. It makes sense to discuss this with your children – not least so it does not come as a surprise to them, but also because they may prefer it if you leave assets to their children rather than themselves. Lots of our clients take this approach and find that discussions with their children make the process a whole lot easier.”
Simon Crooks, a solicitor and specialist in tax and estate planning with Argo Life & Legacy Ltd.
This makes sense to me, if we become more financially secure by the time my parents god forbid leave this earth, then I’d prefer any assets went to my children and the cousins if they were struggling. The UK government agrees, and would rather you pass assets to your relatives sooner. They have introduced changes to Inheritance Tax legislation in recent years. The new Main Residence Relief or Residence Nil Rate Band, which is set to come into effect in April 2017, provides further Inheritance Tax relief for married couples or civil partners – but only if you leave your property to lineal descendants.
Even though more grandparents are leaving the contents of their will to grandchildren – or are at least willing to consider it – the inheritance value is slowly declining. As parents and grandparents are living for longer and require more care later in life, the amount of money people stand to inherit is going down each year.
“We should all be aware of the strain on social and elderly care services. An essential part of Will writing now is to consider planning for care in the future. Having a Will in place alone is not enough. I recommend to all clients, regardless of age, that they put in place Lasting Powers of Attorney to ensure people they choose can manage their affairs should they lose capacity. Without these no one has any authority to act for you except through costly court applications.”
My Dad had to take on power of attorney for my Nana, who had Alzheimer’s disease. She didn’t have any assets, and any she did have, went to pay for her care. It’s awful that we have to think like this. You can also have potential beneficiaries (the children or grandchildren) and trustees who will distribute assets when and how they see fit within parameters you set. For example, if the children needed the funds they can have them and equally, if they don’t they can pass them on or hold them for the grandchildren. A letter of wishes can sit alongside the trust enabling you to put your thoughts down without binding the trustees to any course of action – generally the trustees follow these wishes unless there are good reasons, in consultation with the beneficiaries, not to. It’s so confusing, and well worth taking advice.
Know the facts when it comes to Will writing
Did you know that if you remarry and your estate is less than £250000 that if you haven’t got a will, that any assets would automatically go to your spouse and not your children? I certainly didn’t and it seems over half of the people surveyed didn’t know either. It’s so important to have things in place for your children’s future. Conversely, If you’re not married, then your partner is not legally entitled to anything, whereas if you’re married but separated, the partner is still entitled. Perhaps having a conversation with your partner, your parents and if appropriate, your children and then getting something down on paper is a start, then you can go from there. You can get simple will writing kits or you can see a solicitor if it’s more complex. If the will is written well and has good plans in place then inheritance tax can be less or even avoided. Save this infographic for later so you can keep the information. Free will writing month is every year. If you found this post useful, please share.
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All figures, unless otherwise stated, are from YouGov Plc. Total sample size was 1,524 adults aged 55+, of which 900 are grandparents. Fieldwork was undertaken between 22nd – 24th February 2017. The survey was carried out online. The figures have been weighted and are representative of all GB adults (aged 55+).
This post is in collaboration with Safestore. Safestore is the UK’s largest (and Europe’s second largest) provider of self storage solutions. Their principal operations are located in the UK, where they have over 100 stores including two Business Centres with a further 24 stores in Europe. Whether you need self storage for household, business or student purposes, and short term storage, long term storage or seasonal self storage, you’ll find exactly what you need with Safestore. More information is available at Safestore’s blog.