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Just over half of parents offer to share their wealth equally between their children when they die, with the rest planning to bequeath different proportions, according to a survey of British families.
Their intentions will often surprise their offspring, since less than a quarter of young adults say they have had open discussions with their parents about their financial plans, according to the survey released today.
The lack of intergenerational financial understanding reflected in the results “can have a significant impact on family financial planning, creating challenges in the short and long term,” say the authors of the Kill the Game report.
The survey, carried out by Censuswide for Netwealth, a wealth manager, looked at 1,000 young adults aged 25 to 35 and 1,000 parents of young adults with at least Â£ 50,000 in assets to invest who are considering or considering to transfer wealth to their children.
The report warns that the “communication gap” between the generations is widening over time, “with young adults lacking clarity on their parents’ plans for their wealth when they die and avoiding conversations on the subject.”
Worryingly, the authors say, 66% of parents believe their offspring has a clear understanding of their inheritance plans, while only 39% of young adults believe they have one. Only 23% of young people surveyed said they had openly discussed their parents’ financial plans with them.
The potential tensions are complicated since only 53% of parents plan to share their wealth equally, according to the study. Of those who suggest an unequal division, 15 percent said they’ve already given a child a lot of support, and 14 percent said they want to give more to children who need more. Another 12 percent said their children did not have an equal number of their own children and that they wanted to provide for their grandchildren as well.
Other motives were also recorded. Some 4 percent said they did not want to support a particular child’s partner or extended family, and 7 percent said they were separated from one or more children.
âFor parents who plan to share their wealth according to their children’s needs, having such conversations early on would allow them to explain their reasoning. . . and allow all family members to plan their own finances accordingly, âsaid Charlotte Ransom, Managing Director of Netwealth.
To make matters worse, many parents overestimate their children’s financial capabilities: 76 percent think their kids are in control of their finances, but only 52 percent of young adults would agree.
Also, the study concludes that young adults tend to adopt their parents’ financial habits, so those who commit to saving tend to refer to savers, while big spenders also generally convey their approach. The report says this produces “mixed results” as these cultural traditions can lead to the continuation of bad habits in families.
Meanwhile, as a reminder of the importance of taxation in estate planning, figures released this week show that the amount of UK Inheritance Tax (IHT) paid jumped 19%, topping 6 for the first time. billion pounds over a 12 month period. The amount raised by HM Revenue & Customs rose from Â£ 5.04bn to Â£ 6.01bn in the year to the end of August.
The impact of the Covid-19 pandemic and record real estate prices have resulted in a larger than usual number of estates becoming responsible for the IHT. In addition, the government has not increased the non-taxable inheritance allowance in line with inflation, leaving it frozen at Â£ 325,000 since April 2009.
Mark Giddens, partner at UHY Hacker Young, an accounting group, said: âA tax that was originally meant to affect only the super-rich is increasingly hitting central England. As a result, families increasingly understand the importance of tax planning to ensure that they can pass the fruits of their labor on to their children.