Passing on wealth to future generations is a major motivator for many financial planning clients. The knowledge that they’re supporting their children and grandchildren with important life milestones, such as getting married, going to university or buying a house, can be very rewarding.
Younger people also expect to inherit money and research suggests that they’re making some of their financial plans based on this assumption.
What younger generations expect
According to savings and wellbeing app Get Dreams, 38 per cent of British millennials today admit their spending patterns are heavily influenced by anticipation of a future inheritance.
Earlier this year, the company interviewed 1,500 British millennials to explore how expectations of a future inheritance influences the generation’s financial planning.
Key findings from the research were as follows:
- 65 per cent of millennials expect to inherit money
- 49 per cent of these say they have never seen a will, while 16 per cent are unsure if there is a will in place
- 85 per cent believe they would be the automatic beneficiary in the eyes of the law.
38 per cent admitted they were spending today in anticipation of this great expectation.
They could be in for a shock in later life if an inheritance doesn’t materialise, so the best course of action is to try and ignore the possibility of an inheritance.
Becoming financially self-sufficient outside of an inheritance is always the best course of action.
Life doesn’t always pan out the way we want it to. The cost of later life care and life expectancy are two areas that will affect the timing and amount of any future inheritance.
The Office for National Statistics has shown life expectancy at age 65 years was 18.8 years for men and 21.1 years for women in the period 2017-2019, with an improvement of 6.3 weeks for both men and women in comparison with 2016 to 2018.
This means people who do inherit, may do so much later in life than they might have expected.
Everyone might be shocked at the cost of care too.
The average weekly cost of living in a residential care home is £704, while the average weekly cost of a nursing home is £888 across the UK. The monthly average cost of residential care is £2,816 and receiving nursing care in a care home costs on average £3,552.
The amount that someone pays for care differs according to the part of the UK they live in and their local authority.
The savings and assets thresholds in the UK for 2021/22 are:
- England: £23,250
- Scotland: £28,750
- Wales: £50,000
- Northern Ireland: £23,250
People with capital below these amounts can get financial support from their local authority, which will pay some or all of the costs. If savings or income falls below the threshold, the local authority should begin paying for care costs.
The cost of care is always discussed as a political hot potato, with no government looking to face up to the realities of paying for it, or risking losing votes by asking citizens to pay for it through increased taxation.
It’s definitely best not to bank on the government paying for care and expect for some level of residential care to be paid for later in life.
Get a Will and explain it
The simplest way to have a conversation about inheritance that takes the elephant out of the room is to discuss the contents of your Will with your beneficiaries and outline what you would like to happen.
Naturally, this can present some issues in the family, but that’s where an independent financial adviser can help, as a calming presence.
An adviser can help reinforce some of the realities of later life, which could lead to better financial planning decisions today, especially for people who are maybe banking on receiving an inheritance.