Christmas conversations have gone cold turkey
While not the cheeriest of topics for the festive season, too many families delay “those conversations” about the future - and it is only when we are all sat together around the dinner table that they tend to happen.
Don’t put it off
Perhaps more people would prompt those awkward conversations if they knew that around 72% of people had not made a will, according to a recent article in the Sunday Times. Also, just 25% had discussed plans for passing on wealth with their partner and only 17% had talked it over with their children.
These conversations are even more important in blended families or where parents are unmarried because there may be different rules that apply.
For example, it is a myth that any kind of cohabitation laws exist in this country, so if your partner dies intestate - i.e. without leaving a will - and you are not married, any assets including your home could be passed to other family, even if you’ve been together for decades and have children.
Something else both parents and children need to think about is how to pass down wealth.
In the same article in the Sunday Times, the average amount people expected to inherit was £110,000 - in fact the reality is about £54,000 on average.
And, as with more millennials relying on an inheritance to purchase a home these conversations are really important - as they may not get as much as they think they will. This may have knock-on effects on any future plans and your children may wish to pursue a different life path to homeownership if it is not achievable with inheritance.
Try not to panic though.
If you know your children are in for a larger inheritance, don’t be tempted to enter into complicated arrangements to try and get around paying Inheritance Tax (IHT) because actually, only very few people end up paying it - and you might just find you have set your children up for a tax double-whammy!
Everyone gets an IHT-free threshold of £325,000 with an extra £175,000 on top if you are leaving your home to a direct descendant. Anything passed between spouses or civil partners is tax free, and, you can inherit their unused allowances - meaning you can pass on a total of £1 million free from IHT and then a 40% charge will apply to beneficiaries on anything above that.
If you would like any further advice about wealth planning or inheritance tax, contact Downs Solicitors to see how we can help.