Waiting for a windfall? It might not be a breeze after all
According to a recent survey of 9,000 people, the average that they expected to inherit was £110,000 – but actually they only ended up receiving half as much.
The survey, carried out by investment platform Interactive Investor and reported in the Sunday Times, found 16% of respondents were actually expecting a higher amount of £200,000 – but only 9% actually received that amount.
While we’re not all about sour grapes, as the cost-of-living increases, more people are admitting to relying on an inheritance as a way of making their own lives more comfortable as they age.
Numbers don’t add up
Recent research by Zoopla revealed 43% of British people were counting on inheriting a property to secure their financial future and achieve their homeownership dreams. In other research, it seems millennials have the most unrealistic expectations of inheritance, with one in seven expecting to inherit before they turn 35. They expected to receive some £130,000 on average – but the actual figure was just £11,000 (source as before).
The problem is, we’re all living longer.
Relying on an inheritance is a risky strategy. People are living longer, so if you are holding out for that dream of homeownership, and before the age of 35, you might find you are waiting much longer.
The other problem with people living longer is they are alive longer to spend the funds that we are expecting to inherit! This was a problem for Barry Thorne who, according to an article in the Sunday Times recently, said he was disappointed when his mum died 11 years ago, only to discover she had secured a loan against her £250,000 flat which left it almost-worthless by the time it was sold.
There are also many cases where people use equity release to free up cash while they are still alive, yet forget to tell their families who expect to inherit properties, only to hand them over to the equity release companies when parents die.
It turns out we just aren’t very good at talking about money.
The bottom line is, we just need to be a bit more open with our families about money and what they can expect. In the same Sunday Times article, it states research by RBC Brewin Dolphin that 58% of parents have not had the conversation with their children about passing on wealth – and we suspect it is probably more than that.
It gets even more complicated where blended families are involved – as apparently, they are most likely to be disappointed by an inheritance, simply because there are more family members to share around the cash. Things like costs of funerals, paying Inheritance Tax (IHT) and care providers are also not taken into consideration, which can also lead to further disappointment.
It’s really important to keep conversations open with families so that you can plan more effectively. If you would like to take any advice, contact Downs Solicitors to see how we can help.