personal finance

Inheritance tax: Shock number of adults DON’T KNOW how much to leave – what are the rules?


A staggering 63 percent of people aged 45 and over have not told their beneficiaries how much inheritance they plan to leave them, new findings from Canada Life shows. The shock figure highlights an ongoing uncertainty of how much money is really needed to fund later life and confusion surrounding how inheritance tax works. A huge concern for over-45s is using all their assets to fund their retirement, with 39 percent worried they will have nothing left to give their family. Meanwhile, 40 percent fear they do not have enough saved in their pension to cover their own golden years.

A further 35 percent of people passing on an inheritance believe their beneficiaries will use at least part of it to fund their own retirement.

The research went on to show 63 percent of over-45s plan to leave only what is left over to their beneficiaries.

While 16 percent will leave nothing and spend everything to fund their own retirement.

Inheritance tax must be paid on an estate – made up of property, money and other possessions – once someone has died.

The standard rate of inheritance tax is 40 percent and this must be paid on estates worth over £325,000.

The tax charged will only apply to part of the estate above this value.

So if the estate was worth £500,000, inheritance tax of 40 percent would only be liable on £175,000.

A reduced inheritance tax rate of 36 percent on some assets will apply if 10 percent of more of the net worth is left to charity.

It is still the law to inform HMRC of the estate even if it is below the £325,000 threshold.

While larger unavoidable, there are ways to reduce the inheritance tax left behind.

Some assets left in trusts and gifts given to spouses or marital partners are sometimes exempt from inheritance tax, depending on time.

Pension pots can also be left behind for loved ones to claim tax-free, providing the person died before the age of 75 and has not touched their retirement stash.

It is important to contact a professional financial advisor to discuss inheritance tax options if you are looking to make your liability smaller.

Neil Jones, Wealth Management and Tax Specialist at Canada Life, commented: “There is a clear disconnect among over-45s between their desire to leave something behind to their beneficiaries and the need to fund their own retirement.

“It seems that many are losing the battle, acknowledging they don’t know how much they’ll be able to leave behind to the next generation.

“It appears that many people over the age of 45 may not have clarity on their finances – what they need for later life and what they can set aside for their children, grandchildren and loved ones.

“To rectify the situation and gain control of their finances, over-45s should visit a professional adviser.”



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