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A survey of British families suggested that more than half of parents plan to divide the estate equally when their child dies.
Their intentions will often surprise their children, as less than a quarter of young people say they’ve discussed their financial plans openly with their parents, a survey released today said.
The authors of the Generation Games report say that the lack of intergenerational financial understanding reflected in the findings “can significantly impact family financial planning and cause problems in the short and long term.”
A survey conducted by wealth manager Censuswide for Netwealth surveyed 1,000 young adults between the ages of 25 and 35 and 1,000 parents of young adults with investable assets of at least £50,000 planning or considering transferring wealth to their children.
The report warns that over time, the “communication gap” between generations widens and “the lack of clarity about parents’ plans for property when a young adult dies, and avoidance of conversation on the subject” increases, the report warns. .
Worryingly, 66% of parents say their child has a clear understanding of miscarriage planning, but only 39% of young adults think so. Only 23% of young people surveyed said they had openly discussed their parents’ financial plans.
The potential tension is complex, as studies show that only 53% of parents plan to distribute their wealth equally. Of those who proposed unequal division, 15% said they had already given significant support to one child, and 14% said they wanted more to give to a child in need. Another 12% said their children did not have the same number of children and would like to support their grandchildren equally.
Other motives were also registered. About 4% said they do not want to support the partner or wider family of a particular child, and 7% said they are moving away from one or more children.
“Parents who want to divide property according to the needs of their children will be able to explain their rationale early in such conversations. . . Charlotte Ransom, CEO of Netwealth said, “We help every family member plan their finances accordingly.”
To make matters worse, many parents overestimate their children’s financial abilities. 76% believe their children have control over their finances, but only 52% of young adults agree.
Research also shows that young adults tend to follow their parents’ financial habits, so people who are committed to saving tend to save, while those who spend big, generally impute their approach. The report says this has “mixed consequences” as these cultural traditions can prolong bad habits in families.
Meanwhile, UK Inheritance Tax (IHT) payments rose 19% for the first time in 12 months to over £6 billion, figures released this week to remind the importance of taxes in inheritance planning. The amount collected by HM Revenue & Customs increased from £5.04 billion to £6.01 billion by the end of August.
Due to the impact of the Covid-19 pandemic and record high real estate prices, more properties than usual have been held accountable by IHT. In addition, the government has not increased the tax-exempt ceiling on inheritances in line with inflation, which has been frozen since April 2009 at £325,000.
Mark Giddens, partner at accounting group UHY Hacker Young, said: As a result, families are increasingly understanding the importance of tax planning so they can pass on the fruits of their labor to their children.”
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