We need to talk about inheritance
There are lots of important financial subjects that families needs to discuss.
As parents get older, inheritance becomes one of the most important financial conversations we need to have.
According to some new research, the over 50s are cutting back on essential living costs in order to save money and build a bigger inheritance pot for their children.
The research by Saga Money has found a clash between the wishes of retired people, who want to pass on an inheritance, and their children, who would rather see them spending the money today.
It can be a tricky balance to strike, but Financial Planning makes it easier.
By creating a lifetime cash flow forecast and running some different scenarios, it’s possible to understand how much you can afford to spend now and in the future, leaving behind enough for your loved ones.
The Saga Money research found that more than eight in ten children say they would rather their parents spent their money in retirement than leave them an inheritance.
Despite the majority of adult children having this attitude, one in five parents say they are concerned about leaving an inheritance for their children.
Just under half of retired people believe so strongly in the importance of leaving an inheritance they say that they will not spend frivolously in retirement to ensure there is something left behind for their children.
Discussing inheritance is a good way of resolving these conflicting attitudes.
If frank discussions about money and inheritance mean people can spend more without feelings of guilt, then those conversations are worth having.
It’s also good to set expectations for adult children who might or might not be expecting to receive any inheritance to repay debt, send their children to University or retire early themselves.
The research by Saga Money found that half of parents believe it is important to leave an inheritance for their children, although this sentiment weakens with age.
This weakening sentiment with age is perhaps as the reality of our later life financial position hits home or because as children grow older we see they are less dependent on their parents for financial help.
The study found that property is the biggest asset that forms part of inheritance; seven out of ten parents said the bulk of the inheritance they leave to their children will come from their home, rising to three quarters of those aged 50 or over.
Almost half of parents say that savings will form a big chunk of their children’s inheritance.
Inheritance, money and later life planning can all be very emotive issues that are often taboo, so not discussed in families as openly as they should be.
As Financial Planners, we can facilitate these important discussions between family members and get the different generations talking openly about their financial priorities, leading to the creation of an intergenerational financial plan that serves your lifetime goals and ensures inheritance planning takes place too.