Any mention of inheritance taxes in a Monevator article invariably produces heat in the blog’s comments. One reason may be that few of us are talking about inheritance in real-life.
Of course if you grew up in landed circumstances – strolling across the lower fields as your father waved his cane across your future realm whilst reassuring you that the family plantation in Barbados, the table at Annabel’s, and his collection of Nazi memorabilia would be all yours to – then your mileage may vary.
But in my (infinitely more limited) experience, talking about inheritance is mostly done in a jokey way.
Well, except in a few specific circumstances I’ll get to below.
And it seems my experience is pretty normal. According to Canada Life’s new report on the impact of longer lifespans, when it comes to talking about inheritance, everyone is NOT at it.
In its survey, the financial services giant found fewer than half of would-be bequeathers have discussed their wishes with the potential beneficiaries.
Although happily this number rises to 60% for those with children:
Source: Canada Life
I think it’s revealing that the ‘let’s talk about it’ figure rises slightly for adults with stepchildren.
Because in my experience this set-up – perhaps not surprisingly – is one of the few reliable triggers for The Discussion.
Talking about inheritance: when and why
For many people who might expect something when their parents shuffle off, only a big life event puts the topic of inheritance properly on the table.
Again, I’m not talking about the fortunate tier who’ve been passing down wealth for generations.
Nor those with very wealthy self-made parents. Entrepreneurs seem to take inheritance super seriously. I suppose they see it as an extension of a lifetime of financial achievement.
Rather I’m thinking of a typical aging middle-class couple who own a nice house inflated by 30 years of house price gains – but not much else in the way of riches outside of pensions.
Heir-raising conversations
After sufficient drinks – or maybe a nasty remortgaging shock – friends of mine born to such doughty stock have sometimes bemoaned their parents’ reluctance to broach the subject of inheritance.
“My parents wave their hands about ‘popping their clogs’ and threaten to spend the lot on cruises and skiing holidays,” a friend might begin. “But they never go skiing! They just buy ambitiously small trees from the garden centre and send money to that Smile charity or ActionAid. Presumably they hoard the rest.”
Already fearing this is sounding too mercenary, they typically continue: “I wouldn’t mind if they spent all the money on having fun, obviously. It’s their money. But they won’t spend it all – unless God forbid one goes into care. And then there’s the house, which must be worth a small fortune.”
Before, finally, the kicker…
“If I knew what I might be in-line for then to be honest it would really help us balance the books today. Because we could be making sacrifices for nothing – paying down the mortgage, not moving somewhere bigger, and Susan staying in that job she hates – only to end up with £250,000 in the bank that we can’t do much more with than give to our kids ourselves.”
Obviously every family and conversation is different.
But that’s the gist. A modestly life-changing sum of money may or may not arrive in anything from five to 20 years or more.
Realistically, nobody can model that, except for the parricide-curious.
Talking about it won’t usually make the timings much more concrete, either.
However having a proper conversation certainly wouldn’t hurt. It could prompt earlier and more substantial gifting, for instance. Or deeper investigations into mitigating inheritance tax.
Long-time readers will know that I’d whack up inheritance tax if I was the Chancellor.
But most of you wouldn’t, and I’m not the Chancellor anyway.
So my best advice to you as your friendly money friend on the Internet is simply to talk about it sooner rather than later, if you expect to receive a large legacy.
Because if you do end up facing unexpected inheritance tax charges, then by that point it will be too late to do much about it.
When people start to discuss their legacy
If you’re traipsing back from visiting your eldery parents every month wondering when they’ll finally take the subject of inheritance seriously, I’ve got bad news.
In my experience it usually requires something dramatic to shock people out of their complacency and ready them to confront their mortality.
I’ve noticed inheritance conversations come up after:
The death of one parent – Not something most of us would wish for. But it does focus the mind. (Generally overly-focusses. Be sensitive!)
Serious illness – A cancer diagnosis will usually get a parent to realise they’re not immortal. Again, horrible for all concerned. Although some will continue in denial anyway. Perhaps they feel that admitting to the possibility of death gives license to the rogue cells multiplying in their body. Who can blame them?
Divorce, remarriage, and stepchildren – I’ve noticed parents can get really edgy about passing on wealth to children with partners who enter their lives late. I’ve even seen this persist after stepchildren became seemingly beloved members of the family. It must spring from the atavistic urges at the heart of the inheritance tax conflict – supporting your selfish genes over others.
More charitably, parents may be wary of seeing their offspring and descendants diddled by feckless new partners. Especially if the end of a child’s previous marriage left them on high alert.
Til death do us impart
Yearning for your parents to talk about inheritance may be a classic example of be careful what you wish for.
But you don’t need to be Carl Jung or Sigmund Freud to understand why such shocks can bring talking about inheritance into the open.
Brooding on your own mortality can be fun when you’re 19 and mooning around graveyards quoting The Smiths to your first oh-so-serious girlfriend. (Or was that just me?)
But it’s much less fun when you’re into the second half of your life.
You’ve seen friends and family go. The mirror doesn’t lie and nor does your passport or your doctor.
So you prefer to look the other way and put your fingers in your ears.
It’s the same denial of reality that puts people off making a will.
From the Canada Life research:
Source: Canada Life
Those are pretty shocking figures. But we can’t help feeling that inviting death into the room might encourage him to stay.
Nobody wants the Grim Reaper casting around for candidates to promote up the running order.
Similarly, thinking about your children firing up a spreadsheet to calculate what you’ll be worth when you’re gone isn’t usually what motivates people to have children. It isn’t the sort of thing we like to think about or plan for.
It’s also easy to see how a new spouse who comes with kids from an out-of-sight – and often openly disparaged – former partner will raise suspicions.
They never included this bit in the Disney fairy tales. Only in those gruesome old German ones where somebody ends up getting eaten by their offspring. Or worse!
Primal scream
For related reasons, I’d suggest stressful life events can be bad times to actually make decisions about inheritance. Or any other big commitments for that matter. Even if they can be much-needed starting points.
Emotions are running high. Rationality is often dialled down to a tick-over level.
I was once called in as the family’s putative financial consigliere to look in on a relative after her husband died.
This new widow was telling people she’d have to sell her little bungalow and move into some kind of care facility because (a) she wasn’t long for this world and (b) she couldn’t afford to live in her existing home now he was gone anyway.
This was surprising to me and everyone else because (a) she’d barely seen a doctor in 30 years and was only 70 and (b) he was an assiduous saver and partner who had surely foreseen the probability of his passing before his wife.
Of course it turned out she was well provided for by her husband’s modified but ongoing final salary pension. More than a decade later, she still enjoys pottering around the garden of that same house.
When I spoke to her about it last Christmas she barely recalled her worries back then.
Grief can make anyone a little mad for a while.
And so though an unfortunate life turn that leads to important discussions taking place is better than never talking about it at all, please leave the heavy lifting for sunnier days if you can.
You can go your own way
Of course we can all see that it’s better to talk about these things ASAP, at least in theory.
Parents get time to investigate tax mitigation strategies if they want or need to.
And it’s easier for potential recipients to plan if they know whether they should reasonably expect a windfall in the future.
But a final reason is better peace of mind – for all parties – after having these fraught discussions:
Source: Canada Life
There’s oodles of research showing that feeling you have a purpose and that you’re in control improves your quality of life.
We usually think about this with respect to our job or savings.
But it seems it’s equally true of knowing where your money will go after you die.
Readers! As a blogger of fairly humble origins who doesn’t have kids, most of my thoughts about inheritance come from observation rather than lived experience. So I’d love to hear from parents and children who have struggled – or not – in talking about inheritance. Let us know how you’re doing in the comments below. In the future I’ll update this article with your insights. Also, let’s keep the politics of inheritance taxes out of this thread. They’ll only derail the subject at hand. Thank you!
Good article and possibly timely should the budget introduce or signal significant IHT reforms.
Speaking personally I’ve only got much more idea since I helped my mum with my dad’s estate. All the same I’m not counting any chickens and any inheritance still falls into the “buffer” element of my personal financial plan should I truly experience dire SORR etc. While my dad was still alive there was a distinct possibility he’d have needed care and while it feels like the chances are materially lower with my mother, one can’t rule out that “living to 100 but no longer independent” scenario.
I guess I’d be pretty miffed if her estate ended up being dragged into IHT (after modest earning careers for her and my dad) but she isn’t spending what she has coming in via her plus spousal survivor pension. I’m trying to encourage at least annual gifting and spending directly on grandkids costs. Ultimately it’s them who’ll really benefit from any inheritance should things work as planned for myself and brother.
We’re probably too late to reliably depend on a 7 year rule for any big giveaways etc anyway.
@all — Unfortunately I just had to delete a political comment about inheritance tax (although happily the poster concerned has taken it well and may reformulate and repost anon).
If you’d like to discuss the politics, please do so on the Saturday’s still-lively Weekend Reading thread about the Budget:
https://monevator.com/weekend-reading-if-someone-asks-you-to-be-chancellor-say-no-thank-you/
We won’t get a good and open conversation about discussing inheritance going if adherents to the either side of the taxation argument are making their points here, hence the comment moderation heads-up on this thread.
Thanks for your understanding! 🙂
@The Investor – You wrote: “As a blogger of fairly humble origins who doesn’t have kids…” respectfully you could have stopped there. You (likely) received little inheritance, and you have no children/grandchildren to help, so you (likely) have no empathy for others who wish to help their families. What a shame.
I am currently full on decluttering and chucking a lifetime of junk, having had Covid for 3wks so this is a timely article, thank you. Slightly different for us in that we have no children. It may well be that one or both of us end up in a care home which will no doubt take care of any funds remaining after my efforts to travel the world in some degree of comfort.
An earlier article “Succession Plan” concentrated my mind in that we need to get cracking on a “file” of information for us and whoever sorts it all out at the final curtain. But choosing executors is proving to be a tad problematic, assorted nieces and nephews but quite honestly I don’t see any up to the task. So we have fallen at the first hurdle.
As a neighbour said to me, in certain respects your situation is more difficult than for those with children and grandchildren.
I haven’t answered the question but it will be interesting to read other readers comments.
Good article. My Dad NEVER talks about this stuff. My Mum died a long time ago and my Dad remarried 7 years later. At the time he said my sister and I would get everything, but this hasn’t been mentioned since. My sister is convinced he’s changed his will to give money to her daughters (we never see them, met them once at the wedding!) but I’m not so sure. That said, I’m living my financial life with zero expectation of receiving anything. I find it’s easier that way! I’m 49, still renting and saving for a deposit which in Scotland is tricky with the whole ‘offers over’ debacle so god knows when I’ll have enough to buy. That said, I’m very fortunate to have a well paid job and I’m paying a lot into my 12 yr old pension to make up for lost time. I speak openly with my nieces (I have no kids) that my pension and everything will be left to them, I just ask they don’t try to bump me off early to get it My Dad is old school and won’t talk about such things so only time will tell what happens. If I get anything it’ll be a bonus, that’s the way I look at things!
And if you can’t or don’t want to talk about it at least make a will, and if you are exercised about the results get a solicitor rather than a freebie from some charity (who expects to benefit, natch).
The solicitor’s job is to ask you some tough questions, the point of paying him is to make sure he’s on your side 😉
@BBBobbins
“We’re probably too late to reliably depend on a 7 year rule for any big giveaways etc anyway.”
Remember that there’s taper relief: currently, after three years the taxation rate starts to decline. See https://www.gov.uk/inheritance-tax/gifts#the-7-year-rule
@Jane > So we have fallen at the first hurdle.
It’s a possibility (and maybe common, I haven’t seen many wills but those I have all had this) to have the drafting solicitor as the executor of last resort.
If there’s a primary beneficiary then that beneficiary is the obvious choice. Except if there are descendant siblings, that’s a recipe for one hell of a fight, but this is not your problem.
@Jane, *someone* will have to sort out your stuff when you die. And even if you don’t think they are ‘up to the task’ (frankly, is anyone? We get, at most, a couple of such ‘opportunities’ in a lifetime) they will have to do it, even if you die intestate.
I suggest you look up who your beneficiaries are under intestacy laws. If that seems ok, then maybe ask them to be executors. If it doesn’t, then you’d better write a will and find an alternative. Friends, siblings? Or failing that an expensive professional.
@Curlew acknowledged and maybe the budget will provide sufficient impetus. She knows we will help out if she should need it, of our own violition, not gift with reservation of benefit. But as just this week I ended up being screamed at for suggesting that putting the Barclays app on her IPad might help manage her affairs (when Barclays have closed all presence in her town and barely seem to open in the nearest alternate and only I or my brother would use it with her), I am acutely aware that any actions around money paralyze her with fear.
It’s potentially one reason why IHT is unpopular and generates such visceral reactions as it’s a policy that forces us to have very uncomfortable discussions with loved ones, and if you don’t grasp the nettle then it may cost you dearly. I’m trying, but largely failing, in this department at the moment. Thought I’d had a breakthrough – but it came to naught. Very, very tricky indeed. Appreciate that’s not particularly helpful, more just empathetic.
Aged 78 as is wife so in the crosshairs!
Children (3) were told many times not to expect any inheritance as we had spent lots of time and cash educating them to a good level
All have good jobs,children of their own and are financially independent
Having said all that there will be some cash about- if we both don’t need care homes! – fees currently £50000+ pa per person
I am not making myself or my wife financially beholden to my kids as a divorce amongst the kids could result in asset demands from a non family member by birth divorcee etc etc
Again having said all the above the kids know exactly what we have-have all the requisite powers of attorney are in place -a will been set up with a equal split between the three and they are all executors
At the end of the day of course unforeseen stuff happens -all one can do is have a plan and then hang loose………
xxd09
Having very recently gone through the process of handling the loss of both parents, I can assure you 110% of this subject depends heavily on the personalities of the parents and emotions of one’s immediate family.
No need for details but I was rather surprised that no level headed thinking entered into our situation despite the high academic standards of those involved……
Perhaps inheritance isn’t the most important concern?
If I had one lesson from it, it was make your will clear, fair and well understood by all beneficiaries.
My parents are both mid 80s and living at home. My dad is a very organised person and has been on at me about this for some time. I know where documents are, I’m an executor of the will and I have POA if required together with another sibling. There won’t be much in the way of an estate, as they don’t own their house and there are 4 of us, if I get anything it will be more of a boiler replacement kind of sum rather than making any difference to my provisions.
We have had our wills in place since the birth of our children (and they need reviewed, which this article has prompted me to do, so thanks for that). I think its important when children are not of age to make your wishes known for guardianship in the event of premature parental deaths. They’re well past that stage now so I should make them the executors.
@Prometheus, sorry for your loss, anecdotal I know but it seems quite common in my experience that the second parent can follow on quite soon after the first one.
Both my parents died in the last six months. We found copies of their wills in the tin box in the wardrobe with instructions that my brother and I become executors. Even towards the end they didnt want to discuss their passing or the distribution of their estate. They had made the wills when they paid off their mortgage some 35 years ago. It almost seemed as though that was one chore they didnt want to discuss.
Being an executor is grinding work, I have been engaged on it for almost 6 months and the estate only just breached the probate rules.
I’m almost through it and believe its a privilege that they gave us, our last act for them.
What I would have liked, in the absence of any discussion, would have been an idea as to why they made the choices they did and what informed their decisions. I know that when they were here they would much rather talk about family, grandchildren, neighbours basically anything other than money.
I find I have the same reluctance to discuss inheritance with my kids, instead I keep an investment diary and an up to date “in the event of my death” note along with the spreadsheets etc. I know it helps me to sleep more easily
+1 for using a solicitor to draw up a will. It’s not that expensive and provides belt and braces assurance it’s correctly written and registered. Power of attorney is pretty straightforward to do yourself online – I did this about 10 years back (at 58-ish) and it’s about £82 for each type (financial and health). At the time the solicitor quoted £400 each for basically filling in the form for me online – yeah right. I refused, politely (through gritted teeth).
I’ve talk to my daughters about inheritance and they are not bothered if I don’t leave anything; their circumstances are pretty comfortable. EG I can’t afford to buy a small house where either of them live. Not that I’m badly off either – I sold two properties in the Midlands when I retired and I invested the whole proceeds and use that to fund renting in the town where my granddaughters live. Wouldn’t have known what to do about investing or had the confidence to act like this without resources about FI explaining this stuff, especially here at monevator.
One useful thing I discovered at the time I implemented this scheme was that you retain the ‘primary residence relief’, or whatever it’s called, for IHT if you do what I did and sell it. I’ve no idea how your executor (daughter #2 – the accountant) will prove this to HMRC but I’ve left a note in a document for them – but they’ve shown no enthusiasm to listen to me about this when I’ve brought it up.
I think having considered inheritance for my daughter’s and granddaughters has possibly been a factor in me not enthusiastically seeking a new partner after divorcing years ago. Doesn’t make any sense of course, especially as my daughter’s are unmotivated by receiving an inheritance. But I just don’t feel happy with the idea of remarrying then predeceasing a new partner whose estate then passes entirely to their children, as it most likely would, especially should she die intestate, a scenario mentioned by a poster above. Completely daft on my part, I’m willing to admit, but c’est la vie. I guess that little vignette may serve to illustrate the irrationality that surrounds discussions of inheritance.
Can’t comment on inheritance per se, but do have experience of the importance of wills and PoA.
My parents are in the ‘3rd generation curse’ category, so for the last 15+ years I have been trying to help them ‘stop making the same mistakes’ repeatedly! and survive on what they had left.
A difficult task that has led to some conflict and ill feeling.
5 years ago I persuaded them to update their wills and to get PoA, this whole process took about a year as –
1 – They didn’t see the point
2 – They struggled to understand what the PoA is
3- They wanted my older brother included
4 – They kept changing their minds
I will add here that the whole situation has not been helped by my alcoholic older brother who has been confusing them, coercing them for money
and stealing from them, for decades.
I will spare you the long long story……
However my Dad is now 90, with dementia and is in a care home. He is safe from harm and happy, which is what’s important.
My mother is 85 and has many care needs and is likely to go into a care home very soon.
My brother pickled his brain with vodka and has alcohol induced early dementia and is also in a care home.
The last 2 years have been somewhat hectic, had it not been for the PoA I dread to think how I would have coped with everything.
It has its limitations but it’s far better to have them in place than not.
One key point I learnt too late is that the PoA trumps a living spouse when it comes to decisions about the other spouse.
I did not know this, neither did the staff at the hospital who discharged my Dad into my mothers care, against my wishes, as I knew she would not be able to cope with his needs at home.
My Dad left hospital on the 27th Dec, without a care plan, without a social worker allocated to him, without any provision for rehab at home etc etc.
2 weeks later my mother almost had a breakdown because she couldn’t cope.
It took me 6 months, yes 6 months! to sort out that mess and get my dad the care package he needed.
If you are an attorney for someone and they lose capacity, be prepared for conflict as you battle to be their advocate and make the decisions that they would want you to make on their behalf.
It helps to do your research to know your rights, it appears health and social care professionals do not fully understand the PoA, or atleast many who I have come across don’t.
I agree with the DIY PoA suggestion, it’s easy to do and will save you hundreds of pounds.
@Sarah, that seems a little inappropriate.
In: (i) £25 from an aunt long ago. Blewed it. (ii) Some tens of thousands from parents decades ago. After many years I calculated what had become of it, inflating with the RPI index. Turned out I’d given it all to offspring for university costs, opening pensions, deposits on property. I tell myself that I’ve helped them become prosperous so they’ll be in a position to help support their mother if she needs it. I’m confident they would. I’ve also, I trust, helped them avoid financial stress thus adding to the gaiety of the nation. Good.
(iii) Several thousand recently. I wrote a deed of variation to pass it down the generations so they can invest it towards any cost-of-Mum bills or, in the first instance, cost-of-brats bills. Since we are much too old to look after the beloved brats if their parents die, the latter have arranged for friends to become guardians. Do not overlook this issue! (iv) Unless my wife dies first I don’t expect to inherit anything more. Ditto for my wife, mutatis mutandis.
Out: “Care”. Provisional guess based on family history: I’ll die cheaply and soon. My widow will live long and end up demented and in care. Our savings and, much more important, our house will have to pay for it. Will eventually need management by younger generation who are all abroad and unlikely to return.
And if I need care for any length of time while my wife survives? Tricky and also impossible to plan for. Perhaps my wife could borrow from the offspring, documenting the loan carefully.
It’s a great spity that one can’t buy insurance against the cost of care but one can’t so that’s that. It’s hardly surprising: any insurance company that tried would be permanently terrified of government interference that would ruin them. One can, however, buy an Immediate Needs Annuity. I’ve kept the offspring up to date on this.
+1 for using a lawyer to draft your will if you aren’t comfortable doing so. In a previous life as a trainee lawyer, I dealt with a file where the testatrix had used one of those WHSmith type wills and hadn’t specified the charities she wanted to benefit properly (i.e. she used a generic reference (for example, cancer research) and an incorrect name (e.g. heart foundation)) which meant that the modest legacy was mostly taken up by the costs of taking the matter to court to get approval to distribute the estate as we thought appropriate.
Also +1 for doing powers of attorney yourself. I’ve done mine, my mum’s and ones for a friend – v straightforward.
One quick follow up for the ones with a particular humour – as a trainee lawyer, I spent some time looking through an old textbook that had various old wills clauses in it. After discovering the following, I put it in my will and have included it in each of my wills since – makes me chuckle every time I read it:
“I DIRECT my Executors to take all necessary steps and for this purpose to employ and pay such doctors or other skilled persons as they in their absolute discretion may think proper for the purpose of ascertaining that I am in fact dead and not in any state having only the semblance of death in order so far as possible to avoid all risk of being cremated alive.”.
I can only assume the original drafter had been reading Romeo and Juliet…