Over-50s shift inheritance plans to support family during pandemic

A significant number of over-50s have changed their inheritance plans to support loved ones through the coronavirus pandemic, a major study has revealed.

The research, published by over-50s financial services provider Saga, shows that over a third (37 per cent) of parents and grandparents would rather see their heirs benefit from their wealth now, than after they’re gone.

A further two in 10 said the pandemic has “caused them to adopt a more flexible approach to inheritance plans”. For instance, four per cent said they would be considering gifting a portion of their inheritance now, than leaving it in their Will.

Around seven per cent of respondents, meanwhile, had already made gifts out of their estate equal to around 15 per cent of their wealth.

Commenting on the report, Alex Edmans, Head of Equity Release at Saga Equity Release Advice Services, said: “The pandemic has brought about a whole host of new financial pressures for families. It’s only natural then, for parents who may be more secure than their children to want to offer their support through these challenging times.

“Many are now increasingly turning to their own savings, thinking more flexibly about their inheritance plans or considering benefitting for the equity in their home.

“However, it’s vitally important that parents seek advice on the best route forward before committing to accessing their pensions early, gift money or using equity release – what is right for one family may not be appropriate for everyone.”

While gifting can be a tax-efficient approach to inheritance planning, there are potential pitfalls to avoid. Here’s what you need to know:

  • Exempted gifts

An individual can give away £3,000 worth of gifts each tax year (6 April to 5 April) without them being added to the value of their estate. This is known as the ‘annual exemption’ and can be carried forward to the next year, but only for one year.

  • Spouses and civil partners

There is no Inheritance Tax to pay on gifts between spouses or civil partners.

  • The seven-year rule

If there’s Inheritance Tax to pay, it’s charged at 40 per cent on gifts given in the three years before you die. Gifts made three to seven years before your death are taxed on a sliding scale known as ‘taper relief’.

For more help and advice on matters relating to Wills, inheritance and estate planning, contact our expert team today.