Pre-Inheritance the New Inheritance?
The traditional inheritance is on the wane and being replaced instead with a ‘pre-inheritance', according to Aviva, UK insurance provider. Nearly half (46%) of British adults say they have received a pre-inheritance, where the benefactor passes on some of their estate to beneficiaries before they die, compared to only 37% who have received the more traditional inheritance.
People are most likely to receive their pre-inheritance when aged 18-25 years old (29%), followed by those in the 31 - 40 year old age group (19%) and 26 - 30 year olds (18%).
However, as the pensions crisis continues to bite, only 17% of over 55s are currently planning on leaving a pre-inheritance to their loved ones, with one in five (20%) saying they don't have enough money to pass an inheritance early and 21% saying they need to keep hold of the money to be financially secure for the future.
Control over inheritance spending
A number of benefactors are also beginning to set guidelines as to how they would like their money to be spent. The majority (55%) of both inheritances and pre-inheritances are given without any major restrictions. However, one third of benefactors (33%) have made suggestions as to how their money ought to be spent and a small minority have set out specific instructions to use their money for things such as property (7%) or education (2%).
Although benefactors are increasingly involved in deciding how their money is spent, most of those receiving an inheritance are using the money sensibly, by investing for the future (25%), paying off debts - including student debts (19%), house renovations (12%) and paying off the mortgage (11%). Moreover, Aviva data shows that a number of customers are using the proceeds of equity release to assist their grandchildren, normally paying for specific items such as house deposits or university fees.
The younger generations are most likely to invest inheritance money for the future (34%), but are also more likely to decide to spend the money on a holiday (21%) than any other age group.
Clive Bolton, ‘at retirement' director for Aviva says: "At Aviva we are seeing a number of shifts in how people use their money in retirement. The pre-inheritance is a fairly new initiative. Alongside the obvious benefits of cutting the amount of money liable for inheritance tax, it also seems many benefactors like to see their money being enjoyed whilst they are still alive. In addition, it also allows benefactors, if they wish, to have some input into how the money is spent. For example, some people are choosing to help grandchildren by paying off student debts or providing a deposit for a first home.
"We understand that everyone has different priorities in retirement, and we know that many are keen to help their families financially. However, we also know from our Real Retirement Report that while many over 55s want to assist their loved ones, for some leaving a pre-inheritance is not an option as they need all their money to support their retirement.
"At Aviva we would encourage anyone in this position to consider all their assets - including pensions, investments and property - so they can really enjoy their golden years and potentially help their loved ones too."