The importance of inheritance to the younger generation

Data published by the Office for National Statistics shows that the wealth gap between generations in the UK continues to widen. The findings also show that inheritances are becoming increasingly important to younger people.

Over recent decades, rising levels of household affluence mean that the older generation has higher levels of wealth that can be left to younger family and friends. This wealth is passed on through inheritances, gifts and loans.

The latest Government report looks at how the transferal of assets impacts wealth inequality, social mobility and the intergenerational transference of advantages in the UK.

According to the findings, on average:

  • Individuals with the most income and wealth were likely to receive the most substantial gifts and loans
  • Those aged under 45 were the age group most likely to accept cash gifts or loans from friends and family of the value of £500 or more, and also received the highest amounts
  • Those aged 55 to 64 were the most likely to receive an inheritance and also received the largest legacies
  • The least wealthy and youngest individuals receive smaller estates, but they make up a much more significant proportion of their total net wealth
  • Those in the middle of the wealth distribution were the most likely to receive cash gifts or loans from friends and family of the value of £500 or more.

Gifts and loans

Of 25-to-34-year-olds, 11% had received a gift or loan above £500 in the last two years. This is the age most people become first-time buyers and have children, which could suggest that older family members are keen to help support these expensive life stages. The next highest beneficiaries of gifts or loans is 25-44 year-olds (9%). So, the research could also indicate an ongoing dependence of adult children on their parents in the modern world.

Inheritances

When it comes to receiving an inheritance, the average age a person is likely to inherit is between 55 and 64. This is thought to be because people are living longer.

Inheritances are more likely to be received by those who already have relatively high levels of wealth. However, bequests received by those in the bottom income group were equivalent to 13% of their net wealth, while for those in the top income group inheritances were equivalent to 5% of their net wealth. So, legacies could play some role in reducing inequalities.

Knowing how people save and spend money – and understanding the impact of transfers of wealth between generations – is a crucial step in helping people reach their financial objectives.

To find out how best you can pass on your wealth, speak to one of our expert team by calling 01243 216900 or email us at info@legalmatters.co.uk.

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