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.
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 firstname.lastname@example.org.
Charities are worried about the impact the new “stealth death tax” could have on legacy giving.
The Government is facing condemnation after its plans to hike the cost of applying for probate were revealed. Under the proposals, some grieving relatives would need to pay death taxes of up to £6,000 to secure legal control over a deceased’s estate.
But in addition to families, charities could also feel the impact. In fact, according to The Institute of Legacy Management (ILM), charities will lose out by more than £10 million per year under the proposals.
In response, the Government has been asked to reconsider its stance. Speaking about this issue, the Chief Executive officer of ILM, said that it was deeply concerned by the proposed rise in probate fees.
At present, the current cost of securing probate is £215, or £155 for families who use a solicitor. However, if the Government gets its way, this cost could soar to £6,000 from April next year. This could have a devastating impact on those charities who are reliant on legacy gifts and significantly reduce their income.
At a time where many charities are struggling to meet increasing demand for their services, this could have a considerable impact on many groups across the UK.
The proposals have also come under fire for being a “stealth tax”. This is because the current fees cover the average costs of making a grant of probate, but the new fee structure is hugely disproportionate.
Is it a new tax?
Introducing a new tax requires new legislation. But the Government is using its existing powers to force the change rather than passing a new law. If passed, the new tax will side-step the long-established exemptions and reliefs of the inheritance tax regime, including the charity exemption.
With concerns that this stealth tax will be shouldered – in part at least by charities – the impact on the sector is expected to be significant. So much so that millions of much-needed funds could go to the Government, rather than being used to fund vital services.
The Government has responded by stating that the cost to the charity sector is “not expected to be substantial”.
To find out how to maximise any legacy you want to leave to a charity, speak to one of our expert team by calling 01243 216900 or email us at email@example.com.
Many families will have to pay more in probate fees from April 2019. That’s according to new proposals that see a hike in the cost of applying for probate.
The Government has claimed that fees are necessary to fund an effective and fair court and tribunals system. However, under the plans, some grieving relatives will have to pay death taxes of up to £6,000 to secure legal control over a deceased’s estate.
What are the main changes?
At present, the current cost of securing probate is £215, or £155 for families who use a solicitor. But, under the new plans, the Government has linked the charge to the size of the estate. This means that:
- Inheritances of less than £50,000 will be exempt (the current threshold is just £5,000)
- Estates valued between £50,000 and £300,000 will pay a fee of £250
- Those between £300,001 and half a million pounds will now pay £750
- Estates between £500,001 and a million will pay £2,500
- The cost could go up to £6,000 for estates estimated at over £2 million.
The reforms will also make it easier for grieving families to make the application online while helping people lacking in computer literacy.
Are the changes fair?
While it might seem fair that larger estates have to pay more, these fees must be paid upfront by loved ones (who might not have access to this kind of money).
This also fundamentally changes the fee-structure for applying for probate. Until now, the cost has existed to cover the average costs of making a grant of probate. However, the new fee structure is hugely disproportionate leaving some people to argue that it is actually a “stealth tax”.
However, according to the Government, the new banded fee model represents a “fair and more progressive way to pay for probate services compared to the current flat fee”. It also argues that, for those who do pay, “around 80% of estates will pay £750 or less”. It has said that fees will never be unaffordable and that options will exist to help families choose a way to pay which suits their circumstances.
Nevertheless, with assets from an estate frozen until the executors receive the grant of probate, questions still exist over how some executors will manage to pay the probate fees. Especially for people who may have little money in the bank, despite valuable estates and properties.
To find out more about how the new probate fee structure could impact your estate, speak to one of our expert team by calling 01243 216900 or email us at firstname.lastname@example.org.
When you own a business, not using a professional lawyer to draw up your Will is almost always a mistake.
Failing to cover all your assets and not considering issues around inheritance tax, executors and trusts are two common mistakes made with a DIY Will. But even the smallest of mistakes could render a Will invalid – such as if it’s witnessed by the wrong people or number of people; if it’s not signed or dated in the right place.
Having a valid Will in place is essential if you want the final say in what happens to your business and other assets after you die.
If you die without a Will, or if it’s invalid, everything you own – including business and non-business assets – will be distributed under the laws of intestacy. Which means that you or your loved ones will have no say as to who inherits. To avoid your assets being dealt with under the rules of intestacy, your Will should detail what will happen to your business shares.
When you die, any shares or interest you own in a business become an asset of your estate. Without a Will, these shares could be sold, the company could be broken up, or it could run into trouble without the correct day-to-day management in place.
For example, you might know who you want to inherit your business after you die, but what happens if there’s a tragedy and these people don’t survive? A professional solicitor will know what questions to ask to make sure that your Will covers all situations.
Take a look at the package “Business Wealth Protection” which we’ve put together specifically for business owners. We will look at all eventualities and the Will we draft for you will include a trust and letter of wishes to ensure that inheritance tax is handled in the most cost-efficient way.
In some cases, you might already have a partnership agreement or company papers in place that set out what will happen to the business after you die. These types of contracts are usually put in place if more than one person owns a business and you want the company to continue after your death. You should also consider whether you need a business lasting power of attorney. We’ll help you decide what legal documents you need to draw up in order to carry out your wishes and best protect your business and your loved ones.
It is always important when drawing up a Will that it is done correctly, and for business owners this is more complex. We can help guide you through the process. Just speak to one of our expert team by calling legalmatters on 01243 216900 or email us at email@example.com.