Over-55s back ‘pre-inheritance’ tax incentives

Over-55s are increasingly supportive of giving ‘pre-inheritances’ to family as financial support is “more useful when relatives are younger”, new research from Key has suggested.

The equity release adviser’s findings showed that around 45% of over-55s questioned believe making family wait for an inheritance is “wrong”. This comes as the average age of inheritance is 47 years old.

Despite no changes in the recent budget around inheritance tax (IHT), more than half (53%) of over-55s would back tax incentives to give money to children on the condition it is used for major purchases such a deposit for a first home.

Key’s study, based on a nationally representative sample of 2,000 UK adults, suggested this move would also be welcomed by under-40s – with more than two out of five (41%) having given up on getting on the property ladder without family help, and 56% wanting the government to do more to tackle the intergenerational financial divide.

“While the recent budget did not tackle this issue, both the older and younger generations are keen to see more support for choices that promote intergenerational fairness,” commented Key CEO, Will Hale. “While the over-55s know that they need to consider their own retirement finances and potential care costs, they also want to help children and grandchildren financially.”

Key’s research suggested the biggest potential threat to pre-inheritance and in-life gifting is concerns among over-55s about the cost of care –with nearly half of over-55s (46%) fearing that funding care in later life will stop them leaving an inheritance.

Furthermore, funding care is seen as a bigger threat than running out of money to support normal living expenses in retirement – with less than a third (31%) of over-55s saying retirement income worries will stop them leaving an inheritance.

“A pre-inheritance which contributes towards university fees, a first home or a dream wedding can make a huge difference and – in the case of equity release – puts money back into the economy that might otherwise have sat trapped in bricks and mortar,” Hale added.

“Whether that should be formalised with tax incentives is another question but clearly the decision to increase National Insurance partially to help fund social care attracted some criticism on being unfair to younger generations and a tax incentive around encouraging pre-inheritance in certain circumstances might help balance it.

“When thinking about leaving a pre-inheritance, the best place to start is often by having a discussion with an independent financial adviser who will help you ascertain how you can do this without negatively impacting your financial stability.”

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