Inheritance Tax UK: The simple way families could reduce likelihood of facing an IHT bill

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INHERITANCE TAX is something which families understandably won’t want to think about, with the need to pay it on an eligible estate being due to a death.

The sombre circumstances that come with inheritance may mean that estate planning is something many wish not to talk about with loved ones. However, according to one of the UK’s leading wealth managers, Charles Stanley, talking about money and the future can be extremely important.

The warning has come amid research which has found that 22 percent of UK adults saying they envisage living under one roof with their elderly parents later in life – or that they do so already.

The reasons for this range from a desire to avoid retirement or care home costs, as well as to ensure their parents are not left on their own.

Among the options been planned are suggestions of:

  • Parents moving in with children to avoid being alone
  • Parents moving in with children to avoid care/retirement home costs
  • Children moving in with their parents, so they are not alone
  • Children moving in with parents to avoid care/retirement home costs
  • Parents signing their houses over to children and all living together in it
  • Parents and children purchasing a joint property and living in it as a family.

Meanwhile, 21 percent have said their parents will have to – or already do – fund the costs of a retirement care home.

Due to these costs, eight percent have said they think it’s unlikely that they will inherit anything due to the costs.

But, despite this, research suggests there’s still a significant number of people who are not having conversations about later life with their parents.

A survey by Charles Stanley has found that 14 percent of UK adults have never discussed their parents’ retirement plans with them.

Now, the wealth managers firm has launched a “Conversation Starters” initiative, with the aim to encourage families to talk about money and to start planning for the future.

Despite escalating retirement and care home costs having the potential to dramatically erode potential inheritances and put them at risk, around a third (31 percent) admit that they’ve not considered how this is likely to impact the financial legacy left by their parents.

Findings suggest that more than two in five (42 percent) believe that these costs will reduce their inheritance, while eight percent expect it will mean they’ll end up receiving nothing.

However, the company is highlighting one way in which some people may be able to reduce the likelihood of savings intended for inheritance deplete.

The research has found that three in five (60 percent) say they have received a financial gift from their parents to help with key life moments such as house deposits, weddings, car purchases or starting a business.

And, Charles Stanley adds, utilising the option of financial gifting early on may help reduce the amount that is eaten up by care/retirement home costs or eligible for Inheritance Tax due further down the line.

Alex Price, Director of Financial Planning at Charles Stanley said: “The looming cost of care may be putting future financial legacies under threat as many people have to sell their homes or use their hard earned savings to pay for it.

“This is making families think smarter about their living arrangements, as older members get to the point of needing an extra helping hand and are moving back in with their children – the Boomerang parents.

“Whichever route families decide to go down, the key starting point is talking about the options available and planning early.

“But one in seven UK adults admit that they have never discussed their parents’ retirement plans with them, potentially building up trouble for the future.

“Just thinking about having conversations about money can feel uncomfortable, and often, people don’t know how to start having them.

“But they are essential to make sure you can take advantage of all the available options and can achieve your longer-term goals, which will provide real comfort and peace of mind.”

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