Will inherited wealth help or hurt those you love?

[SentimentRules]

Surely if they love you, they wont hate you over money not going to them?
And if they do hate you for not giving any, I'd question the love lol

It probably depends how you came to have money yourself. If you earned it all from scratch, and you feel like the road to success made you... then you would probably not want to deny loved ones, that same opportunity.

But if you inherited money rather than made it yourself, you won't know that road. And don't realise what you deny the beneficiaries

I bet anyone here that had to do it from scratch, will reflect, and remember the years of trying to make It, as the best years.

[StepOne]

Certainly better it goes to grandchildren in priority to children

My own experience has led me to think the opposite. My grandmother left all her money to her six grandchildren - it came to £2,000 each in the early seventies. Her three sons (including my father) got nothing.

The money was put in trust until we were 18. When I got my share, which had grown to about 5,500 pounds, I bought my first car, and frittered the reset away supporting my student lifestyle. I guess that my cousins did similar.

If, instead, my dad had got my and my sisters share, it would have paid off his mortgage at time when interest rates were 8-10%. Who knows what my parents would have done with the extra, but I'm sure that overall we'd have been better off as a family, so I've always been convinced since then that I would leave any money to my own children. If they decided they were at a stage in life where they didn't need it, then they could always pass it on to the next generation, but at least they would have the choice.

I don't really see any advantage to forcing the money to skip a generation.

StepOne

[PinkDalek]

I don't really see any advantage to forcing the money to skip a generation.

It would depend on one's families' personal circumstances but generation skipping is both a valid and sensible course for IHT planning purposes.

[StepOne]

I don't really see any advantage to forcing the money to skip a generation.

It would depend on one's families' personal circumstances but generation skipping is both a valid and sensible course for IHT planning purposes.

What is the IHT advantage of skipping?

[kempiejon]

I don't really see any advantage to forcing the money to skip a generation.

It would depend on one's families' personal circumstances but generation skipping is both a valid and sensible course for IHT planning purposes.

A colleague has inherited cash and a property, we were having this chat. Her and her husband are both working in their 50s, planning to retire and possibly downsize. They both have pretty good final salary pensions due shortly and their house is mortgage free. I offered her the suggestion of the inheritance being passed down to her kids as she probably doesn't need the cash and both young people are at the beginning, making their way starting out on career, family, the money could make a big impact. She was indignant, the money was hers to spend on holidays and "things" as her parents had bequeathed the money to her and if her kids were lucky there might be something left when she was gone. I told my parents to fritter my inheritance on anything they wanted as I was OK for cash and pensions thank you. I didn't suggest they give the inheritance to my niece and nephews

[JohnB]

My grandfather (who I was never allowed to meet) gave half his money to his children, half to his grandchildren, in the mid-70s. I must have got about £6k. It was the foundation of my house deposit, and my sister's, and a lot more useful to us than my parents. As I have no children, only nephews, I'm glad my parents have not skipped a generation in their wills, as for fairness I would rather the money goes through me, so I've started gifting them my nephews in anticipation, as again the money is a lot more useful to them than me. I hope it makes they care more for 'generous uncle John' in my dotage.

[Dod101]

I said to grandchildren 'in priority to children'. In fact unless my estate suffers a real blow, my two children will get a lot more than my grandchildren anyway but what I have done is left grandchildren with a decent six figure sum each and after a few other bequests left the residue to them. That will still be very sizeable but I do not think my kids expect 50% of what I have.

Dod

[PinkDalek]

I don't really see any advantage to forcing the money to skip a generation.

It would depend on one's families' personal circumstances but generation skipping is both a valid and sensible course for IHT planning purposes.

What is the IHT advantage of skipping?

Random article https://www.taxadvisermagazine.com/arti ... l-distress (albeit that relates to Deeds of variation)

Generation skipping

A widow dies, leaving everything to her son. He is wealthy and concerned the inheritance will remain unused until he dies, when it will suffer 40% IHT before passing to his daughter. ...

Another https://www.investorschronicle.co.uk/20 ... ticle.html

"It makes sounder financial sense for those approaching later life to pass assets a generation or two further down the family tree, than to direct children - and, if they can afford to, they should do so earlier as well," says Mr Killik.

The main reason for this is, with youth on their side, young people will be able to benefit from the power of compound interest on any investments they receive. Furthermore, passing on assets to younger generations could be a way of minimising the amount of IHT your family will have to pay overall.

[StepOne]

The main reason for this is, with youth on their side, young people will be able to benefit from the power of compound interest on any investments they receive. Furthermore, passing on assets to younger generations could be a way of minimising the amount of IHT your family will have to pay overall.

Hi PD,

Sorry I can't read those articles, so I can't see the details, but just picking up on the points above, the compound interest argument is spurious as the money earns interest from the moment it is bequeathed to the moment it is spent, irrespective of who owns it during that period. In fact, as an 18 year old inheriting, I didn't benefit from compound interest as I spent it all!

StepOne

[EthicsGradient]

StepOne,
At its simplest, skipping a generation may just mean one lot of IHT to pay rather than two. If someone dies at an average age of 85, and passes it all to their children, say aged around 60, those children may have already paid off their mortgages. It becomes general invested cash, that may end up attracting IHT again, 25 years later. But the generation below, average age 30, say, could have mortgages to pay, or deposits to put down on houses, and are just starting families of their own.

"Skipping a generation" these days probably doesn't mean leaving it to children under 18.

[Chrysalis]

So moving forward: it seems to me that I must concentrate on a) building my (and my wife's) pension pots cos they can be passed on the next generation without any tax and if our pensions go into the grandchildrens' pensions the following benefits accrue.

a) they can't spend it until they reach the right age
b) it should grow at least greater than inflation
c) it will obviate the need to put money into their pensions when they are starting off in life (buying houses etc)

Just a couple of points. If your pension pots are passed down to your grandchildren, they will not be ‘added’ to their own pensions and there is no age restriction on the grandchildren accessing them. The options they have for accessing the funds depend on the pension provider, but they can take a lump sum, or they may be able to buy an annuity or keep the pot in drawdown. The tax treatment depends on the age at death of the previous owner of the pension - if under 75, it is tax free, if over 75 then it is taxed as your grandchildren’s income (so a disincentive to take large lump sums). Inherited pensions don’t affect their own annual allowance or lifetime allowance.

If what you actually want is to directly add to your grandchildren’s own pensions, then you could open personal pensions in their name and they will benefit from tax relief. The grandchildren’s own annual and lifetime allowances would apply. They would be able to access them at State Pension age minus 10 years (under current rules). Or you could fund LISAs for them if they are over 18.

[BusyBumbleBee]

So moving forward: it seems to me that I must concentrate on a) building my (and my wife's) pension pots cos they can be passed on the next generation without any tax and if our pensions go into the grandchildrens' pensions the following benefits accrue.

a) they can't spend it until they reach the right age
b) it should grow at least greater than inflation
c) it will obviate the need to put money into their pensions when they are starting off in life (buying houses etc)

Just a couple of points. If your pension pots are passed down to your grandchildren, they will not be ‘added’ to their own pensions and there is no age restriction on the grandchildren accessing them....

How right you are, Jabd2001, but in my defence

a) by replying to the original post,which had gone unanswered for several days, I was trying to stimulate discussion - which it did.
b) before it is passed down that way, the grandchildren will be expected to sign off that this is to be kept entirely for use when they reach pensionable age otherwise they won't get it. (or they can withdraw (at current values) £2n880 per year to put into their already existing SIPPs = and the taxman will pay an extra £720 per year.

with kind regards - BBB

[Dod101]

My thoughts on leaving substantial sums to grandchildren is much simpler than all the thoughts of IHT etc. Suppose I die in the next 10 years (very likely) my children will be in the age range of 57ish to 63ish. They are both doing OK as far as I can tell. They have decent houses and a good lifestyle. I had retired by that age for some years!

My grandchildren will by then be 30 or so down to 25ish. Who do you think needs the money more? Nothing more complicated than that. I love them all equally and it is not as if my children are being cut out. If I die before then, which is perfectly possible, then my argument I think is even stronger. I cannot get worked up about IHT one way or the other.

Dod