A report published by the Resolution Foundation predicts that leaving an inheritance will become commonplace during the next 20 years, with ‘millennials’ born between 1981 and 2000 identified as the main beneficiaries.
Historically, living standards rise with each generation but millennials are currently falling behind their predecessors, particularly in relation to climbing the property ladder, savings and pensions. They are half as likely to own their own home at age 30 as members of the post-war ‘baby boomer’ generation.
However, the report finds that the passing down of assets held by the baby boomers, (born 1946-1965), to younger family members through inheritances and gifts is likely to increase significantly, thereby improving the living standards of millennials and some of ‘generation X’, (born 1966-1980). It also predicts that the total value of inheritances will double during the next 20 years, peaking in 2035.
At present, most people are likely to inherit during their 50s. The report estimates that the most common age at which those currently aged 20-35 are due to inherit will increase to 61. Receipt of inheritances at this age may assist in retirement planning or helping the children of millennials to access property ownership. However, factors such as increased life expectancy and the funding of future social care costs may impinge significantly on the amount of wealth bequeathed.
The findings of the report may lead to further consideration of ways to engineer intergenerational wealth transfer at an earlier stage, possibly by facilitating downsizing or equity release. Inheritance Tax reforms, due to be fully implemented by 2020, will introduce a new housing allowance which means that up to £500,000 per adult can be bequeathed tax free. The report found that this could lead to the average tax burden being halved for 20-35 year-olds in relation to inherited property.
If you would like to discuss passing on wealth - whether by using Wills, trusts or gifts - then please contact us.