The descendants of so-called ‘baby-boomers’ are being warned to be wary of Inheritance Tax (IHT) after a new report found that parents and grandparents born in the years immediately following the Second World War (WW2) will leave behind a record inheritance to today’s younger generation in their Wills.
Leading think tank the Resolution Foundation has estimated that over the next 20 years, inheritances will more than double.
The group says that today’s so-called millennials (defined as 17 to 35-year-olds for the purposes of its research) will be handed down record sums of wealth when their parents and grandparents pass away.
The concept of significant redistribution of wealth is not being achieved by taxation as the majority of inherited wealth is passing to those among the higher income earners.
In many cases, today’s 17 to 35-year-olds are having trouble getting on Britain’s property ladder despite the perception of wealth percolating down the generations, often because the inheritance arrives too late to assist with the cost of home ownership.
This is not aided by the impact of Inheritance Tax – which, in the UK, is charged at a rate of 40 per cent of an individual’s estate worth £325,000 or more, or £650,000 on the death of the survivor of a married couple (or those in a civil partnership).
Under new rules introduced in April 2017, individuals who wish to pass down their property to direct lineal descendants are able to benefit from an additional £100,000 IHT allowance under what is known as the additional residence nil rate band (RNRB). The RNRB – which can be utilised when leaving property to children, grandchildren, step children or foster children – is subject to certain conditions and can inadvertently be forfeited in the absence of advice from a specialist solicitor concerning the drafting of Wills.
The findings of the report and their potential future impact on the policy of a Government of a different political persuasion underline the need to explore every avenue for tax mitigation by way of lifetime gifting, which also has a far greater beneficial impact on those seeking to get a foot on the first rung of the housing ladder.
Carter Lemon Camerons LLP Solicitors is a City law firm which provides Wills and Probate services with a personal touch to its clients – that go beyond the simple drafting of documents. Unlike many City practices, we are happy to act in smaller private legal matters, bringing the same care and consideration as we do to large commercial matters. If you require advice on Wills, please contact Neil Acheson-Gray, Ian West or Michael Woodward.