Whatever their generation or income, many people are being forced to reevaluate their financial priorities as a result of the rising cost of living, which is eroding even the most resilient savings accounts and salaries.
Millennials who are now turning 40 face very different challenges than when their parents were the same age, but parents are still under pressure to step in and help where they can without depleting their own retirement savings.
Any person born between 1981 and 1996 is a millennial, also known as Generation Y.
Help with living expenses
The effects of rising living expenses on estate and retirement planning are now being studied. In order to cover their children's immediate living expenses, more than a third of parents of 40-year-old millennials believe they will need to provide inheritance support this year in the form of inheritance gifting.
Almost all (94%) 40-year-old millennials would use any inheritance received today to assist with living expenses after previously using inheritance to purchase real estate and launch businesses. According to the research, parents of the oldest millennials are thinking about giving them their inheritance early to help them with living expenses this year as they turn 40.
Rising inflation
In light of the Bank of England's warning of further rising inflation, more than one-third (37%) of parents of 40-year-old millennials now plan to gift their inheritance (Inheritance gifting) this year in order to assist their children more with immediate living costs as opposed to larger purchases like property.
The study also showed that nearly two in five (38%) parents anticipate being more adaptable in their financial support throughout the remainder of this year, giving money when needed rather than in advance.
76% of 40-year-olds have already received some kind of inheritance gifting from their parents, and almost all put this to use in savings and investments (30%), establishing a new business (20%), or purchasing their own property (18%)
Savings and investments
The majority of 40-year-olds (76%) who have received an inheritance from their parents have used it to start their own businesses (20%), save and invest (30%), or purchase their first property (18%). More than three in four (76%) of 40-year-olds have already received an inheritance gift from their parents.
If they were to get the same bequest this year, however, almost all of them (94%) stated that they would spend more of it on living expenses, such as bills, commuting, dining and clothes. 9 out of 10 (92%) of them make £55,000 or more.
Growing financial support
The impact of the cost of living on financial priorities may be seen in the fact that among those 40-year-olds who are expected to inherit money in the future, paying for living expenses (18%) comes in second place only behind saving and investing (31%).
The majority (85%) of parents of 40-year-old millennials are confident they will have enough to fund their whole retirement, despite growing inflation and the cost of living.
However, due to rising financial support for their offspring, more than half of parents (57%) are concerned that inheritance tax may significantly affect their final fortune.
Would you like to discuss your future financial planning?
Although it has always been critical for families to discuss financial planning with one another and their financial advisor, the effects of rising inflation make this step even more essential. We can go over your alternatives if you need professional guidance on anything from investing to inheritance tax.
Expert advice in Leamington Spa | Inheritance Gifting Advice
Inheritance Gifting FAQs
Inheritance tax is essentially a tax that is placed on gifts that are given to a person. It is a tax imposed by the government and is based on the value of the gift, as well as the relationship of the giver and receiver.
In general, inheritance tax is paid by the recipient of the gift. In some cases, however, the giver of the gift may be responsible for the tax. This is typically only done if the giver was not related to the recipient, or if the gift was of a particularly large value.
In terms of who can be responsible for paying inheritance tax, it depends on the details of the gift. In some cases, it may be the recipient of the gift who has to pay it, while in other cases it may be the giver. In either case, it is important to speak with a qualified tax professional to ensure that you understand exactly who is responsible for paying any taxes associated with a particular gift.On some gifts you've given, inheritance tax may need to be paid after your passing.
Gifts made less than seven years before your death could be subject to tax, depending on:
- who you give the gift to and their relationship to you - the monetary value of the gift - the date the gift was given to youYes, you can gift inheritance to a charity in the UK. This is known as giving by testamentary gift, which means that you make a gift as part of your will or trust. It’s an incredibly generous way to leave a lasting legacy and it can also give you significant tax advantages.
When making a gift by testamentary gift, you can choose to leave a specific sum of money, the residue of your estate, or a percentage of whichever is greater. You can also designate specific items that you wish to leave to the charity, such as property or artwork.
Making a gift by testamentary gift is straightforward, but it’s important to make sure your wishes are legally binding. It’s recommended that you speak to a solicitor to ensure that your will is properly drafted and that the gift is made in accordance with UK law.
You can also choose to give to the charity during your lifetime, which can have similar tax advantages and may be the best option for some people. You can even make a donation directly from your pension if you are over the age of 75.
No matter how you choose to donate an inheritance gift, giving to charity through your will or trust can be incredibly rewarding. It’s a great way to leave a lasting legacy and make a real difference in the world.
