Families relying on an inheritance to pay off their debts or fund their retirements need to think again, according to the latest official statistics.
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Rather than pass on their wealth, many are simply spending what they have amassed during their lifetime leaving little in the pot for future generations.
And most of the wealth tied up inheritances goes to a lucky few in richer families.
Figures from the Office of National Statistics (ONS) show 1.6 million people received an inheritance of more than £1,000 in the two years before the survey – which took place between 2008 and 2010.
The research shows half were left less than £10,000 and only 10% received £125,000 or more.
Values of inheritances may drop
The total value of all inheritances during the survey period was £75 billion.
Almost 90% of the inheritances involved cash or jewellery.
Property – mainly homes –comprised a fifth of inheritances.
Beneficiaries tended to sell property but keep cash, jewellery and collectibles.
The ONS expects to see the value of inheritances drop as more people are living longer and spending more of their savings on day-to-day living expenses and care costs.
The report advises families that the best way to pass on wealth is by lifetime gifts. If the donor lives seven years after the date of the gift, the inheritance does not need reporting and would not be included in the figures as no inheritance tax would be due.
However, most family wealth is tied up in home ownership, especially with the growing trend for buy to let investment, which may see larger value inheritances in the future.
“One key point is inheritances received by a few people were of a disproportionately higher value that those received by most people,” said the ONS report. “Around 20% picked up a share of £57 billion, leaving 80% the rest of the £75 billion.”
Who’s most likely to inherit?
Unsurprisingly, the study showed 46% of inheritances were left by a parent or parent in law, while grandparents passed on a fifth of inheritances. One in ten came from an uncle or aunt who had no children of their own.
A small number of people (5%) received an inheritance from a friend or neighbour.
The research also profiled who is most likely to receive an inheritance:
- Anyone living in the wealthiest 20% of households
- Some working as a manager
- The self-employed
- Someone whose father was self-employed
- Someone whose father had a university degree
Those least likely to inherit are men, non-white ethnic races, those aged over 65, who rent their homes and work in ‘routine’ occupations.
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