YOU SHOULDN'T BANK ON AN INHERITANCE WINDFALL: MANY PEOPLE DISCOVER THEY WILL GET NOTHING, RESEARCH DISCOVERS

Millions are making plans around an inheritance they will never receive, research by will writing service Farewill shows.

Some 3.5million people have made financial plans to spend expected inherited family wealth, only to be disappointed when their loved ones pass away and they receive nothing.

Almost one in four 18 to 24-year olds have been blindsided by a lack of inherited funds. This drops to just over one in six for 25 to 34-year-olds.

The key mistakes that prevent relatives from receiving the fortune they expected is when people fail to update their wills or discuss their plans with family.

Nearly half of adults admit to never updating their will - and 47 per cent of people who have updated their will have not done so in more than ten years.

Dan Garret, chief executive at Farewill, says it is essential for most people to put a will in place to determine where their assets will go. 

He says: 'With the rise of property prices over the last four decades, the expectation of intergenerational wealth transfer is higher than ever.

'These great expectations can lead to huge disappointment if not managed properly.'

What about inheritance tax?  

If you do intend to leave money, property or other assets behind for your family, this could also lead to complications as they may need to pay inheritance tax on it. 

Most estates don't get hit by inheritance tax, but it still manages to be regularly dubbed Britain's most hated tax.

It is charged at 40 per cent on assets above the inheritance tax threshold when people die and has long been the subject of criticism.

You need to be worth £325,000 if you are single, or £650,000 jointly if you are married or in a civil partnership, for your loved ones to have to stump up death duties.

But there is a further chunky allowance which increases the threshold to a joint £1million if you have a partner, own a property, and intend to leave money to your direct descendants.

Once an estate reaches £2million this own home allowance starts being removed by £1 for every £2 above this threshold. It vanishes completely by £2.3million

If you are worth more than this, your beneficiaries will have to hand over 40 per cent of your assets above those levels to the Government.

Luckily there are many legal ways to dodge the dreaded 40 per cent 'death tax' if you want to pass on the maximum sum possible and are prepared to plan ahead.

> Read our guide to how inheritance tax works - and how to avoid it legally. 

There have also been calls to end some of the tax cuts afforded to families who inherit money from a loved one. 

Last week, the Institute for Fiscal Studies said the Government should stage an inheritance tax raid on unspent pension pots and close other loopholes, in order to gain an extra £200million in revenue. 

2024-04-21T12:44:41Z dg43tfdfdgfd