RESEARCH CARRIED out by Safestore has revealed that 41% of grandparents aged 55 and over would consider leaving the contents of their Will to grandchildren in order to help them financially.
The disparity between wages and house prices, the cost of education and fluctuating interest levels from banks puts Generation Y (those born in the 80s and 90s) on the back foot when it comes to secure investments; something the Baby Boomers never had to worry about. Therefore, the bank of mum and dad could slowly be replaced by the bank of grandparents.
The self storage company discovered that a number of grandparents would consider skipping a generation when it comes to posthumously distributing their wealth. In total, 26% of all people aged 55 and over said that they would consider leaving their estate to grandchildren:
– 28% said that the most likely reason would be if they felt that their children were financially secure (compared to grandchildren who need more help financially)
– 10% said that even if they were estranged from their children they’d still want their grandchildren to benefit
‘These results are interesting as it shows that future planning is changing’ says Simon Crooks, a solicitor and specialist in tax and estate planning with Argo Life & Legacy Ltd.
Generation skipping is a valuable tool in Inheritance Tax planning, which is about getting as much of your assets down to your descendants as you can. Leaving assets to children, especially those who are financially secure and therefore don’t need them, means they are likely to be taxed again before they reach your grandchildren, who are more in need of the funds. Leaving assets to your grandchildren, rather than your children, increasingly makes sense.
With people living longer, by the time there is an inheritance it will be the grandchildren who are in greater need financially. If they have to wait for their parents to leave it to them in turn, the assets will be taxed twice before they reach them. It makes sense to discuss this with your children – not least so it does not come as a surprise to them, but also because they may prefer it if you leave assets to their children rather than themselves.