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Growing number of million-heirs will need financial planning

20 February 2018

One in 25 people expect to inherit an estate worth over £1 million, according to new research by Canada Life. 

The annual Inheritance Tax Monitor survey of people over 45, also found around one in 50 people expects to inherit more than £5 million.

Canada Life said the figures “reveal the financial impact of the UK’s massive wealth increase in recent decades,” with rising stock markets, and higher property values helping to increase individual wealth and with it, the expectation of substantial inheritances

Around one in four people (24%) expect an inheritance of £250,000, while one in seven (15%) expect over £500,000.

Despite this, the survey revealed a lack of knowledge about inheritance tax, which currently stands at 40% above the available nil-rate band threshold. On an estate worth £1 million, the tax payable would be £230,000 without an inheritance strategy – the equivalent of an average UK house price. The majority of people (70%) did not know the tax threshold, while only one in 20 knew about the residence nil-rate band tapering for estates over £2 million, likely leading to greater tax bills for larger inheritances.

Karen Stacey, head of distribution services, Canada Life (pictured), said: “People’s expectations are likely to be substantially wrong without financial planning, and it’s quite likely they could lose substantial amounts of money in tax. Yet it’s quite possible to ensure that, by using a straightforward trust, the entire amount goes where it is intended – the beneficiaries.

“For people expecting around £500,000 or more in inheritance, there is still a danger of losing tens of thousands of pounds in tax. It’s very much worth their while talking to a professional adviser or planner to make sure there’s a sound financial plan at work.”

Professional Paraplanner