90% of people will rely on inheritance to fund later life – but are they protected?

New research shows that 9 in 10 adults are relying on inheritance to fund their retirement and pay off debts.


The report, conducted by Tower Street Finance, revealed that 1 in 5 beneficiaries are planning to use inheritance monies to pay off their mortgage, 16% need inheritance to supplement retirement income with a combined 19% intending to pay off credit cards and personal debt. But despite such heavy reliance on inheritance payouts, most are not prepared and are leaving to chance exactly who will – and will not – benefit in future.

Around 80% of the population are intending to leave an average inheritance of £290,000 to family members and loved ones, but 54% of UK adults still do not have a will and many have a limited understanding of inheritance and intestacy rules. This could be problematic for would-be beneficiaries, with those reliant on inheritance payouts falling short if they are inadvertently excluded from a will.

Cohabiting couples are at particular risk of having no entitlement to an estate through intestacy rules, but despite being the second fastest-growing type of household in the UK many are not prepared and do not have the protection that a will affords.

The same goes for the growing number of blended families, which include children from previous marriages. Half of UK step-parents have denied their step-children a fair share, or any entitlement, of the inheritance. 32% of step-parents have a will that does not treat their children and step-children equally, and 17% of step-parents admitted they had excluded step-children from their wills altogether.

The report also found that most people have no real understanding of how probate works, or how long the process can take, as well as very little understanding about inheritance tax and who is liable to pay it. Only 14% knew that the executor or personal representative (when there is no will) is responsible, and a further 27% wrongly believe that any inheritance tax liabilities can be settled once probate is granted.

Worryingly, the report now suggests that even more factors are set to compound the risks around diminishing inheritance amounts and distribution. Developments such as the Covid-19 pandemic and the housing boom are predicted to have a sizeable impact, making preparation and protection more important than ever before.

It is thought that 4 in 10 people fear the Government will increase the current 40% inheritance tax rate to help cover the cost of the Covid-19 pandemic. 54% now think the Government is set to hike the rate to 50%, with 1 in 7 predicting that it could rise to 70%. A minority of 1 in 33 fear the Government could even double inheritance tax to 80%.

The housing boom will almost certainly affect inheritance tax liability. Soaring property prices are pushing many more estates into a liable territory, with experts predicting that fewer beneficiaries will now want to be left a legacy of bricks and mortar. The report shows that 45% of UK adults plan to sell any property they inherit, and just 18% say they will keep the family home, and either lives in it themselves or use it to provide a rental income.

The freezing of the current tax threshold until 2026 also means that more properties will be liable for inheritance tax. The average property in London is already valued at £487k – way over the £325k threshold, with homes in the South East currently costing an average of £337k. By 2025 house prices are expected to rise to £548k in London and £394k in the South East.

Although spouses and civil partners are the only family members completely exempt from inheritance tax on their homes, 73% are still planning to leave their estate to their children, step-children and grandchildren. But with the average property increasing in value by £16,000 this year alone, it is unlikely that beneficiaries will want to be left with the financial burden of inheriting a family home at all.

Commenting on the report Tower Street Finance’s director, Dicky Davies said:

“The realities of avoiding the topic of inheritance are stark. The number of people dying in the UK without a will is higher than ever, and more people are being forced into legal battles over inheritance disputes, with the Ministry of Justice claiming that the number of court cases has now reached record levels.”

As the wills and probate landscape becomes ever more complex, the safeguarding of estates and inheritances are becoming a bigger consideration for many. Lawsure can offer a range of Wills and Probate insurance products that offer protection against eventualities such as missing beneficiaries and missing wills, as well as executor and unoccupied property insurance.


DISCLAIMER:  Nothing said in this article constitutes legal or other professional advice and no warranty is given nor liability accepted for the contents of this article. LawSure Insurance will not accept responsibility for any loss suffered in consequence of reliance on information contained in the article.