A quarter (25 per cent) of over 55s, equivalent to 5.2mn people, do not know if their estates will get charged inheritance tax, research from Canada Life has revealed.
The research, which surveyed 2,000 adults, found despite inheritance tax only presently affecting around 4 per cent of estates, almost three in 10 UK adults (28 per cent) think their estate will be taxed upon death and 22 per cent are worried about it.
Canada Life tax and estate planning specialist, Stacey Love, said while inheritance tax affects the minority of estates, “house prices have increased significantly over the past 30 years or so, and the various tax thresholds remain frozen until 2028 at the earliest”.
“If you have any uncertainty as to whether you’ll be caught in the inheritance tax net, it’s worth thinking about your overall wealth including the current value of your home,” she added.
When it comes to planning to leave an inheritance, ensuring the correct people benefit from their estate was the top concern, mentioned by 19 per cent of respondents.
This was followed by current or future care expenses and the impact this has on their estate, being able to leave a financial legacy at all, and openly discussing this with family members to avoid misunderstandings (all mentioned by 13 per cent).
Canada Life found even though many do not know if their estate will be taxed, 63 per cent of those aged 55 or over also say they do not plan to seek financial advice to understand the tax implications.
Of those who are worried about the prospect of their estate paying inheritance tax, the top three related concerns were losing too much of their estate to tax (mentioned by 38 per cent), the legalities involved, (29 per cent) and understanding the process (27 per cent).
Love added: “Our research also shows that, in the past five years, more than a quarter of beneficiaries (28 per cent) received an inheritance directly from a trust or as a combination of a trust distribution and a bequest from an estate.
“Choosing the right trust as part of your financial estate planning strategy is not only about managing any tax liability, it is also an appropriate way to control who benefits from your estate, to what extent they can benefit and at what age.”
She added that, ultimately, estate planning is about putting affairs in order, to help make the lives of loved ones easier.
While Love acknowledged it might feel like an “uncomfortable step to take”, she emphasised that it is “important to start planning ahead and consider speaking with a financial adviser to take advantage of opportunities which may be available to mitigate any inheritance tax”.
tom.dunstan@ft.com
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