When is an inheritance "enough"?

[Wardrobefred]

Somehow, from really quite modest beginning our family has accumulated quite a lot. Ordinary jobs (no one has ever been a higher rate tax payer for example) but sensible spending/saving and investment (and property tbf) means that my last surviving parent has just left c. £2m (after inheritance tax), split between me and DSis.

I don't need or want it. I own my home outright, have a decent income and pensions that will be plenty for me, substantial savings. My life is not flamboyant, but I have want I need/want, travel a lot and can't think of any major changes I'd make with the money.

So, I'm thinking this money should go directly to my DC, early 20s and living at home. Obviously it's life changing for them. Neither have launched very well. Both work, but not particularly applying themselves to career progression or qualifications. There's a part of me that thinks this windfall won't be entirely helpful for their overall life and happiness.

Because of DC I've always been determined I won't remarry, to protect their inheritance. However, I'm now coming to the view that they don't need it!

I have a lovely DP who I've been with 8 years, never lived together and our life is good, but maybe it's time I thought about doing what I want (I've said I don't want to live with him because I enjoy my independence, but it's definitely fuelled by protecting my DC) and maybe it's time to consider changing my will so that the man who's made my life so good over the last few years inherits something.

He brings a lot to the realtionship, but not money (supports himself, doesn't cost me anything currently, but doesn't have savings or assets). If we did live together, I wouldn't want him homeless in the event of my death, even if he did bring it on himself by not being better at financial planning! I know you can leave a life interest, but where I've seen that happen it seems to bring nothing but trouble, as the DC want their money asap...

Also, I don't think my DC "deserve" it more than he does. I love them dearly, they're good kids and want to see them OK, but £500k each is enough without having worked for it?

I guess it's a good problem to have but there's definitely part of me that thinks this money could do more harm than good.

Don't tell them the money is there, promise them nothing, and step up pressure to launch.

I know this is way different in terms of amount, but a friend of mine is a multi-millionaire. His two sons had every advantage (the friend worked for his money, didn't inherit it, but fortuitously sold his company for a fortune) - not spoilt by any means, he tried to keep a balance between things that gave them advantage (private schooling) and not having it all. Long story short they are now cut off and disinherited addicts who will never amount to anything. The advantages never outweighed their expectation of inheriting so much money they's never have to look to themselves for anything.

If your kids have no expectations (and given the right pushes) they may grow out of this fecklessness. If they think they will inherit shed loads of money they will have no incentive.

I’ve just done a deed of variation to split my inheritance between three adult kids. Two have used it as a deposit for a home together, the third has done nothing at all. He didn’t really need the money but it was important to treat them all the same. Had a long chat with one of the two yesterday and she’s very downhearted by how difficult life is for them, while very grateful for the leg up. Their money doesn’t go far. All three have a fantastic work ethic, one has a huge student debt and two have mental health issues. I’d do anything I could to give them a bit of stability.

Just buy them a house each with the money.

From a practical point of view - if you do a deed of variation and the money goes straight to the children they get the full 500K each.
If you inherit and then they inherit from you - 40% of that 500K will go in inheritance tax on your death and that may well be more in the future.
The money is worth more to the children now but if you want to pay an extra 400K tax.......

Why don’t you buy a property, and let them live in it? That way, the property is yours, but they get to live there rent free (?) which will allow them to save for their own deposits

You could even rent the third bedroom out to a stranger, and have an income from that?

I'd buy them houses with it. That way they have stability and they can work out their careers from there.
That's what I plan to do with my own feckless children anyway.

Could I ask what you mean by failed to launch well, you say they have a lack of ambition but it could just be that they don't feel there is any point in flogging themselves to death when they are never going to be able to afford to buy a house, and they would rather have a gentler and more enjoyable life. I think a lot of the younger generation feel like this and aren't hoodwinked into working themselves into the ground for some bunch of avaricious bastards who don't really care about them, only profit.

Maybe if they felt that wasn't the case then they would be keener to work hard!

I would def give to my DD (but a different situation, she is a massive grafter and works very hard but in an initially low paid self employed creative industry so she's either going to be as poor as a church mouse or pretty well off, depending how it goes! But I don't doubt she would spend it wisely on a flat and investing in her career rather than frittering it and doing nothing)

You are (hopefully) a long way away from death so there is a middle ground - as long as you survive 7 years post gift, it will be free of IHT.

Nail on the head.

I think it was Peter Jones who said he was "going halves" with his kids when it came to subsidising them, i.e. they pay for half and he'd pay the other half.

If you give too much in one go, it's really true that "easy come, easy go" can often happen.

Far better to "facilitate" them to improve their lot, i.e. give them a lump sum for the deposit when they want to buy a home - not in cash, pay it to the solicitor on their behalf!

"Subsidise" them but don't "give" them too much in one go.

But don't forget that when you die, they'll get a lump sum anyway and would be free to spend/waste it as they please, so it's got to be a balancing act between giving them too little now and them struggling and not hitting their potential, or giving them too much too soon before they're ready and wasting it. Only you know your children so you have to evaluate it.

But it is a bit harsh to "sit on" huge sums of cash whilst your children are struggling and potentially making poor decisions due to not having money, only for them to finally inherit in decades to come when it's too late to have any meaningful affect on their lives, i.e. after it's too late for them to have children if they decided they couldn't afford to, etc.

You need proper financial advice from someone who knows about inheritance planning and tax. There are many ways of dealing with this £2M, spending some, gifting some, investing some and living off the income, setting up a trust, a family investment company, a pension etc. Theres tax implications of each choice.

The LAST thing I’d do is give £500k to immature young adults. You will make them a target for gold digging freinds or parther, next thing they will taking 10 “ best mates “ on holiday and buying a new partner a sports Car. Surely that’s not what your parents would have wanted their life savings spent on !

But why do they need to “earn a proper living”…… because society says so?

If I thought I could give my DS enough money so that he didn’t have to flog himself until retirement working at the grindstone, instead having the security net of a home that’s paid for so that he could do a simple, stress free job to pay his expenses and enjoy his life I’d do it in a heartbeat.

Buy two properties half in your name, half in theirs or put the money/properties in trust for them. In terms of your partner you can leave them life time use of a property with it going to your children eventually. It does sound like your partner is similar to your child and may be lacking ambition? My dad has changed wills to favour a partner who didn’t last and it has changed how we look at him as to me it says he loves this person more than his kids, this person who wasn’t on the scene long, but happened to be younger and attractive - she eventually left after getting a lot of money out of him. You are not obliged to sort out your kids’ poor finances but at the end of the day they are your kids so should always come first imo! You have zero responsibility for your partner’s poor finances too, you are not his parent and if he never met you his situation would be the same. Live with your partner before you go changing wills to favour him, you also do not have to marry him and you can just leave him property for life time use! Might be worth discussing him moving in as you learn so much from living with a person but also perhaps get him to talk to someone about financial management and planning for his retirement.

I would talk to a lawyer or a finance specialist to find out what is the best way to support your children and not lose too much in tax. Also if you donate 10% to charity that brings inheritance tax down to 30%, depending on the amounts etc… it can reduce a tax bill but again you would need to speak to someone who specialises in that to see if it's worthwhile.

One thing I would say is I have two brothers who are a wee bit spoilt and entitled - over the years any time they have been given lumps of money they just decide not to work for a while until it’s gone and then they feel sad for themselves. My younger brother moans about how hard things are for him because of the housing market etc… but he has blown a lot over the years, has two MAs paid for and zero ambition. If your kids haven’t learned financial responsibility and are not motivated then a wad of cash could hinder rather than help them, if there is no carrot they may just sit around and flitter the money away. Get them into cognitive behavioural therapy, find out why they have a lack of motivation (could also be things like adhd), get them on a course or a career coach! Don’t just give your inheritance to your kids or partner if none of them understand the value of money or hard work! Honestly you do sound a bit like my mum who would give people the clothes off her back and sees her role as being to look after everyone except herself.

Nail on the head with that attitude which is prevailent these days. My son is heading that way. He's worked his arse off in school, sixth form, university and now working in a well paid graduate job in a different city, but still can't afford much "fun" money as most of his wage is going on stupidly high rents, utilities, food, tax, nic, student loans, pension contributions, private dental contract, etc etc. He was all full of life and enthusiastic when he started, but has slowly got into a "flunk" with how little he can save, and that's despite him not having a wild active fun life. He's really wondering why he bothered and he's only 23. Seriously looking to emigrate as soon as he qualifies! (like most of his work mates!).

I am broke and was cheated out of my inheritance if that helps?

Why not just give them enough that they can “launch”?

It’s infinitely harder to buy a house now. So much so that it almost seems so unreachable that’s it’s pointless to try.

Why not give them £150k each as a huge deposit for a house and head start?

Why does it have to be all or nothing?

I think you should invest it now, and have an honest chat with your kids about what they want from life. Unless you think they'd just ask for it all now and squander it? Even if you wait to give them something when they really need it, that is likely to be way before you pass on. Or put it in trust until they are 30 years old?

Maybe it enables them to develop other qualities though, such as those you value in your partner (would you say he earns a proper living?)

40% inheritance tax wouldn't be deducted if you give it to them at a later date (unless you die within 7 years of the gift - obviously this can't be predicted, but if you're in good health I think it's reasonable to hope that you won't die young).

Personally I'd give them a generous amount now (say £100k or £200k each), but not enough to enable them in the way that you're worried about. Stick the rest in a high interest account and give it to them later on when they are in need of a bit of extra cash.

In terms of giving it to DP, does he have DC of his own, I don't think you've said? Because while I can see the argument for leaving him some money, I think the thing that would really upset your DC is if he ended up leaving "your" money to his own DC if he died after you (you can't stop him doing this).

Speaking as someone who inherited enough money to buy a house - if you want to keep a house in a decent state, then you definitely don't 'opt out' of working. Bills and upkeep cost a fair bit, and that money has to come from somewhere. But having a secure roof over my head has enabled me to relax and enjoy life more than I could before when I was daily expecting my landlord to tell me he was selling up.

My parents bought their first house in the late 90s. They were teachers who earned around £22,000k each. The house was £50k and they got 100% mortgage with no need to save a deposit.

I despise it when they comment on the current housing situation and sneer and how few young people “apply themselves”.

Hmm. Why haven't they launched? The world is a bit of a shitshow to be honest and things aren't looking good out there. I would incentivise them with the money to find their vocation, though. You can buy them houses outright, so they can focus on finding jobs that they are happy in, rather than pushing themselves into areas and locations that aren't a good fit for them for financial reasons. Once they've picked a direction, and it's one that truly works for them as individuals, I'd set them up with their own homes. Whatever happens then, they've got stability and security in a world where those things are sparse.

Just give them the money and avoid potential inheritance tax. Let them make their own mistakes, it's a bit late to start trying to control their lives. They may decide to start a business, pursue something they always wanted to but couldn't afford.

All this they have to launch properly and know the value of work, etc, etc, why do they need to? And why would having a bit of money behind them not be good for them? Maybe the money will be the thing that gets them a real start in life. Poor and hardworking is over rated in my opinion, if you can make their lives easier do it.

I'd consult a good financial advisor, life is uncertain for your children and for you. A FA will be best placed to formulate a plan to give you and your children some security and best use of this money. It sounds a lot but it really isn't these days and it could be blown through quite quickly if not careful, especially by those with less financial experience.

It only makes sense for you to hang on to it for a few years if you don't mind them getting less due to inheritance tax and/or if you want to maintain control of it. [which also means control of them in a way]

I would keep the money for now, but invest it with the intention of keeping your hands off it for as long as possible. £500,000 invested now with a very achievable interest rate of 5% would turn into over £1m in 15 years. If they haven't launched by their mid-40s, they are unlikely to ever do so, and they could have the money then. But all that said, I don't know how inheritance tax applies so that plan might well not work.