To think the Uk will move to an iheritocracy

[nappyvalley1992]

In the UK (especially the south east) PAYE earnings seem to increasingly play little part in overall wealth and what matters more of background/family wealth and increasingly the only path to a comfortable middle class life is via inheritance.

I am a late millennial of the south east whose parents own a very average home worth £1 million which under current rules I should inherit tax free. It's a similar story for almost all of my friends (amount almost equivalent of a lottery win). My parents were not even very middle class and had average jobs, they have just got lucky through house price inflation. Its not often spoken about, but I can foresee a wave of very wealthy millennials emerging in the next 15-20 years, and increasingly it wont really matter what someone earns in their day job, the biggest determinant of wealth will be those who are lucky enough to inherit.

Some millennials might even inherit large sums 2 or 3 times via grandparents, and inheriting from parents on both sides of the couple.

Will the government eventually start taxing inheritance more or what will the future look like in this area?

How can you inherit a £1m house tax free? I don't know much about inheritance tax, probably because I won't inherit anything so it doesn't affect me.

You don’t mention care fees in old age… don’t underestimate how much of this inheritance bubble could be eaten up even with an amount of 1mil, half could be spent on an average care home for a stint of a good few years. Maybe more in the coming years and dependant on area. Also I expect more inheritance tax to come over the future as you are correct it’s a big wealth bubble.

If a couple is married, it's double tax allowance that they pass down.

It’s not just in the U.K. Property prices have soared in other countries, too - notably in Australia and parts of the US.

Less than half of people go into residential care. This is often overstated.

It's been like this in London for decades. Locals living here for generations either all crammed into tiny council or HA flats, or living in converted basement or attic flats in their parents' houses (usually bought in the 80s when more affordable for the middle earners), which they'll inherit one day — although that can mean costs and problems, too. It's common for Londoners to houseshare with friends or still live with parents way into their 30s and 40s or longer.

So you want them to tax us by PAYE to the hills and inheritance?

Personally, I am going to leave this country and soon as I can to a place I am remunerated commensurate to my education and job. People in my age are all doing the same, it’s the brain drain.

Less than half means there's still around a 50% chance of needing a care home and fees around here are 60-70k.

Eh? I think you need to look at the iht rules. Plus, you neglected care home fees which can wipe out any inheritance. You cannot guarantee any kind of inheritance and working hard to save for your own retirement is your best bet!

I mean, I don’t exactly think this is a new thing.

All the 70-somethings in my family have the wealth they have because it was passed down to them in property, either when a parent died, or they were gifted a little cottage on the family farm that’s now easily worth £1mil even though they had very ordinary jobs. They wouldn’t have been able to buy those properties today with the jobs they had.

'....less than half of people go into residential homes......'.

I think people underestimate the impact of this happening to them. And it's not just residential, it's care in the home.

Apart from generally feeling very comfortable at the thought sizing up my DMs home for inheritance, I assume it will be there for her care when she needs it. She wouldn't live with me (I've offered!) and has no other support should she need it in late old age.

Won't you the mellenials, need to house yourselves?
Unless you move with your 1 million somewhere really cheap?
Do you own a house already?

Yup I BBC and see where you’re going with this OP.

I think you’d need to account for the cost of domiciliary carers too. We paid about £1k a week for a relative. It wasn’t fancy care either

I wonder what the statistics are on who ends up needing residential care? I'm just guessing but I suspect it's less likely to be the wealthy who tend to have a healthier old age.

People typically don’t get inheritance until very late in life.

that doesn’t mean we aren’t seeing a rise in inequality being driven by parental income. The haves get good educations, secure lucrative careers, and then marry one another. It is rare for people to partner with someone with much lower economic prospects.

www.moneysavingexpert.com/family/inheritance-tax-planning-iht/#whopaysitax

Read the attached point 4, I am not wrong.

Ah I see. Seems a bit unfair.

Still, I'd wait for the budget before getting too excited about the thought of becoming a millionaire on my parental death.

Isn't there talk of capping a persons lcare bill at 85k regardless of how long they live into old age ? I know conservative government were trying to bring this in, guess we will know more post budget

Yes we already have a mortgaged home worth £500k

The vast majority of people don't have parents whose homes are worth £1m+.

I'm in the South East (Hampshire) and our home is valued around 220k. It's a 2 bed Victorian terrace and they're the most common type of property.

As pp has said, many home owners will have to sell their home to fund care in old age.

Others have 2+ children so their share of inheritance won't be enough to buy outright.

Then there's the many hundreds of thousands whose parents are renting, so they'll inherit bugger all.

Apologies if this sounds ignorant, but I don't know any millennials whose (usually) boomer parents are renting.

Even in that situation, they’ll pass down £650k at most (£325k x2). That’s still almost £400k less than £1m. I don’t think you can avoid paying IHT on the house if it’s £1m.

Not necessarily. Alzeimers, Parkinsons and dementia don't discriminate based on the size of your wallet. I know plenty of wealthy people needing care homes in their late 70s and early 80s.

'Even in that situation, they’ll pass down £650k at most (£325k x2). That’s still almost £400k less than £1m. I don’t think you can avoid paying IHT on the house if it’s £1m.'

See below:
www.moneysavingexpert.com/family/inheritance-tax-planning-iht/#whopaysitax

If a house is passed down to children or grandchildren, there is an extra allowance of 175k, making it 500k per person, 1 million per couple, so the Op. is spot on with her 1 million allowance per couple.