Your inheritance is more critical now than at any time since the Victorian era
We all know how much those Victorians worried about inheritance. It was a sign of the perilous times ordinary people lived in.
Inheritance featured in all the great novels and plays of the era, and for a good reason. In an age before the welfare state, when social mobility was practically non-existent; the status and wealth you inherited from your family pretty much defined you.
If you were born poor, then that’s how you would probably spend your life.
So, it’s sad to see that many experts feel we are heading back in that direction.
According to the Institute of Fiscal Studies, your lifetime wealth is influenced by how much you inherit from your family to a greater degree than at any time since the nineteenth century.
The changing dynamics of wealth
There isn’t one specific thing that is causing the problem.
Life expectancy has increased. On the face of it that’s great, but the reality is a lot of people are surviving longer in poor health. This places a greater tax burden on working age people.
The cost of housing prevents many people from getting on the property ladder. While historically low interest rates make investments harder to profit from.
Meanwhile Government policy continues to be geared towards supporting the older, wealthier generation at the expense of the young. Take the triple lock pension policy, which has seen pensions increase by 9% at a time when wages are stagnating.
What can we all do about it?
It all sounds a bit gloomy but there are things we can do to help ourselves and our families.
For a start, good planning and organisation are key.
Always take professional financial advice and plan for your retirement. There are plenty of highly skilled advisers out there who can show you how to make the most of what you have, no matter how modest it might seem.
Getting your inheritance affairs in order can also make a huge difference too.
If you are one of the 31 million estimated UK adults that don’t have a Will, you run the risk of your estate not being passed to your loved ones.
There are many things that can be done through your Will to ensure that the people you care about most are looked after when you are gone.
Leaving it to chance puts those choices in the hands of the courts; and can even expose your family to a much longer wait for their money and higher bills to pay while they do.
How Trusts can help
Trusts can be set up to ensure that your children don’t inherit everything at 18 should you die while they are still young.
Many people who inherit young go on to lose their inheritance before they have had a chance to mature.
The same Trusts can be used to support vulnerable adults and ensure they are adequately provided for and protected from making bad financial decisions.
If you are self-employed you should consider setting up a business trust with your partner so that, in the event of your sudden death, the business will continue to function as normal and your family continue to receive the benefit.
Setting up a Lasting Power of Attorney
You should also consider creating a Lasting Power of Attorney so that loved ones can act on your behalf in the event of an accident or sudden illness.
This can have a hugely positive effect on the family finances if you are the one who normally controls the cash.
Small decisions; big results
The tactics we’ve listed above might not sound like the most dynamic things you can do. But statistically they are a lot more effective than buying a lottery ticket every week and hoping for the best!
Hopefully we’ll see efforts it the near future to address this worrying drift backwards in time, but until then it pays to be organised and make the right choices for your family in the years ahead.