Monday, 08 October 2018 10:14

More than 6.9m parents give kids inheritance early

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New research suggests that 20% of parents – 6.9m mums and dads – have transferred assets to their children early to mitigate inheritance tax.

According to the report from Direct Line Life Insurance, some £227bn has been transferred to children to avoid inheritance tax.

The average value of assets transferred early is £32,920 but there are major regional variations. In London the average transferred is £119,207 compared to £12,495 in Scotland and just £9,009 in Wales.

In addition, parents in London are the most likely to have transferred assets to their children, with more than two in five (41%) giving their kids an early inheritance, averaging £119,207. But only one in nine (11%) of East Midlands parents has done this.

Divorce and splitting of assets remains a key driver of change with some 15% of divorcees setting aside assets for their children early so that they are not transferred to their new partner if they die, gifting on average £16,602.

Some 13% of all people surveyed said they hadn’t transferred assets because they were concerned that they might need their assets in retirement. 

One in eight parents (13%) believed their children should not be provided for while they are still alive, while 9% did not know that gifting money could reduce their inheritance tax bill when they die.

The survey found that the increasing number of broken marriages was making inheritance planning more complicated, with divorcees often transferring assets to named beneficiaries early to avoid them going to their new partner if they remarry.

Jane Morgan, business manager at Direct Line Life Insurance, said: “Just 20% people with a life insurance policy have placed this into trust and almost a fifth of those with a life insurance policy admit they did not know this was an option.”

Table one: regional breakdown of early inheritance

Region

Percentage of parents who have transferred assets

Average value of assets transferred

London

41 per cent

£119,207.00

North East

30 per cent

£40,124.70

Northern Ireland2

28 per cent

£38,166.80

Yorkshire and Humberside

19 per cent

£29,885.60

South East

18 per cent

£20,376.30

East of England

17 per cent

£22,103.30

West Midlands

17 per cent

£16,379.30

Wales

17 per cent

£9,009.00

North West

16 per cent

£15,403.10

Scotland

15 per cent

£12,495.20

South West

13 per cent

£23,157.60

East Midlands

11 per cent

£20,431.40

UK average

20 per cent

£32,920.10

Source: Direct Line Life Insurance

• Research was conducted by Opinium among 2,003 adults in July 2018

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