A recent survey by financial service provider, Responsible Life, found that more than 28% of retirees plan to leave their assets to beneficiaries other than their immediate family. Those hoping for generous inheritances to facilitate house purchases, pay off student debt or fund their own retirement may well be disappointed.
The reasons for the move away from family beneficiaries are many; estrangement is one but also a wish to reward friends and neighbours who may have provided more significant practical and emotional support in later years than immediate family members who are geographically distant. Charities are also significant beneficiaries with animal charities a particular favourite and the associated inheritance tax benefits of charitable giving are not to be ignored. A gift of just 10% of a testator's estate to a recognised charity reduces the tax rate on the entire estate from 40% to 36%.
Other reasons include wanting adult children to 'make their own way' in life rather than expecting to benefit from their parents' hard work and financial prudence. In addition many retirees anticipate having little left to leave with their estates depleted either voluntarily or through the costs of later life care.
However, for those intending to pass over their relatives in favour of charities or other third parties thought should be given as to whether those excluded could bring a successful claim against the estate under the Inheritance Act ( Provision for Family and Dependants ) Act 1975. A recent slew of successful cases in the courts brought by disgruntled family members means that both testators and their advisors should address the issue of a potential claim during the will drafting stage and take steps to avert such a claim such as by drafting a Statement of Reasons or including a nominal legacy. Failure to address the issue before death could end up with costly and protracted litigation which reduces the funds available for all beneficiaries.
More than a quarter (28 per cent) of retirees plan to leave their money to friends, animal charities and neighbours instead of children and grandchildren.