When thinking about how parents will split their assets between children, it’s often assumed wealth will be evenly distributed. However, a survey suggests that, for a variety of reasons, a significant proportion of inheritances may not be.
According to a report in Money Age, just 55% of UK adults plan to split their wealth equally among their children. If you don’t want to split your estate evenly, it can make writing your will and estate planning more complex. It’s important to think about how you’d like your assets to be distributed to ensure your wishes are carried out. Here are three reasons you may not want to split your estate evenly between your children when you pass away.
1. You want to reflect gifts provided during your lifetime
It’s becoming more common for parents to provide financial gifts or support during their lifetime. This could be to help children achieve a specific milestone, like buying their first home, or for other estate planning purposes, like reducing Inheritance Tax.
A survey from Canada Life suggests that over a third of parents have already passed on significant gifts to the next generation. If you’ve provided gifts to a child already, you may want to reflect this in your will. 13% of parents said they would consider the financial support already given when setting out inheritances for their children.
If this is something you’d like to consider in your will, it’s important to keep track of the gifts provided. It’s also a good idea to schedule regular reviews, as the value of your assets may change and alter how you’d like to distribute them.
2. You want to reflect each child’s circumstances
You may also want to reflect on the circumstances of each child when deciding how to support them with an inheritance. If one child is less financially secure and so needs more support, you may decide to leave a greater proportion of your estate to them.
As with the above, if this is your goal, regular reviews are important, as your children’s circumstances can change, as can your assets.
3. You want to pass on a certain asset to one child
You may have certain assets that you want a child to inherit. This could be for sentimental or practical purposes and may affect how evenly your estate is distributed. For example, you may want one child to inherit your home so they can raise their family there, or want to pass on jewellery to another. These decisions can mean that your estate isn’t distributed evenly or that it’s more complicated to do so.
Of course, there are many other reasons why you may not want your estate to be evenly distributed. What’s important is that your wishes are reflected in a will and you take steps to prepare your estate.
Could your decision cause conflict?
While not distributing their estate evenly is something 4 in 10 parents are thinking about, you should also consider how your decision could affect family relationships and whether it could cause conflict.
37% of UK adults said that they would be upset if they received less from an inheritance than their siblings. Just a quarter (24%) said they would not feel anything if this happened. Being proactive can help to minimise potential conflict, so speaking to your children about your decision and why you’ve made it can help them understand your thought process and reduce conflict.
Being open about your will and what you will leave behind can also help your children have more confidence about their future. It can be a difficult discussion to have, but it can help make sure your family is on the same page.
The importance of reviewing your estate plan
Once you’ve put an estate plan in place, including writing your will, it’s important to set out regular reviews. Over your lifetime, your assets and wishes can change.
Some assets, like your property or investments, may increase in value during your life. Others, such as the assets you use to create an income in retirement, will deplete. These changes may affect what you leave behind for loved ones and could change how you want to pass assets to the next generation. Keep in mind some things outside of your control can also have an effect. For example, if you need care or support later in life, you are likely to need to cover at least some of the costs, which can have a significant effect on the value of your estate.
Your wishes may also change over the years. Perhaps welcoming grandchildren will mean you want to set something aside for them, or you may decide to support a charity with a charitable legacy. By regularly reviewing your will, you can ensure it continues to reflect your wishes and circumstances.
If you’re thinking about how you’d like to pass assets on to loved ones, please contact us. We can help you understand the value of your assets and what your options are.
Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only. The Financial Conduct Authority does not regulate will writing, some aspects of tax planning or estate planning.
Richard Fyfe is a Chartered Financial Planner and a Director of Fyfe Financial.