6.9 million parents mitigating IHT by transferring assets early

20% of parents passing on wealth early

New research from Direct Line Life Insurance 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, some £227bn has been transferred to children or grandchildren.

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.

Parents in London are also the most likely to have transferred assets, 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.

To transfer, or not to transfer …

Some 13% of all people surveyed said they hadn’t transferred assets because they were concerned that they might need their assets in retirement. Proper financial planning would help these people establish whether they had sufficient assets to fund their retirement, and as such could afford to transfer money early.

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

Conversely, we know from working with retirees that many people get great pleasure from seeing their children and grandchildren enjoy spending their hard-earned money whilst they are still alive.

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.

The importance of getting IHT advice

This report shows how important getting good advice about Inheritance Tax (IHT) is to make sure you’re not caught short in retirement. The rules around IHT are complex, so be sure to seek advice from a professional before deciding to transfer your money

Table one: regional breakdown of early inheritance

Source: Direct Line Life Insurance

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