Income vs Inheritance

borkid

MacMickster wrote: »

Par of the problem with inheritance is that it leaves a lot of capital just sitting as savings.

With life expectancies now in the mid-80s and climbing, any sizeable inheritance left "to our children" is actually going to people approaching their own retirement. I suspect that much of it ends up sitting in savings accounts of those who inherit the money as a rainy day fund to see them through their own retirement, before then being passed on to their own children for the cycle to be repeated. It never becomes the circulating capital which helps to boost the economy.

Although grandchildren do often receive some of the overall inheritance, perhaps we now need a shift in the way that we view the idea of inheritance, so that grandchildren receive the bulk of most estates rather than the children.

And if there are no grandchildren who would get the money? I'd want my money to go to my children one of whom has had a raw deal healthwise and her inheritence would give her a more comfortable old age if she lives long enough.

cells

Sometimes threads can get a bit off topic and i am guilty of feeding side conversations so Id like to get this back on track a bit.

Most of us only really think about income for most things including housing and if it is affordable or not.

With potentially something in the region of £200 billion a year (mostly tax free) gifted away or left as inheritances we have another dimension to consider.

Should a person on the average wage be able to afford the average property? yes or no the reality is that there are large numbers of people (millions) who will get inheritances and gifts who are part of the market and they can not be ignored. Since they are part of the market it clearly means someone on the average wage wont be able to buy the average property they will be a bit lower on the 'pecking order'

Property that looks maybe overpriced when only looking at earned income does not look so bad when we consider earned and gifted income.


Anyone from clan hpc care to post this up there to see what they think of it?

Thrugelmir

cells wrote: »

With potentially something in the region of £200 billion a year (mostly tax free) gifted away or left as inheritances we have another dimension to consider.

That's only £2847.14p per head of the population. Hardly going to spark a boom........

cells

Thrugelmir wrote: »

That's only £2847.14p per head of the population. Hardly going to spark a boom........

£200 billion a year is over £7,100 per household PER YEAR of tax free income. That itself is VERY significant sum of money.

That sum of money is not evenly spread across every household it seems about half of households get little to nowt. That would mean the ones that do get ~£14,200 per household per year tax free.

To ignore this huge sum of 'income' would be very foolish.

System

HornetSaver wrote: »

It's not "fair" that those with large inheritances will be able to buy whilst those without and on similar incomes won't, but that's a fact of life. Whether inheritance tax is 0% or 60%, it will remain a fact of life for as long as currency is in existence. And to my knowledge even the radical left isn't proposing abolishing currency.

.

The radical left have walked into a trap by associating themselves with the concept of home ownership and hence an interest in mortgage availability. Up to about two generations ago only the rich owned houses, in the eyes of the left, so they were free to attack home owners and concentrate instead on the need for better council housing for their own people.
Now that they have accepted the bait just like everyone else they too have become caught up in the house price spiral and its vital linking to the wider issue of national prosperity.

If they were truely radical then they would argue that housing, like other basic needs, should not be in the hands of private owners, and they would be advocating the total nationalisation of all land and housing, and its allocation on the basis of need alone.

There aren't any socialists now.

cells

Generali wrote: »

To work through the figure, apparently there are about 540,000 deaths a year. Of those, half leave less than £5,000 and half more. The half leaving more than £5,000 leave an average of £260,000 so total inheritance is probably about £72bn or roughly the OP's figure. Good guestimation cells!

Going back to this thread, your post suggests

270,000 people die each year leaving little to nothing so we can discount their impact on housing purchases

270,000 people die each year leaving behind an average of £260,000. That is a significant sum of money and a significant number


Of these 270,000 deaths leaving £260k on average each that might filter down to say 1 million people as inheritances getting ~£65k each.

So about a million people (and their families) EACH YEAR get a significant £65k boost to their wealth and purchasing power.

few people know or consider this when talking about housing or even general financial health of households but its clearly a widespread and big boost in wealth that needs to be considered

economic

but out of this inheritance wealth, how much of it is housing stock that simply gets passed onto the next generation? this housing doesnt actually get onto the market and drive the prices. so shouldnt you be excluding the housing wealth from the amount that can potentially drive prices higher? given most peopels wealth is tied up in property i would imagine this has a big impact and so you are overstating the impact inheritance has on prices.

kinger101

economic wrote: »

but out of this inheritance wealth, how much of it is housing stock that simply gets passed onto the next generation? this housing doesnt actually get onto the market and drive the prices. so shouldnt you be excluding the housing wealth from the amount that can potentially drive prices higher? given most peopels wealth is tied up in property i would imagine this has a big impact and so you are overstating the impact inheritance has on prices.

I think it mostly gets sold as most people have usually bought their own home by the time their parents pass away. A considerable amount of the marketed houses near me look like they were owned by someone who passed away. The ones with "no chain" and "needs modernization".

There are many reasons why you wouldn't move into a parental home, even if you were renting where your parents deceased. Move than one child inherits. It's nowhere near where you live. Or you just do want the hassle of getting rid of that avocado bathroom suite and want a new/recently refurbished one instead.

Some interesting stats here on assisted FTB.

https://www.cml.org.uk/news/news-and-views/712/

Think it might exclude inheritance though, as technically, it's then the buyer's money.

cells

economic wrote: »

but out of this inheritance wealth, how much of it is housing stock that simply gets passed onto the next generation? this housing doesnt actually get onto the market and drive the prices. so shouldnt you be excluding the housing wealth from the amount that can potentially drive prices higher? given most peopels wealth is tied up in property i would imagine this has a big impact and so you are overstating the impact inheritance has on prices.

Im not looking at it from just the point of the housing market but rather 'income' and wealth generally.

If 270,000 people a year are leaving on average £260k each that shows a significant number of people do get inheritances and obviously this is going to be fairly broadly spread out (over a 40 year period its 10.8 million such deaths. If typically a dead person leaves something to 3 people that means 32.4 million people get an inheritance over a 40 year period or virtually half the population. Whats more if say a family is a man/woman and two children and the woman gets an inheritance from her dead father it helps the whole family of 4 not just the woman in that unit

Anyway back to your idea of wealth in property being recycled. yes but so what? Some people leave homes, sometimes this is sold and split, sometimes it is kept as a BTL or the inheritor decided to live in it. Either way its capital and capital of one form (eg property) can easily be converted to another form (eg cash)


When we think of wages and wealth, we need to consider these 270,000 inheritances of £260k annually. It filters into the economy generally and the housing market in particular.

oh and these figures are for whats left on someones deathbed. I think a similar sum, perhaps more, is gifted before death to avoid inheritance tax or just to get things in order before you die or lose your mental or physical health

This £70.2 billion is the starting point. I think its closer to £200 billion annually with gifts/planning taken into account.

cells

economic wrote: »

but out of this inheritance wealth, how much of it is housing stock that simply gets passed onto the next generation? this housing doesnt actually get onto the market and drive the prices. so shouldnt you be excluding the housing wealth from the amount that can potentially drive prices higher? given most peopels wealth is tied up in property i would imagine this has a big impact and so you are overstating the impact inheritance has on prices.

Generali post has a link which shows what the inheritances are actually composed of

the lower value pots (£0-£50k) seem to be mostly property and cash while the highest pots (>£2m) seem to be mostly securities.

Overall property looks like about half of a typical inheritence