Leaving some of your pot for the kids as inheritance - why?

michaels

Seems to be an oft stated aim for many.

To me this makes no sense.

If I get anything from my parents it will be after I have retired - this is of course a good thing as it means they will have led long and fulfilling lives.

However as it is uncertain, I will have had to make all my retirement plans based on making sufficient provision for myself so anything I get from my parents will be on top of what will already be a sensible provision so potentially of limited use, the same value would have brought benefit (higher spending, earlier retirement) if it had been available over my entire working life but it won't be.

My plans are to downsize or otherwise release equity when my children reach the house buying stage (passing on their 'share' of the equity in out home when they need it) and otherwise aim to run my pot down to zero.  I guess possibly any inheritance I might receive could help with this plan if it arrives before my kids reach this stage but I suspect (and hope) it will not.

SO I wonder what those who are planning on passing money on on death think it will achieve for their offspring?

My main argument is that by the time 'children' receive an inheritance it will generally be to late to have a financial impact on their lives so if you are planning to pass on wealth it should be done much earlier and that therefore trying to ensure a bequest should not be a key part of retirement planning.

Keep_pedalling

As you don’t know the date of your death it is very difficult to run your pot down to zero. It would be great if you could but the reality is you will run it down to zero too early or not achieve that at all. Planning to leave some to your children does at least give you nether option of using those assets for yourself if you get desperate.

MalMonroe

Perhaps people just want to do something nice for their children? After all, it's entirely up to them what they do with their money.  My parents had nothing to leave my brother and myself when they died - and that was fine with us. In their retirement they were able to live comfortably and without any struggles or money worries.

I won't have much, if anything to leave my daughter but we often do have shared and very enjoyable experiences now, even though she's an adult. Her dad and I divorced when she was small and he's better off than I am so I hope he'll think of leaving her something in his will but she is not expecting anything from either of us. Anything she does receive will be a bonus (pun intended).

It just depends on everyone's individual circumstances and whether or not they want to leave their children something. I guess it makes a lot of people happy to think they can do that.

I still feel a responsibility to my daughter - call me daft, many do! - because, like me (and everyone else on the planet), she never asked to be born. 

NedS

michaels said:

Seems to be an oft stated aim for many.

To me this makes no sense.

If I get anything from my parents it will be after I have retired - this is of course a good thing as it means they will have led long and fulfilling lives.

However as it is uncertain, I will have had to make all my retirement plans based on making sufficient provision for myself so anything I get from my parents will be on top of what will already be a sensible provision so potentially of limited use, the same value would have brought benefit (higher spending, earlier retirement) if it had been available over my entire working life but it won't be.

My plans are to downsize or otherwise release equity when my children reach the house buying stage (passing on their 'share' of the equity in out home when they need it) and otherwise aim to run my pot down to zero.  I guess possibly any inheritance I might receive could help with this plan if it arrives before my kids reach this stage but I suspect (and hope) it will not.

How do you plan to provide for any care home costs in old age should you require them if you have already substantially down-sized your property and run your pension pot down to near zero?

michaels said:

SO I wonder what those who are planning on passing money on on death think it will achieve for their offspring?

Our plan is to earmark our property towards any care home costs should we need them (we won't need the property to live in if we are in a care home), and our DC pension assets are set up in such a way as to only need to draw the natural yield (dividends) ensuring the the pot remains intact (and outside of our estate for means-testing and inheritance tax) making it available to leave as the major inheritance to children upon death - along with the house if a care home is not required. The obvious flaw in our plan is if one partner needs care provision whilst the other partner is still alive and living at home, although tenants in common may provide a solution to that.

If we are fortunate enough to benefit from inheritance ourselves (which will largely depend if our own parents require a care home), then that can be passed on directly to help our children now with their current housing struggles as we are well placed with our own provision.

Marcon

michaels said:

Seems to be an oft stated aim for many.

To me this makes no sense.

If I get anything from my parents it will be after I have retired - this is of course a good thing as it means they will have led long and fulfilling lives.

However as it is uncertain, I will have had to make all my retirement plans based on making sufficient provision for myself so anything I get from my parents will be on top of what will already be a sensible provision so potentially of limited use, the same value would have brought benefit (higher spending, earlier retirement) if it had been available over my entire working life but it won't be.

My plans are to downsize or otherwise release equity when my children reach the house buying stage (passing on their 'share' of the equity in out home when they need it) and otherwise aim to run my pot down to zero.  I guess possibly any inheritance I might receive could help with this plan if it arrives before my kids reach this stage but I suspect (and hope) it will not.

SO I wonder what those who are planning on passing money on on death think it will achieve for their offspring?

Same rationale as any other bequest, but without being subject to IHT.

dunstonh

SO I wonder what those who are planning on passing money on on death think it will achieve for their offspring?

It depends on your overall wealth.   Some use the pension wrapper for estate planning.   Others use it solely for income provision.  Some use it as a tax wrapper for investments.

Everyone has different objectives and everyone can use the methods they want to suit their views and opinions.

squirrelpie

NedS said:

How do you plan to provide for any care home costs in old age should you require them if you have already substantially down-sized your property and run your pension pot down to near zero?

Our plan is to earmark our property towards any care home costs should we need them (we won't need the property to live in if we are in a care home),

...

The obvious flaw in our plan is if one partner needs care provision whilst the other partner is still alive and living at home, although tenants in common may provide a solution to that.

Just to point out that care costs aren't always so neat. Sometimes you are able to remain in your own home and receive care there, which is generally thought to be preferable to moving into a care home. But in that case you still need the house as well as funding for care costs. Similarly, if one partner does move into a care home, the other partner still needs the house to live in, so it can't be sold to provide the care costs (at least not without major disruption at a potentially stressful time). There are many variations to consider.

squirrelpie

And on the original subject it does seem to be a very emotive and not very logical subject. Why is there an additional concession in IHT for direct dependents, for example? It just annoys people like us who don't have any such. Why should adding to the world's population problem be rewarded financially?

Brie

Leaving some of your pot for the kids as inheritance - why?

I was thinking you were talking about a different kind of "pot" and was boggled at the idea of leaving some for the kids to inherit.

tacpot12

squirrelpie said:

And on the original subject it does seem to be a very emotive and not very logical subject. Why is there an additional concession in IHT for direct dependents, for example? It just annoys people like us who don't have any such. Why should adding to the world's population problem be rewarded financially?

I could ask why you should receive any money when my parents die? What have you done to deserve their money, when I have looked after them and cared for them?

michaels

Brie said:

Leaving some of your pot for the kids as inheritance - why?

I was thinking you were talking about a different kind of "pot" and was boggled at the idea of leaving some for the kids to inherit.

 If we did ever need any for medicinal purposes then our kids would certainly be able to help us out - the other way, not so much.