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

IdrisJazz

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?

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?

This.

If there's some money left in the pot when I die, care home or not, I'd be happy I've made the right calls.

I'm planning to not have to rely on any inheritance to sustain a decent quality of life in retirement. But there should be something relatively substantial at some point (ca. £250k perhaps) that will most likely crop up close to my retirement when I shouldn't really need it. I will without a doubt allow us some treats at that point, but I intend to use a significant chunk of that to pass straight down to my children at a time they are more likely to need it. (It's ironic that most people can't afford a nice family home until they actually no longer have a family).

Then the hope is that by the time my wife and I die, our children can do much the same thing and pass a good deal of their inheritance down to their children, and so on.

michaels

NedS said:

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.

NedS said:

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.

We live in the SE so currently there would be scope for us to downsize, give each of our kids a 6 figure sum towards their housing and still have enough for a decent property/future equity to fund care needs.

Passing inheritance received either directly or immediately to grandchildren is what my point is about, children are likely already financially set up by the time their parents pass so are not really going to get direct benefit from a large bequest (unless the inheritance is built into their retirement plans, but does anyone really do that?)

ussdave

We don't have kids yet and in terms of our parents there will be nothing to be passed down.

I can see the logic in "playing it safe" in terms of your planned spend and therefore incidentally having some money left over when you die, but otherwise I don't see why anyone would aim for that over giving extra financial support whilst you're still alive.  Gifts given whilst you're alive mean your offspring get to benefit from that money for longer (and probably when it matters more to them - buying a house, having their own kids, etc) and you get the satisfaction of seeing them reap that benefit.

I guess the exception would be if you're expecting to have a very large estate at the point of death, in which case it seems sensible to consider how best to minimise tax for your beneficiaries.  

The exception for us personally is our house.  We're hoping this is our forever home so hopefully it'll only get liquidated when we've both popped our cloggs, or I suppose to fund carehome fees if needed.

dharm999

if if things go to plan, then our pension pots will be significant, and alongside other savings, means we are in the very fortunate position that any inheritance from my Mum we don’t actually need for our long term plans.  My dad died at 60, of a heart attack and as I start to think about my mortality, I am thinking that any inheritance from my Mum, and doing something useful for small local charities with it.  Our son has a well paid job, his own place, so is set up and doesn’t need anything from us.  That means any inheritance from my Mum is completely surplus to our requirements.  I appreciate that I am in an extremely fortunate position and most people aren’t in the same situation.  You can’t take it with you, so why not do something useful with it.  

Pensions_matter_2

We are hoping to future proof our home enough to be able to stay put and it will be available for care costs later if necessary. If we dont need it then it will be passed on to children, but I see it mainly as an insurance against care costs. Hopefully it will be enough to cover 4 or 5 years of care each if needed, with our incomes helping with meeting part of the care costs too. There is only so much risk you can cover - its a matter of weighing it all up and also trying to make the most of your retirement while able to. Ideally Id hope we can pass on to children who I dont think will have it as easy as we did, given the price of property and reduction or watering down of DB scheme provision in both private and public sectors. 

Albermarle

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?

You are not the only one to think this, or even speculate on pension pots not remaining free of IHT indefinitely.
IFS suggest higher taxes on inherited pensions — MoneySavingExpert Forum

Albermarle

I can see the logic in "playing it safe" in terms of your planned spend and therefore incidentally having some money left over when you die, but otherwise I don't see why anyone would aim for that over giving extra financial support whilst you're still alive.  Gifts given whilst you're alive mean your offspring get to benefit from that money for longer (and probably when it matters more to them - buying a house, having their own kids, etc) and you get the satisfaction of seeing them reap that benefit.

This is a good summary of a sensible approach. An exception can be to deliberately leave money ( probably in trust), for someone who can not look after themselves, where a gift during lifetime maybe of little/no benefit.

ussdave

Albermarle said:

I can see the logic in "playing it safe" in terms of your planned spend and therefore incidentally having some money left over when you die, but otherwise I don't see why anyone would aim for that over giving extra financial support whilst you're still alive.  Gifts given whilst you're alive mean your offspring get to benefit from that money for longer (and probably when it matters more to them - buying a house, having their own kids, etc) and you get the satisfaction of seeing them reap that benefit.

This is a good summary of a sensible approach. An exception can be to deliberately leave money ( probably in trust), for someone who can not look after themselves, where a gift during lifetime maybe of little/no benefit.

That sounds like a reasonable situation where you might manage things a bit differently, yes.

Grumpy_chap

michaels said:

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

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.

We have much a similar situation, albeit with my Mother (as Dad has already passed).  

The biggest thing on inheritance is the uncertainty - especially as a short period in a nursing home can burn through the lot.

If, however, you do inherit, you can use DoV to pass that to your children so they get the life-changing benefit and it never affects your estate in terms of potential IHT or other factors.

In our case, we don't have any children, but Mum says how much her Grand-Children (my two Brother's Children) will be able to do once she is gone.  I have often suggested that she's be better to make a gift now so that (a) she can see the benefit and (b) they do receive the money when it would be a real benefit to them - first house is really the time that this happens as once you're on the housing ladder it all becomes less significant.  As we don't have children, I always thought I was safe making that suggestion as it is not asking for my own benefit.  (I also suggested that my younger Brother would benefit from funds to be a deposit on a house.)

None of these were taken up - old people seem to have a desperate need to have a bigger than necessary bank balance.  Perhaps someone told them there is an admission fee for the Pearly Gates?

It all becomes moot as, if left too late (as in my Mother's case), any large gifts get caught under deprivation of assets if the nursing home fees ever stroll along.  I suspect this is not far away for my Mother.

NannaH

We gave our Daughter a house deposit from my Husband’s inheritance in 2021. 

 I would definitely try to use the house’s value for care fees rather than being massively taxed on pension withdrawals,  it’s obscene that money going straight into care fees is taxed,  not everyone would have enough for a care needs annuity but a lot of people might have enough for a couple of years worth of fees.