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

[Deleted User]

Inheritance “might happen” but certainly not the objective.  Having it as the purpose when making and spending money strikes me as vanity. 

artyboy

To answer the OP, for me it's part of the broader estate planning process. Worst case, I'll have passed on more than enough to my children while they are young to be useful. Best case, they'll also get 7 figures each in IHT free inherited pension.

And no, I won't be scrimping on my own lifestyle, what they get will depend on investment performance. Real generational wealth is a new concept to me so it's not something I feel the need to kick start at the expense of a comfortable dotage...

These kids will be paying high taxes for many years to repay all the nonsense our generation has gone through/inflicted on them, not to mention helping fund the state pension, so frankly I couldn't give a fig about what others (especially childless others) think about IHT fairness, irresponsible carbon footprint of breeding, or whatever soapbox they are on 

Sunnylifeover50plan

From talking to people and first hand experience, if something is left over, it often wholly or partially skips a generation passing from grandparents directly to grandchildren. Personally I wouldn't argue for or against but if or when you inherit something it can be quite useful.

ussdave

artyboy said:

To answer the OP, for me it's part of the broader estate planning process. Worst case, I'll have passed on more than enough to my children while they are young to be useful. Best case, they'll also get 7 figures each in IHT free inherited pension.

And no, I won't be scrimping on my own lifestyle, what they get will depend on investment performance. Real generational wealth is a new concept to me so it's not something I feel the need to kick start at the expense of a comfortable dotage...

These kids will be paying high taxes for many years to repay all the nonsense our generation has gone through/inflicted on them, not to mention helping fund the state pension, so frankly I couldn't give a fig about what others (especially childless others) think about IHT fairness, irresponsible carbon footprint of breeding, or whatever soapbox they are on 

I tend to agree about the soapboxes but (as someone who is childless) I don't agree with that being used as a metric to judge someone's opinion on pretty much anything other than how horrible it is to have a hangover and still have to get up to look after the kids.

kinger101

As others have said, I'd say it's not necessary a plan but an outcome.  I you retire at a time when sequence of returns works in your favour, it is possible you might have more in your pot when you die than when you retired.  

sevenhills

I do think people over estimate the importance of deprivation of assets.
If you are well with no prospects of going into a care home, then you can gift money?

squirrelpie

sevenhills said:

If you are well with no prospects of going into a care home, then you can gift money?

It's not a question of prospects or not of needing a care home. You're well one day looking forward to a happy retirement then the next day you or your loved one get a diagnosis of cancer or dementia etc and all your plans are changed, with minimal likelihood of surviving seven years.

It's the arbitrariness of those events that make life an unfair lottery and lead to calls for limits or state-backed insurance or whatever for care costs.

pensionpawn

ussdave said:

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.

Couldn't agree more. I didn't receive an inheritance from my parents (and didn't expect one as it was all earmarked for a motivationally challenged sibling who was still living at home at 32) however they helped me once, only when necessary, when I needed it. We have done the same with our (now adult) children, paying off their car loans after they had committed to buy their first house (both at 23). This was necessary (for the mortgage application, no debts) and an incentive (not the only one, we put their "rent" up too  ) for them to become independent young adults. They have pride in knowing that they saved for the bulk of their deposits and paid for the majority of their possessions as opposed to the kids of some friends and colleagues who have been gifted £50k+ for deposits etc.
Planning a pension that will leave them a large lump sum when they get to our age will be too late (if we last to our parents age) for them, and as others have commented, will probably only benefit our (yet to arrive) grandchildren. I think of it along the lines of Nanny McPhee: as parents we're here to help them when they need help, not (provide for) when they want help.
My wife's side of the family has considerably more wealth than my side did, however by the time any inheritance comes to her, it will be too late to make a major difference as she's now just retired. Also, you should never bank on an inheritance as we have form in parts of our family of Wills being changed in someones final weeks and children predeceasing parents.
Our view (and each to their own) is that I intend to be the (cash / pension) poorest person in the graveyard. We have planned our retirement strategy to be able to retire asap on a modest (2 x PA) and enjoy the early years rather than work into our 60's to have a treasure chest to pay for someone to wipe various parts of my body when you're too old to enjoy your wealth. The house is the kids inheritance (50% preserved trust / tenants in common Wills) and our emergency care fund.
Most of us don't know when we're going to croke it however if I make it to mid 80's (when my parents checked out) I'll be impressed as I've burnt the candle a little brighter than they did. I've planned our finances to retire asap on drawing 2 x personal allowance until 85, the just 2 (or one...) x state pension, plus what we didn't spend -> 85 until the final curtain goes down.
Apologies for the opus..

NannaH

If there is anything left of our pensions then our only Grandchild will inherit it,  along with 20% of our house if it doesn’t get sold for care fees, with 80% going to our Daughter. 

She has already benefitted to the tune of £25k from her Grandfather’s estate that we gifted her to enable a bigger house deposit. 

I’d rather use the house for care fees than the pension/s, for tax purposes.   I’d rather not pay 40% tax on the income needed to pay for a care home thank you very much. 

bostonerimus

Powerful and wealthy families have stayed powerful and wealthy by passing on money to the next generation. I'm not powerful, but by many objective measures I am wealthy and I want to use some of that money to leave a legacy and I also want to reduce the size of my estate to minimize inheritance taxes, in the US DC pension balances are included in the value of the estate.

My income comes from DB and state pensions and a rental property, so I don't need my DC and GIA investments to live off and as I live in the US I have long term care insurance to help cover care fees. As I don't have any children I am already gifting money to my nieces and their children. I have some specific bequests to charities in my will, but whatever is left in the estate when I die will go to my nieces. 

Passing the money to my nieces' families will make them very comfortable and I will leave it up to them to use it wisely or squander it.