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

bluenose1

All of our income will come from DB pensions / rental income and my DC pot will be used to live on until my DB pension kicks in so not in much of a position to give the kids much money yet. We don’t have much in way of savings but will have at least £120k equity in our rentals when we sell.

Though my eldest and his wife are in well paid jobs, with a lovely house, so no support needed there. My middle son is also in a well paid job so hopefully he will be alright.
My youngest is in a minimum wage job so imagine he will need the Bank of Mum and Dad the most.

I could work another couple of years to have the finances to help them more, but don’t particularly want to.
In theory I can afford to go May 23, just before my 57th birthday and will have more income than we have had over last 4 years as have been putting so much into my Pension.

barnstar2077

I am all for helping beneficiaries earlier rather than later, albeit with one caveat. 

When my grandfather passed he left my siblings and I 9k each, not to be recieved until we were 25.  I think that was very wise of him and would add the same stipulation myself if I were to leave someone younger money.  The same money at 18 would probably have been wasted, but by the time I was 25 I had bought my house and really understood the value of money. 

bostonerimus

barnstar2077 said:

I am all for helping beneficiaries earlier rather than later, albeit with one caveat. 

When my grandfather passed he left my siblings and I 9k each, not to be recieved until we were 25.  I think that was very wise of him and would add the same stipulation myself if I were to leave someone younger money.  The same money at 18 would probably have been wasted, but by the time I was 25 I had bought my house and really understood the value of money. 

My nieces have children that aren't quite teenagers yet, so I send the money to them and let them dole it out to the kids. They put a lot of it in accounts for university and then let the kids spend some of it on what they want. This year my favourite grandniece (this is anonymous so I can admit to having a favourite) spent the money on a trip to Scotland to ride the Harry Potter Train, the Jacobite Steam Train from Fort William to Mallaig, and on the train to London, hotel rooms and tickets to see the National Theater's production of "My Neighbour Totoro" at the Barbican...how cool is that! and she's 11 years old. 

When they reach 18 I will talk to them and their parents about annual gifts to see what's sensible.

LV_426

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?

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.

Well it may make no sense to you, but it's entirely dependent on on individuals circumstances, and there's a lot of variables involved.
We had kids relatively late, so my youngest is now 12 (I'm 56).
It also depends what combination of pensions you have. I'm not anticipating needing to draw on my DC assets, as I have a couple of DB pensions. This combined with SP (both me and the Mrs qualify for sull SP) will provide a sufficient income.
Therefore my plan is to pass on a lot of this wealth to my kids. I anticipate giving them a substantial amount towards a house. I've benefitted from buying my first house at probably the best time in a generation, and this has meant low mortgage payments throughout my life. I want to pass on these financial breaks to my kids, who live in a debt-laden society.
This will most definitely not be too late for my kids. However I'm probably not the norm.

Albermarle

barnstar2077 said:

I am all for helping beneficiaries earlier rather than later, albeit with one caveat. 

When my grandfather passed he left my siblings and I 9k each, not to be recieved until we were 25.  I think that was very wise of him and would add the same stipulation myself if I were to leave someone younger money.  The same money at 18 would probably have been wasted, but by the time I was 25 I had bought my house and really understood the value of money. 

Although it seems to be quite common in a will, to stipulate that money is not passed on until 25 or similar, often it is not legally binding, unless the will is written a very specific way AFAIUI.
Probably many people just follow the will's wishes but if the young person demands the money earlier, then they may well be entitled to it, once they are 18. 

bostonerimus

Albermarle said:

barnstar2077 said:

I am all for helping beneficiaries earlier rather than later, albeit with one caveat. 

When my grandfather passed he left my siblings and I 9k each, not to be recieved until we were 25.  I think that was very wise of him and would add the same stipulation myself if I were to leave someone younger money.  The same money at 18 would probably have been wasted, but by the time I was 25 I had bought my house and really understood the value of money. 

Although it seems to be quite common in a will, to stipulate that money is not passed on until 25 or similar, often it is not legally binding, unless the will is written a very specific way AFAIUI.
Probably many people just follow the will's wishes but if the young person demands the money earlier, then they may well be entitled to it, once they are 18. 

I think you'd achieve the "not until 25" aim with a trust which could be the beneficiary of the will. 

marycanary

I will retire in a few months when I am 60. If I live to be 90, the age my father died my mother's current age, my eldest will be 63 and my youngest 55. If I don't need care and they receive the value of my house it may help them to retire before they are 70, or whatever the pension age is by then. 

This seems like a reasonable situation if I need care the house value pays towards it and if I don't my children may be able to retire a bit earlier.

michaels

marycanary said:

I will retire in a few months when I am 60. If I live to be 90, the age my father died my mother's current age, my eldest will be 63 and my youngest 55. If I don't need care and they receive the value of my house it may help them to retire before they are 70, or whatever the pension age is by then. 

This seems like a reasonable situation if I need care the house value pays towards it and if I don't my children may be able to retire a bit earlier.

Your kids will have lived their lives working towards a planned retirement date so I guess if they get inheritance before that date then it will allow them to benefit by going earlier - but if they have both already saved enough to retire at 50 then it will make little odds that they get a windfall after that.

In my case I hope to be retired long before any potential inheritance at which point I am unlikely to change my spending pattern just because I suddenly have a bigger pot.

marycanary

michaels said:

marycanary said:

I will retire in a few months when I am 60. If I live to be 90, the age my father died my mother's current age, my eldest will be 63 and my youngest 55. If I don't need care and they receive the value of my house it may help them to retire before they are 70, or whatever the pension age is by then. 

This seems like a reasonable situation if I need care the house value pays towards it and if I don't my children may be able to retire a bit earlier.

Your kids will have lived their lives working towards a planned retirement date so I guess if they get inheritance before that date then it will allow them to benefit by going earlier - but if they have both already saved enough to retire at 50 then it will make little odds that they get a windfall after that.

In my case I hope to be retired long before any potential inheritance at which point I am unlikely to change my spending pattern just because I suddenly have a bigger pot.

It would be nice if they could afford to save to retire 10 or 20 years before the state pension age but I think with student loans, high rent or mortgage payments and wages increasing slower than inflation the chances are not great. 

I also want them to retire long before they get any inheritance.

DT2001

LV_426 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.

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.

Well it may make no sense to you, but it's entirely dependent on on individuals circumstances, and there's a lot of variables involved.
We had kids relatively late, so my youngest is now 12 (I'm 56).
It also depends what combination of pensions you have. I'm not anticipating needing to draw on my DC assets, as I have a couple of DB pensions. This combined with SP (both me and the Mrs qualify for sull SP) will provide a sufficient income.
Therefore my plan is to pass on a lot of this wealth to my kids. I anticipate giving them a substantial amount towards a house. I've benefitted from buying my first house at probably the best time in a generation, and this has meant low mortgage payments throughout my life. I want to pass on these financial breaks to my kids, who live in a debt-laden society.
This will most definitely not be too late for my kids. However I'm probably not the norm.

I agree, there a lot of variables. We didn’t create a plan with the expectation of receiving an inheritance but have recently done so. This has lead to MIL tweaking her wills to partially ‘jump a generation. My BIL and our children will now inherit (definitely at a ‘better’ age). In addition MIL has created an income producing portfolio with the excess funding BIL’s pension and helping university costs. Capital has been kept intact to divert, if necessary, to help with her care costs.
We’ll pass capital on when retired (OH enjoys work so we are still accumulating although FI). We have not passed on much capital yet as it might help with the final move but pay wages as self employed to help build up deposits (older parents, I’m 62 and our youngest of 4 is 15). Like many we pay for family holidays inc those that earn.
I suppose the lack of desire to retire asap, the expected failure of decumulating and the inability to forecast death will lead to an inheritance.

To answer the OP’s question as to why. We feel as responsibility to our children!  - my mother did despite living off a low income and knowing all of her children were better of than her.