Research suggests that many parents intend to provide their children with financial help by funding early inheritance gifts.
According to Key Retirement’s study, over half of parents propose to make a significant financial gift to each of their children, with an average target of £15,000. For 11% of parent respondents, however, the total per child reached £25,000.
When it came to funding the payment, over half state that they intend to use their savings initially, with growing numbers of those over 55 choosing to use equity release. This was the method of choice for 22% of those either unable or had chosen not to use their savings.
Tax breaks for these ‘living inheritance’ gifts have also received ample support; over a third (37%) of parents and grandparent respondents stated that if the Government provided tax breaks, they would be inclined to gift a living inheritance. According to Key, the breaks may also enable future generations to benefit from familial funds more easily. By encouraging wealth to be transferred to either children or grandchildren, the tax breaks could indirectly alleviate any intergenerational wealth disparities.
As has been widely reported, friends and family are increasingly helping first-time buyers to take their first step onto the property ladder. By using these financial gifts, over half (58%) of relatives wish to help their children or grandchildren get onto, or move up the property ladder, whilst 34% are contributing to a deposit on a new home.
Commenting on the research was Dean Mirfin. The technical director at Key Retirement highlighted the growing financial struggles which the younger generations are facing, and, considering what their child may be subject to, parents and grandparents simply want to help.
“The financial squeeze on younger generations and the struggle they face in saving for homes and paying off student debt are major problems.
“It is clear parents and grandparents want to help and are already doing a lot to make gifts with more than half planning major handouts.
“The research shows high awareness of the use of equity release to fund gifts. More than two-thirds were aware that they can release equity from their homes to help their loved ones.
“For those who maybe do not have the savings to make gifts, access to money which can be raised through equity release is seen by many as the best early inheritance that people can give. It can have a dramatic effect on their families’ longer-term financial well-being and the desire to gift remains relatively consistent across most of the UK.”
