A new report from the Resolution Foundation has revealed millennials are in line to receive the largest and most wide-reaching ‘inheritance boom’ of any post-war generation. However, this won’t come in time to solve their home ownership and wealth inequality woes.
The analysis finds that the large sums of wealth accumulated by older generations will provide a major boost to younger generations’ wealth accumulation and living standards in years to come. Inheritances are set to more than double over the next two decades and peak in 2035, as the generally high-wealth baby boomers – who currently hold more than half of Britain’s wealth – progress through old age.
However, the Foundation notes that while inheritances and gifts have a large and important role to play in boosting the wealth of younger generations, they are not a silver bullet for addressing their much lower home ownership rates and slower wealth accumulation. This is because inheritances will be distributed unequally and arrive far too late in life.
And while future intergenerational transfers will provide a welcome wealth boost to many who have built up little or no wealth, they will also increase absolute wealth differences between millennials, says the Foundation.
Among young adults there is a strong relationship between their property wealth and that of their parents. Millennials with their own property wealth of £200,000 or more have parental property wealth of £195,000 per sibling, while millennials who don’t own their own home have parental property wealth of just £85,000 per sibling.
The Foundation also notes that inheritance tax will do increasingly little to dampen the opening up of these big wealth gaps among future recipients. The new housing allowance – which once it is fully implemented in 2020 will mean that up to £500,000 per adult can be passed on tax free – could halve the average tax burden on millennials’ parental property wealth if it was inherited at current levels.
For expert legal advice on inheritance planning and inheritance tax then contact our specialist lawyers today.