Millennials will benefit from the biggest “inheritance boom” of any post-war generation, but it will be too late to solve housing issues and wealth inequality, a recent report says.
Those who have parents and grandparents in the “baby boomer” generation will be left record sums of wealth, the Resolution Foundation said.
But they will have to wait – until, on average, the age of 61, it suggests.
The think tank defines millennials as those currently aged 17 to 35.
The Resolution Foundation said that inheritances were set to more than double over the next 20 years, and this will peak in 2035, as the generally high-wealth baby boomers progress through old age.
Almost two-thirds of young adults have parents who own property, which they may get a share of in the future, the report said. By comparison, 38% of adults born in the 1930s received an inheritance.
The report also noted millennials were only half as likely to own their home at 30 as baby boomers were.
Older generations have benefited hugely from the big increases in household wealth in Britain over recent decades. While the millennials have done far less well in accumulating their own assets, they are nevertheless thought likely to benefit from an inheritance boom in the decades ahead.
But are they really? The report misses out three important factors.
Firstly, those in their 20’s and 30’s may take little comfort from the report. They tend to have student debts rather than homes and pensions and probably even struggle finding work. That inheritance is a lifetime away.
Secondly, up to half of women and a third of men are potentially going to have to pay for care at some point … and one in four people who pay for care eventually run out of money. That will effectively kill off any inheritance for the rest of the family.
Thirdly, and crucially, even the costs of care do not prove to be an issue there is the perennial matter of inheritance tax. Many asset rich individuals will leave their family with a considerable inheritance tax liability on their death. They are the majority who have either given the issue for those left behind no thought at all, have procrastinated until it is too late to plan effectively or have taken actions which are at best ineffectual and at worst counterproductive. Time is your ally if you are thinking a decade or two into the future. It is your mortal enemy if you can’t bring yourself to take it seriously and leave it for the family to sort out.
The inheritance tax regime is relatively benign as things stand for those taking a medium or longer-term perspective. Those with a shorter-term perspective have never fared well. It is anticipated that this will change decisively over the next five – ten years. The government, any government in the first half of the 21st century, will find that demographics and the changing characteristics of work will force it to spend considerably more than it currently does. The tax burden is guaranteed to increase on a hitherto unprecedented scale in an attempt to fund this while the tax base is currently far too narrow and is narrowing.
Inheritance tax reliefs of all kinds and the scope and rate of inheritance tax will increasingly become a very easy target for governments which are becoming, frankly, starved of resources. Tax receipts are inadequate.
Millennials will look back uncomfortably at how parents and grandparents squandered the family opportunities by doing nothing or taking inadequate control of their circumstances while they had every opportunity to change the outcome. That is why, increasingly, it is the adult children often in their 40’s who are attempting to engage with parents and professional advisers before it is too late. This tendency for the younger generation to be the catalyst for robust planning is one which can only intensify over the next five-ten years. Complacency can be fatal.
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