More than 6.9 million parents give kids inheritance early

• A fifth (20 per cent) of parents have transferred assets to their children to mitigate the amount of inheritance tax payable on their estates
• Parents have transferred over £227 billion to their children in an attempt to avoid hefty inheritance tax bills
• Average value of assets transferred to children early is £32,920
• 15 per cent of divorcees have set aside assets for their children so that they are not transferred to their new partner if they pass away
   

New research¹ from Direct Line Life Insurance reveals over 6.9 million parents (20 per cent) have given their children 'their inheritance' early, to try to reduce the amount of inheritance tax payable on their estates. This amounts to a total of £227 billion, at an average of £32,920.10. A further 6.5 million (19 per cent) parents have not yet transferred assets to their kids but plan to do so in the future to avoid a hefty inheritance tax bill. 

Of those who haven’t considered giving their children their inheritance early, 34 per cent said they did not have any assets to transfer, while more than one in ten indicated that they might, but that their children were presently too young to be gifted money. A further 13 per cent were concerned that they might need their assets in retirement.  One in eight parents (13 per cent) believed their children should not be provided for while they are still alive,  while nine per cent did not know that gifting money could reduce their inheritance tax bill when they pass away.

The increasing number of broken marriages are also making inheritance planning even more complicated, with divorcees transferring assets to named beneficiaries early to avoid them going to their new partner if they remarry. In fact, one in seven (15 per cent) divorcees has already transferred assets to their children or has placed them in trust, gifting on average £16,602.80. Another 37 per cent of divorcees plan to transfer money in future if they remarry.  Almost a quarter of divorced parents (23 per cent²) made these transfers because they are concerned that their new partner would not provide for their beneficiaries in the event of their death.

Jane Morgan, Business Manager at Direct Line Life Insurance, commented: “Worrying about what happens to your children when you’re no longer around is natural for any parent and it is understandable that people want to maximise the money they leave behind. However, it is important that people planning to transfer money understand the tax implications that a gift might give rise to.”

“With almost one in ten (nine per cent) parents placing their assets into trust, this is something people should also consider when arranging their life insurance³. Placing a life insurance policy into a trust⁴ could avoid payments being included in inheritance tax calculations. However, despite this, just 20 per cent of people with a life insurance policy have placed this into trust and almost a fifth of those with a life insurance policy admit they did not know this was an option.”

Philip Munro, partner at law firm Withers LLP, says: "Lifetime gifting is a strategy that can be used to reduce a future potential inheritance liability and will appeal to many parents who want to provide for their children, particularly as they may be struggling to access the current housing market.  However, there can be inheritance and capital gains tax implications in the making of gifts and so parents should consider taking tax advice. 

“Where individuals are taking out life insurance it would often be recommended that these polices be held in trust to avoid their proceeds being taxed on the death of the life insured,"

When considering whether to put a life insurance policy into a trust, it is important to seek independent financial advice. If a policy is written into a trust, it should help to ensure that any money paid out from the life policy would not be part of the estate of the person covered, helping to minimise Inheritance Tax. This will also help to ensure that the money paid out from the life policy can be paid to the right people quickly, without the need for lengthy legal processes. Another benefit of placing a policy under trust is that you can indicate who you want the proceeds to be paid to. A trust can control when the money from the life policy will be paid out.  This can ensure that children receive some financial support from the money, but do not have full access to it.

Morgan continues: “Direct Line Life Insurance offers an affordable way for people to help look after their loved ones financially if they pass away during the term of the policy, paying out a lump sum, to help deal with every day money concerns such as household bills, childcare costs and mortgage payments.”

For more information on life insurance, please visithttps://www.directline.com/life-cover/inheritance-tax
 

Regional findings (internal note: for use in national sell-in):

Parents in London are the most likely to have transferred assets to their children, with more than two in five (41 per cent) awarding their kids a ‘half-time inheritance,’ averaging a huge £119,207. The capital is followed by the North East (30 per cent) and Yorkshire and Humberside (19 per cent). On the other end of the scale, only one in nine (11 per cent) East Midlands-based parents has taken this tax mitigating measure.  Welsh parents have on average moved the lowest amount at just £9,009.

Table one: regional breakdown of ‘half-time inheritance

Source: Direct Line Life Insurance

City findings (internal note: for use in local sell-ins)

Parents in London are the most likely to have transferred assets to their children, with over a quarter (29 per cent) awarding their kids ‘half-time inheritance’, averaging a huge £73,589. The capital is followed by the Newcastle (28 per cent) and Liverpool (28 per cent). On the other end of the scale, only five per cent of Nottingham-based parent has taken this tax mitigating measure.

Table one: City breakdown of ‘half-time inheritance’

Source: Direct Line Life Insurance

- ENDS -

Notes to Editors

1. Research conducted by Opinium among a nationally representative sample of 2,003 adults between 27th to 20th July 2018
2. Low base size, should be viewed as indicative only
3. Withers Worldwide LLP
4. If written so it is legally compliant: Source: Withers Worldwide

For more information on the offering, please visit: www.directline.com/life-cover  
 

For further information please contact:

Claire Jarrett
PR Manager
Direct Line Group
Tel: 01651 832 411
Email: claire.jarrett@directlinegroup.co.uk
 

Katie Ormrod
Citigate Dewe Rogerson
Tel: 0207 282 1023
Email: katie.ormrod@citigatedewerogerson.com
 

Duncan Miller
PR Manager
Withers LLP
Tel: 0207 597 6033
Email: duncan.miller@withersworldwide.com

Direct Line

Started in 1985, Direct Line became the first UK insurance company to use the telephone as its main channel of communication. It provides motor, home, travel, pet and life insurance cover direct to customers by phone or on-line.

Direct Line life insurance policies are underwritten by Legal & General, registered office: One Coleman Street, London EC2R 5AA. Legal & General Assurance Society Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority under number 117659. You can check the FCA register at www.fca.org.uk/register or call the FCA on 0800 111 6768. Legal & General will introduce customers who select the Funeral Benefit Option to Dignity Funeral Services, who are members of the National Association of Funeral Directors.

Customers can find out more about Direct Line products or get a quote by calling 0800 145 5522 or visiting www.directline.com/life-cover