Planning to leave an inheritance

When we talk to clients about their goals in later life, the ability to leave an inheritance to their children or grandchildren often features on their ‘retirement wish list’.

Leaving an inheritance is usually seen as an important way to provide younger generations with a head start in life; to get onto the property ladder, clear debts or invest capital for the future.

Whilst wanting to leave an inheritance is a noble aim, the reality is often quite different.

New research from Prudential has found that only 52% of those planning to retire this year are confident they can afford to leave an inheritance.

One in ten will go further and actively cancel their plans to leave a legacy for their families in order to boost their own retirement income.

What prevents people from leaving an inheritance for their children?

In our experience, it is the combination of cost pressures in later life which makes leaving a legacy unaffordable.

In addition to the cost of supplementing pension income in retirement, the costs of long-term care combined with the financial support provided to adult children and elderly parents leave little if anything in the ‘pot’ at the end of life.

This is where Financial Planning can play such an important role.

One exercise we complete with our Financial Planning clients is a lifetime cash flow forecast. In the simplest terms, this demonstrates when an individual or family will run out of money.

Cash flow forecasting enables us to demonstrate how small changes to Financial Plans can cause or prevent running out of money in later life. For individuals who are keen to leave an inheritance, this type of planning is essential.

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