Statistics show the Inheritance taboo costs £80k each in unnecessary tax

At Magenta we always encourage our clients to talk to their parents or their children about their money and especially about what will happen about inheritance tax when someone dies.

Families could be paying an avoidable tax bill of more than £80,000 because parents are too embarrassed to talk to their children about their financial future, according to new research by Charles Stanley.

No one likes to talk about dying, but proper advance planning could save up to 40% on death duties. Instead, parents are reluctant to talk about it and leave their children unprepared and potentially storing up future problems for themselves. 

Not only could families be paying too much Inheritance Tax, they are also at risk of family disputes over inheritances. 

In 2017/18 taxpayers paid a total of £5.2 bn in IHT; up to £2bn of this (40%) could have been saved with the right advice to help navigate inheritance tax rules, which amounts to around £81,600 per estate eligible for IHT.

It’s important that families talk about inheritance so they can plan ahead. Not only will everyone be clear on what to expect, which can prevent family conflict further down the line, but it means as much of your hard-earned money as possible is passed on to loved ones. 

With the proper planning, the impact of inheritance tax can be minimised by taking advantage of legitimate exemptions, although many of these can be complex which is why they are often missed. Importantly, the longer you leave it, the fewer options you have, as many tax saving strategies have to play out over time.

Children assume that their parents have made provisions, – when we ask about family planning a common response is “my parents are very canny, they will have all that sorted out”  but more often than not, this is not the case and there is little we can do. Inheritance tax planning for clients in their 80s is a lot more challenging than if we had met them in their 60s!

Interestingly 19% of children think their parents don’t have a will; in reality, 44% of parents don’t have a will.

The most common reason for not discussing inheritance is because the subject is awkward, but we think this is like a grown-up version of the birds and bees talk. We know its going to be difficult but it can save a lot of heartache later on.

British families have to realise that their reluctance to discuss money issues within the family comes at a heavy price and may mean money leaving the family completely to pay the taxman.

At Magenta we are experts at dealing with whole families – their different ambitions for the future, the conflicts and the dramas – we can provide a “helicopter view” of the whole situation and make sound recommendations for everyone to thrive.

Please feel free to pass this on to anyone you feel might be interested – it may even be used to open a door to your own money and inheritance tax discussions.