5.2 million of over 55s don’t know if their estates will be taxed

by | Mar 18, 2024

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A quarter (25%) of over 55s – equivalent to 5.2 million – do not know if their estates will get charged inheritance tax, new research by Canada Life reveals. 

Despite inheritance tax only presently affecting around 4% of estates, almost three in 10 UK adults (28%) believe their estate will be taxed upon death, and a similar number – one in five (22%) – are worried about the prospect of this. 

Planning concerns

 
 

When it comes to planning to leave an inheritance, ensuring that the correct people benefitted from their estate (19%) was the top concern. This was followed by current or future care expenses and the impact this has on their estate (13%). The same proportion (13%) were concerned about being able to leave a financial legacy at all, or openly discussing this with family members to avoid misunderstandings (also 13%). 

Stacey Love, tax and estate planning specialist at Canada Life, comments: “Whilst inheritance tax currently affects around 4% of estates, house prices have increased significantly over the past 30 years or so, and the various tax thresholds remain frozen until 2028 at the earliest. If you have any uncertainty as to whether you’ll be caught in the inheritance tax net, it’s worth thinking about your overall wealth including the current value of your home.”

Even though many do not know if their estate will be taxed, two-thirds (63%) of those aged 55 or over also say they do not plan to seek financial advice to understand the tax implications. Of those who are worried about the prospect of their estate paying inheritance tax, the top three related concerns were losing too much of their estate to tax, the legalities involved and understanding the process (38%, 29% and 27% respectively).

 
 

Stacey Love continues: “Our research also shows that, in the past five years, more than a quarter of beneficiaries (28%) received an inheritance directly from a trust or as a combination of a trust distribution and a bequest from an estate. Choosing the right trust as part of your financial estate planning strategy is not only about managing any tax liability, it is also an appropriate way to control who benefits from your estate, to what extent they can benefit and at what age.

“Ultimately, estate planning is about putting your affairs in order, to help make the lives of your loved ones easier. While it might feel like an uncomfortable step to take, it is important to start planning ahead and consider speaking with a financial adviser to take advantage of opportunities which may be available to mitigate any inheritance tax as well as future proofing your estate planning for the next generation.”

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