Powerful estate planning tools ignored or forgotten by wealthy Brits
Canada Life IHT Survey 2016
- Only a quarter of wealthy Brits have sought professional estate planning advice to ensure their families don’t pay more tax than required.
- More than a quarter don’t even have a will and just one in five have gifted money.
- Many say they do not need these tools but families would face substantial inheritance tax (IHT) bills without any planning.
Wealthy Brits over the age of 45 are forgetting or ignoring simple estate planning tools that could help them to pass on more of their estate to their families, according to Canada Life’s annual IHT survey.*
The research found that over a quarter (27 per cent) of those aged 45 or over with enough assets to trigger a potential IHT bill do not have a will, leaving their inheritance plans unclear and meaning their wealth could pass to relatives they did not intend to provide for under intestacy rules.
Another simple and effective estate planning strategy is to gift money to relatives, but just a fifth of respondents had done so –– with over half (51 per cent) saying they don’t see a need.
One of the main reasons that simple estate planning tools are being ignored by people with enough wealth to benefit from them is a lack of understanding that could easily be rectified by better use of financial advice. However, Canada Life’s research found that just 27 per cent of wealthy Brits over the age of 45 have sought professional advice on IHT planning.
This is despite the fact their families could face higher than expected IHT bills as a result and illustrates a widespread failure to look to the future and plan adequately.
Opinions of wealthy split on usefulness of other inheritance tax planning tools - see figure 1:
| Most commonly used estate planning tools | Most unpopular estate planning tools | ||
| (% of consumers that have used them) | (% of consumers that have no intention of using them) | ||
| Writing a will | 73% | Take out life insurance | 46% |
| Take out life insurance | 37% | Setting up a trust | 40% |
| Gifting money | 21% | Gifting money | 27% |
| Setting up a trust | 13% | Writing a will | 2% |
Base: 1,001 UK consumers aged 45 or over with assets exceeding £325,000
Almost half (46 per cent) of respondents said they would never take out life insurance as part of their estate planning. Nearly three quarters (72 per cent) said they didn’t see a need to use life insurance, suggesting a lack of understanding of how this can be a successful estate planning tool and that greater education is needed from professional advisers.
Trusts were the second most unpopular strategy, with 40 per cent saying they had no intention of using them.
Nineteen per cent said setting up a trust was too time consuming or complicated when, in reality, it is a straightforward inheritance tax planning strategy and presents an opportunity for advisers to discuss this with their clients.
However, a significant minority (13 per cent) said they have used them, showing that these continue to be an important part of estate planning for people who want to pass on their wealth in a controlled manner.
* Survey of 1,001 UK consumers aged 45 or over with total assets exceeding the individual inheritance tax threshold (nil rate band) of £325,000. Carried out in September 2016. Percentages may not add up to 100 due to rounding or multiple answer questions. Research conducted by Atomik.
Canada Life offers a range of wealth management solutions, including retirement income planning, estate planning and investment solutions from a choice of jurisdictions, including the UK, Isle of Man and Republic of Ireland.
