Pandemic has led parents to give inheritance away early and cut back on spending to help loved ones.
A fifth of the over-50s are supporting their children financially during the Covid-19 pandemic, according to research.
Adult children may have flown the nest but the pandemic has caused many to seek financial support from their parents after losing their jobs, being placed on furlough, or facing debt issues.
A survey by the Saga Equity Release Advice Service has found almost 70% of parents have used their own savings to support their children, while 35% have cut back on spending on themselves to help their family.
The financial and emotional stress caused by the pandemic has also led to changes in how parents and adult children view their inheritance.
More than half (55%) of parents said they still believe it is important to leave an inheritance, but 20% say the pandemic has encouraged them to think more flexibly.
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Instead, 37% of parents would rather see their children benefiting while they remain fit and well and 4% intend to gift money that would have been part of an inheritance in advance.
Some are even considering accessing their pensions or downsizing their home to release cash to support their children.
Alex Edmans, head of equity release at Saga Equity Release Advice Services, says: “The pandemic has brought about a whole host of new financial pressures for families. It’s only natural, then, for parents who may be more secure than their children to want to offer their support through these challenging times.
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“Many are now increasingly turning to their own savings, thinking more flexibly about their inheritance plans or considering benefitting from the equity in their home.”
Darren Cooke, chartered financial planner for Red Circle Financial Planning, says there are inheritance tax (IHT) planning issues to consider for parents giving money to children.
He adds: “If the gifts are inside the annual exemption they would have no impact on IHT, or if they are made from excess income from the parents they would also be exempt.
“Larger capital gifts would come under the ‘potentially exempt transfer’ rules and the parent would have to survive seven years for them to fully fall outside the estate. Of course, that is all irrelevant if the estate is below the IHT threshold in the first place.”
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