The average amount of inheritance received has reached £119,000 and different age groups tend to use the money in different ways.
Research by insurance provider SunLife finds that people aged over 55 save the majority of their inheritance, spending an average of £21,400.
Most adults plan to save their inheritance, with 11% saving all of it and a further 80% saving on average £56,596.
When it came to spending money, 40% spend around £6,000 to pay off any debts they had. 29% of adults would use their cash to clear off their mortgages.
The research also looked at the top trends among adults in 2016 spending their inheritance. These were:
- Holiday (77%)
- Home improvements (49%)
- New car (42%)
- Children or grandchildren (41%)
- Larger items (32%)
Among those age 55 and over, 25% would use some of their money to pay off debts compared to half of adults aged 18-34.
Over 25% of younger adults aged 18-34 would spend the money towards buying a property and 45% would buy a car.
Ian Atkinson, head of brand at SunLife, said:
“As our research has found, saving money can make us happier than spending it. The research also shows that experiences can make us happier than things, so where people are spending some of their inheritance, it’s interesting to see the top choice is in fact an experience – having a holiday.”
Passing on family home
You may choose to pass on some of your inheritance to a spouse or direct descendent.
If your estate is worth over £325,000, it will be liable for inheritance tax (IHT). If you think that your estate is likely to exceed the IHT threshold of £325,000, the introduction of the main residence nil-rate band could offer you a way to reduce your estates tax liability.
From 6 April 2017 the additional nil-rate band (or ‘family home allowance’) can be used to pass on a family home to a child or grandchild.
The nil-rate band will be applied to property before the existing nil-rate band. This will increase by £25,000 each tax year for the next 4 years until it reaches £175,000 in 2020/21.
Married couples and those in civil partnerships can pass on any unused allowance to their spouse or partner.
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There are some additional planning points to consider around the new nil-rate band:
- If the home (or a share of it) is held in a trust its eligibility may be affected
- The main residence band is tapered at £1 for every £2 that the value of an estate exceeds £2 million.