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Parents more inclined to give sooner rather than later

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Increasing numbers of parents are giving money in advance to their children rather than leaving them bequests in their wills as a means of saving on inheritance tax.

A new survey from Aviva, the insurance group, found that pre-inheritance gifts, whereby parents give their children money now instead of gifting it to them in their wills, are more popular than traditional inheritances.

The study revealed that 46 per cent of those polled said that they had received funds from their relatives while they were still alive compared with just 37 per cent who benefited from bequests in wills.

Most of those who pass their money on do not require that it be spent or used in any particular way.

However, one in three did offer advice on how the funds may be used, but only 7 per cent stipulated that the money go towards buying a property, and just 2 per cent ringfenced the funds for paying for education.

Of those who were given the windfall, 19 per cent cleared debts with it, 12 per cent ploughed it into their homes, and 11 per cent used it to pay off mortgages.

Clive Bolton, Aviva’s retirement director, said: “We are seeing a number of shifts in how people use their money in retirement. The pre-inheritance is a fairly new initiative.

“Alongside the obvious benefits of cutting the amount of money liable for inheritance tax, it also seems many benefactors like to see their money being enjoyed whilst they are still alive.

“In addition, it also allows benefactors, if they wish, to have some input into how the money is spent.”