The Daniel Craig effect
You may recently have seen the topic of inheritance hitting the headlines, as James Bond actor Daniel Craig says he doesn’t plan to leave much of his multi-million-pound estate to his children.
Along with Craig, many people do not wish to leave their estate to their children for fear of the impact it may have on them. It is argued that there is a sweet spot between leaving your children enough money to achieve their dreams and potential and leaving them so much that they rest on their laurels and sit around waiting to inherit from the bank of mum and dad.
For those who are concerned that a large inheritance would act as a disincentive for their children to work towards financial success in their own right and wish for their children to earn their own way, and also for those who have concerns that the inheritance received may be frittered away by the children, we suggest leaving their estate on discretionary trust. By doing this, the children, along with anyone else named as discretionary beneficiaries, have no entitlement to benefit from the estate, merely a hope. It is entirely at the discretion of the trustees, guided by any wishes that have been communicated to them by the deceased, who inherits from the trust and in what sums.
Some people also take the view that, whilst they wish to leave their children a level of inheritance that ensures they are comfortable and provided for (a roof over their head and food in the fridge), there are ‘better’ uses for any wealth that exceeds this level. In these circumstances, it is common for people to prefer to leave a portion of their estate to charity. Gifts left to qualifying charities are exempt from inheritance tax and additionally, if you leave 10% or more of your net estate to charity, your estate benefits from a reduced rate of inheritance tax of 36%, rather than 40%. This may act as another incentive for benefiting causes other than your children. For people who wish to divide their estate between family members and charities, we can advise on the correct wording of their Wills, to ensure your estate benefits from the reduced rate.
This update is for general purposes and guidance only and does not constitute legal or professional advice. You should seek legal advice before relying on its content. This update relates to the prevailing circumstances at the date of its original publication and may not have been updated to reflect subsequent developments. If you have general queries about our updates, please email: email@example.com