Daniel Craig Won't Leave "great sums" to His Children - Should More People Follow His Example?

007 actor Daniel Craig has revealed that he is not intending to leave his children a large fortune, telling Saga Magazine: “I don’t want to leave great sums to the next generation”.

While most of us do not have the sort of fortune Daniel Craig has presumably amassed from his film career, the question of what to do with your estate is a pressing concern for many older parents. This question is especially pertinent for those who have benefited from booming house prices.

The amount people expect to leave to their children has grown substantially in recent years, with those aged 54-74 anticipating leaving £174,000 on average while for those aged 75-plus, the figure is £275,000, according to research by wealth manager Charles Stanley.

While this is potentially good news for children who stand to inherit, there are a number of issues parents need to consider when deciding what should happen to their estate. Common questions include whether it might be better to help their children out sooner (for example, contributing to the purchase of a first home), what the impact of inheritance tax might be and what to do about the potential for future care costs.

Is it better to help children out now rather than leave an inheritance?

Children are every parent’s worry, whether they are young or old, and most parents want to make sure that their children will not struggle financially when they are no longer around.

However, there are advantages to gifting your children money now, rather than waiting. Not only does this mean you get to see them enjoy the benefit of your assistance but passing your wealth on while your children are younger can also have much more impact.

This is especially true for children struggling to get on the property ladder, where helping them buy their own home can save them a lot of money on rent, help them start building equity and avoid the risk of house prices continuing to rise and becoming even less affordable.

That said, it is also important to think about your own financial needs and make sure you do not leave yourself in financial difficulties in future by giving away too much during your lifetime.

Why should you save for care?

Care can cost a significant amount of money and this is not something most people want to leave their loved ones to pay for. If you cannot cover the cost of your care from savings, your local authorities will look at releasing equity from your home.

If you are planning on leaving your property to loved ones, saving for care can help to ensure the equity in your property is not needed to fund the support you need. You should therefore make sure that you factor in the cost of future care to your estate planning and when thinking about gifting money or other assets to your children during your lifetime.

What is inheritance tax and how does this impact your estate?

The standard inheritance tax rate is 40%, but the good news is you will only be taxed 40% for any value over the £325,000 threshold (known as the ‘nil-rate band’). There is an additional tax-free allowance of £175,000 (as of the 2021/2022 tax year) if you pass on your main residence to a direct descendent (such as a child or grandchild).

Any inheritance you leave to a spouse or civil partner is exempt from inheritance tax. This means you can either leave them your entire estate tax-free or leave up to £500,000 to your children (if this includes your main residence) and leave the rest of estate to your spouse or civil partner and there will be no inheritance tax to pay.

Gifts you make during your lifetime to your children (or other loved ones) may be exempt from inheritance tax or attract a reduced rate, depending on the circumstances.

How do lifetime gifts work with inheritance tax?

Gifting money or other assets to your loved ones whilst you are still alive (known as a ‘lifetime gift’) can help them out as well as potentially being more tax-efficient.

Types of gifts include:

• Money
• Personal goods – jewellery
• Household goods – furniture
• Property or land
• Stock and shares – those listed on the London Stock Exchange
• Unlisted shares – those held less than two years before death 

Whether lifetime gifts count as part of your estate for inheritance tax purposes when you pass away will depend on various factors, including the size of the gift, the reason for it, how long before you pass away the gift is made and whether you continue to receive any benefit from the gift.

The seven-year rule for lifetime gifts

If a gift is given more than seven years before you die, the recipient will not have to pay any tax on the gift.

But anything given away between zero and seven years before you pass away will be counted as part of your estate for inheritance tax purposes (with certain exceptions, detailed below). However, the rate of inheritance tax will depend on how long ago the gift was given.

The inheritance tax rates for lifetime gifts made less than 7 years before you pass away are:

• Zero to three years: 40%
• Three to four years: 32%
• Four to five years: 24%
• Five to six years: 16%
• Six to seven years: 8%

Lifetime gifts that are automatically exempt from inheritance tax

Certain types of lifetime gifts will not be considered part of your estate (and therefore liable for inheritance tax), even if they are made less than 7 years before your death. The rules for these types of gifts are:

Annual exemption

Any person can give away £3,000 each tax year without it being considered as an asset of their estate in future. This allowance can be used solely for one person or for multiple persons. Any unused exemption can carry onto the next tax year, but no further than this. 

Small gift allowance

You can make small inheritance tax-exempt gifts of up to £250 to whoever you want each tax year.

Wedding or civil partnership gifts

Gifts given for a wedding or civil partnership are exempt from inheritance tax up to a certain value:

• Your child can receive £5,000 from you 
• Your grandchild or great-grandchild can receive £2,500 from you
• Any other person can receive £1,000 from you

A wedding or civil partnership gift allowance can be combined with another allowance, excluding the small gift allowance.

Gifts for birthdays and Christmas presents are also exempt from inheritance tax, as long as the present is funded from your regular income.

Gifted assets from which you continue to receive a benefit

If you continue to receive a benefit from an asset you have gifted (e.g. living in a property you have gifted to your children), then it may still be considered part of your estate for inheritance tax purposes. It is therefore always sensible to consult an inheritance tax specialist if you are planning to continue benefiting from an asset after it is gifted.

What are the advantages of leaving money to charity in your Will?

There are many great reasons for leaving charity assets, including:

• Any gift – money or property left to a UK charity is free of inheritance tax
• Leaving charity money helps to support a cause, you’re interested in
• Leaving more than 10% of your assets to a charity potentially reduces the amount of inheritance tax for your loved ones, dropping the amount from 40% to 36%.

Charity gifts in your Will can therefore be a tax-efficient option, as well as helping to support causes you care about.

Why is it important to write a Will?

A Will allows you to document what happens with your assets or dependent children after you die. There are many reasons as to why you should leave a Will, including:

• Protects your partner if you aren’t married – If you do not state what your partner is entitled to in your Will, they will not receive anything no matter the amount of time spent together.
• Protects your dependents if they aren’t blood-related – If you have children who are stepchildren or fostered, they will not automatically be entitled to your estate unless it is written in your Will.
• Advises what happens to your dependents after you pass. For example, if at the time they are under the age of 18 your Will, will advise who takes care of them.
• Prevents family disputes

How to prevent a Will dispute (Contentious Probate)

If you do decide that you don’t want to leave your children with an inheritance, it is important to advise them of this whilst you are alive; otherwise, they might dispute your Will after you have passed, potentially meaning your wishes won’t be followed.

Book an appointment with our Will writing solicitors today

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