New research by Canada Life has found that as many as one in 25 people in the UK have inheritance expectations amounting to at least £1 million. For one in 50 people, these expectations exceed £5 million. 

According to Canada Life, these high expectations are the result of general increases in wealth over the last few decades, particularly through increased property values and rising stock markets.

However, Canada Life warns that unless people carry out proper estate planning, much of the value of their wealth will be at risk of disappearing as inheritance tax (IHT), which is charged at a rate of 40% on the part of estate that falls over the nil rate tax threshold of £325,000.

“People’s expectations are likely to be substantially wrong without financial planning, and it’s quite likely they could lose substantial amounts of money in tax,” explained Karen Stacey, Head of Distribution Services, at Canada Life. “Yet it’s quite possible to ensure that, by using a straightforward trust, the entire amount goes where it is intended - the beneficiaries.”

“For people expecting around £500,000 or more in inheritance, there is still a danger of losing tens of thousands of pounds in tax,” she added. “It’s very much worth their while talking to a professional adviser or planner to make sure there’s a sound financial plan at work. The risk of a big IHT bill drops to zero at the inheritance tax threshold of £325,000, below which there is no tax.”

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