The now widespread practice of leaving your estate to loved ones dates back to ancient Greek times and has remained popular throughout the centuries.
However, there’s no doubt that time has now moved on. While traditional inheritance remains the norm throughout the Western world, older generations are also starting to embrace the concept of a “living inheritance.”
But what is a living inheritance, and what are the benefits of this from the perspective of both benefactors and beneficiaries alike?
What is a Living Inheritance, and Can You Afford it?
Simply put, a living inheritance means giving away assets or money to family members. At the same time, you’re still alive rather than waiting for the estate to be distributed following your death.
This means that you can see the benefits this provides to your loved ones, and it also makes practical sense when we’re living longer than ever before.
However, the first question is whether you can afford a living inheritance? The truth is that such an option is only viable for those with the requisite wealth and assets who can afford to give cash and property without compromising their own standard of living.
Certainly, wealthier property owners can use an equity release calculator to estimate how much money they can gift to a family member. At the same time, this option will likely be largely unavailable to those who don’t own homes or have already mortgaged their property.
This is a key consideration, as embracing the concept of a living inheritance may not work and could be counterproductive in some instances.
What are the Benefits of a Living Inheritance?
As we’ve already touched on, a living inheritance enables you to proactively give cash and property to your loved ones long before your death to see the benefits of this and achieve genuine peace of mind in your later years.
Moreover, a living inheritance is particularly beneficial to recipients in the current financial and economic climate, with inflation rising in the Western world and continuing to outstrip real wage and earnings growth.
This is creating an entire generation of citizens struggling to cope with the daily cost of living, so a cash boost or injection from your estate may prove worth its weight in gold.
Similarly, gifting large cash sums or a house can help younger loved ones take their first steps on the property market, proving increasingly inaccessible without financial assistance. For example, while the average house price in the UK is now 65 times higher than in 1970, wages have only increased 36 times during the same period.
Certainly, this leads us to the practical things that a living inheritance can be used to achieve, from helping your family buy their first home to paying for higher education.
Ultimately, this will depend on the wealth you’ve built over time, but the key is that you have the necessary capital to create a living inheritance in the first place.