When her grandmother died unexpectedly of a stroke aged 75, Estelle Keeber was heartbroken. “My grandmother was my rock and the pillar of our family,” says Keeber, a 41-year-old marketing consultant from Leicester. But the heartbreak didn’t stop there. Once the funeral was over and the mourners had departed, things went downhill.
Keeber was expecting her grandmother’s £250,000 inheritance to be split between her and her sister, enough finally to buy a home of her own. Her grandmother “had explained to me that my sister and I were to be the only beneficiaries,” she says.
Keeber and her grandmother had been estranged from Keeber’s mother for four years. “My nan had told me she didn’t want my mum to be able to receive her inheritance,” she says. But then no will was found — and her mother inherited the lot.
Such are the vicissitudes of the inheritance game. We are in the midst of what economists are calling the “great wealth transfer”, with $84 trillion set to change hands globally in the next two decades. For property-hungry millennials, aged 28 to 43, it can’t come soon enough, but Keeber’s experience demonstrates that great expectations do not always come to pass.
Britain’s theoretical inheritance pot is vast. Over-65s in Britain hold £2.73 trillion in property, £2 trillion of it mortgage-free, according to Savills. Only 10 per cent of homeowners in England are people aged 25 to 34. While younger generations are counting on an inheritance to get onto the property ladder, for many the money will be too little, too late — and for the unlucky ones it won’t come at all, or it will be frittered away on legal disputes.
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Keeber’s story is a familiar one. She is among the record number of people disputing wills every year: 10,000 and rising in England and Wales.
Laura Phillips, legal director at solicitors Kingsley Napley, says inquiries to the firm about will disputes have risen by 20 per cent, year on year. “The number of claims that are reported don’t really touch the sides of the number that are settled out of court,” she says. “Because of an increase in property prices, estates have become more valuable. There’s a bigger pot, and there’s more to fight over.”
Another factor is that family links are more complex than they used to be: as many as one in three families are thought to be “blended” — the product of remarriage and multiple parentage. This adds all manner of complications.
Polly’s father died when she was very young, and when her mother remarried, she brought the bulk of the wealth to her new marriage. But when Polly was 29, her mother died of a short illness, passing her money to her husband. He died less than 12 months later and — because her stepfather had not made a will — the wealth passed to his children, excluding Polly, despite the fact that a significant part of his estate had originated from her mother.
Under English inheritance law, stepchildren do not automatically benefit from their step-parents’ estate. “I just couldn’t believe this was a fair outcome or something that my stepfather would have wanted,” Polly says. “I tried to reach out to my stepbrother to see if we could discuss matters but he was completely uninterested.” She ended up settling the dispute out of court. “I’m glad I sought legal advice, although it could all have been avoided if my stepfather had made a will,” she says.
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‘Mum and Dad think it’s the 1990s’
Even for those who do receive large wads of inheritance, rising life expectancy means it often arrives much later than they might have hoped. People born in the 1980s can expect to receive their inheritance when they are 64, according to the Institute for Fiscal Studies. For Gen Z (aged 12 to 27), it will be much later.
“My parents took early retirement a few years ago after they experienced some health issues in their fifties,” says Sam, 35, a bar manager living in Manchester. “On one hand, it’s fair enough that they should enjoy their retirement, but on the other hand, I need help to get on the housing ladder. My mum and dad seem more bothered about going on fancy holidays and spending their pension lump sum themselves. They have wildly underestimated how much I’ll need to buy a flat — they think it’s the 1990s, when flats in Manchester were still sixty grand.”
Molly Broome, an economist at the Resolution Foundation, suspects the great millennial wealth transfer will in many cases skip a generation. “If a millennial inherits at the age of 60 and they’ve already bought their house, nearly paid off their mortgage and have a comfortable pension, then they might just pass that straight on to their children,” she says.
Broome warns that late inheritance may confine many younger people to the rental market for decades, damaging the economy. Typically, owning a house with a mortgage costs less than privately renting, which enables people to have more liquid savings, consume more and invest more in their pension.
Giving while living: ‘It’s like yeast’
One solution is the King Lear approach: giving children and grandchildren their inheritances while alive. This has the potential to backfire, though: if donors die within seven years of their transfer of wealth, the recipient is liable to pay inheritance tax on these “potentially exempt transfers” (known as PETs). In 2020-21, 13,380 transfers were liable for this tax, costing the payers up to £1.4 million depending on the timing.
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Sir Steve Webb, the former pensions minister and Liberal Democrat MP, has been a vocal supporter of the “giving while living” movement, which started in the United States.
“There’s a phrase: ‘Early money is like yeast’,” he says. “Although it’s lovely to inherit significantly at 60, that money could have done so much more for you at 30 or 40.” People in their thirties or forties who are taking huge 35-year mortgages may be well into retirement by the time they pay them off.
“At the moment, we think, ‘I’ll spend what I need, and then what’s left, my adult, nearly retired children can have’. We need to change the mindset,” says Webb, who suggests that giving money to children while you’re still alive has “the added pleasure of seeing them enjoy it”.
Critics argue that this approach lets the government off easy, transferring the responsibility for solving the housing crisis and wage stagnation to wealthy parents. And there is another big problem: social care.
Broome suggests older generations “overconsume housing” and are often reluctant to downsize, partly because property is a tax-efficient way to pass on wealth, but also because that wealth may be required to pay for social care. As many as 1.7 million people could be living with dementia in England and Wales by 2040, a far higher figure than than previously forecast. Demand for social care is rapidly outstripping supply: in 2022-23 the government received two million requests for social care in England.
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Money and family is rarely a straightforward combination, but this confluence of rising care and housing costs, huge wealth transfers and increasingly complex family dynamics promises to make inheritance a defining issue of the coming decades.
The dashing of hopes, when the money has already been mentally spent, can be a cruel blow. “A son can bear with equanimity the loss of his father,” Niccolo Machiavelli wrote. “But the loss of his inheritance may drive him to despair.”
Yet Estelle Keeber found a silver lining amid her crushing disappointment over her grandmother’s inheritance. Although she was unsuccessful in challenging her mother, whom she no longer speaks to, and remains renting in Leicester, “there is one good thing about this,” she says. “It’s brought my sister and me closer together.”
Some names have been changed
Additional reporting by Phyllis Akalin and Rosie Kinchen
