One in six people rely on an inheritance windfall to fund their future, according to research from Lincoln Financial Group.
Based on interviews with 2,376 people and using a pro rata calculation system, the firm says more than 7.4 million people believe inheritances will sort out a range of financial issues, including paying off unsecured debts.
The data also suggests the average windfall from an inheritance in the past three years is around £40,430, while more than a million people have received inheritances of over £100,000 and around 74,000 received between £300,000 and £500,000.
Lincoln Financial Group argues its research proves people need to take greater care with financial planning to avoid the inheritance tax trap.
Inheritance tax is levied at 40% on estates worth more than £285,000. The threshold rises to £300,000 from April this year. Government statistics show £3.5bn was raised from inheritance tax in 2006 – a 12% rise on 2005.
Lincoln research suggests the majority of people plan to use inheritances for investments or paying off mortgages. However around 518,000 will use the cash to clear unsecured debts.
It says around 8% of those who have received inheritances in the past three years have used them mainly to clear debts while another 14% have used the windfalls for new cars and holidays.
Ian Noble, head of life sales & marketing at Lincoln Financial Group, says: “Relying on an inheritance to fund your financial plans is potentially risky - and you could be waiting a long time.
“With average inheritances of around £40,000 being collected in the past three years it is only natural that many people are counting on windfalls when planning their finances. But hoping for the best is not a financial strategy.
“In any case, inheritance tax is a growing issue which will affect more and more of us in the years ahead as rapidly rising house prices mean people owning average homes could be caught by IHT."
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