£15bn worth of inheritance goes unclaimed, figures show

If you got hit by a bus tomorrow it would be… a shame.

But at least you know your family and friends, the charities closest to your heart and even the plans for your final send off will be financially covered.

Except that your loved ones may never receive your cash savings or home or investments or pension or life insurance... because they simply can’t find the money.

New research shown exclusively to The Independent suggests a huge £15bn of assets are lying unclaimed in the accounts of the deceased.

With more than 30 million people in the UK without a will, and huge swathes of the population never talking about finances with their family, the money is sitting in dormant financial legacies in limbo.

Laws known as bona vacantia (ownerless goods), have seen a staggering £48m in unclaimed property and estates allocated to the Crown when people have passed away.

And while huge chunks of inheritances are going missing due to a lack of communication, there’s the added emotional distress caused to the 7 million people, almost a quarter of the population, who fear that they didn’t manage their loved ones’ assets according to their wishes because it was never discussed before their death, according to research by will writing service Farewill.

Fuelling the conversation gap are a series of potentially expensive assumptions. A third of the UK population wants to talk to their parents about death and how to manage their estate but haven’t because they don’t want to upset them.

But almost the same proportion of parents say they feel the same but don’t want to upset their children.

As a result three in every 10 families have never discussed death with their family, despite almost four in every 10 Britons saying managing their parent’s estate after their death was the biggest responsibility of their lives.

In fact, almost half of us don’t know the full value of our parents’ estates.

“Given that 25 to 45-year-olds are expecting to receive more than £1.2 trillion in the next 30 years, conversations around the intergenerational transfer of wealth are becoming increasingly necessary,” warns Carl Drummond, a senior wealth planner at Sanlam UK. His own research suggests 5 million people expect to receive at least £50,000 in assets or money, with most anticipating an inheritance of £233,000.

Almost a third of those expecting substantial inheritance admit to putting off saving and “living in the now” because they have the windfall coming. A similar number say they will be reliant on this inheritance for their financial security in future.

So they should really start talking to those they expect to receive the money from.

“While it’s often not an easy conversation to have, it’s an important one,” warns Drummond.

“Many younger people are relying on inheritances to pay off debts or avoid saving for later life and if their expectations exceed the windfall they receive, they are at risk of making unrealistic long-term financial decisions. Seeking financial advice and having conversations early can help families get peace of mind and be better prepared for the future.”

5 steps to a helpful family discussion

Before you have a family discussion about inheritance, you need to have a good idea of your financial position and your intentions:

1. Who do you want to receive your wealth?

It sounds simple enough, but potential beneficiaries don’t always realise they will be sharing their inheritance with others, such as grandchildren, charities or friends. While this may result in a difficult conversation, at least you will be helping your beneficiaries be more realistic about their financial future.

2. Establish how much you are likely to pass down

This is quite complex, and it’s worth seeking advice from a financial planner. Firstly, you should write down the total value of your assets, where they are held and how they are invested. (As an aside, it may be worth considering consolidating accounts to minimise paperwork and administration for you moving forward.) Then you need to calculate how much you think you will need for the future. Obviously, this is hard to predict as you don’t know how long you will live and how healthy you will be, but it’s good to make some predictions. Lastly, you need to consider how you would fund possible care expenses if the need arises.

3. Gift now or leave for later?

Once you have been through this exercise, you should have a better idea of how much money you have, how much you will need, and how much you could potentially gift now.

4. State your wishes

Do you want to have a say on how the assets are spent or used? Are you happy to provide an outright gift with no conditions attached? State your intentions now so that your beneficiaries know what to expect.

5. Plan to minimise inheritance tax (IHT)

With the help of a financial adviser, work out your IHT position (in total) and on each asset (individually) you have. Once you have this information, you can start considering how you can reduce your inheritance tax by reviewing all the different allowances and options available. You should also fund your expenses from assets that are subject to IHT, as this will help reduce your taxable estate.