Will your family fritter away their inheritance? They're likely to be more careful than you think...
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The chances are your family would act responsibly with a large inheritance, new research shows.
More than half of people surveyed claim they would save at least some of the money left to them by loved ones.
Decisions like investing, paying off a mortgage and other debts and boosting a pension are also popular - while spending an inheritance on 'fun' comes in seventh on the list.
People are even less likely to just spend as they go along or splash out on a big one-off purchase, according to the study by Hargreaves Lansdown.
And then, when the firm turned to look at what people would prefer their family to do with an inheritance after they are gone, it turns out most take a pretty relaxed line.
The most common answer was 'don't mind', with saving the money next, followed by have fun.
'You don’t need to worry that your family is going to squander any money you leave to them – they’re going to do all the sensible things you want them to,' says Sarah Coles, head of personal finance at Hargreaves.
'In fact, if anything, they’re going to be more sensible than you’d like.'
Inheritance plan: More than half of people claim they would save at least some of the money
She explains: 'We asked people about all the things they’d like their family to do with an inheritance after their death and saving was the second most popular answer.
'The good news is that when we then asked people they would actually do with an inheritance, saving was the top answer – at 53 per cent.'
Hargreaves, which surveyed 2,000 adults weighted to be representative of the UK population, expressed some caution about the responses received from potential beneficiaries.
'Answering a question like this might encourage people to give the answer they think they’re supposed to – so they say they’d prioritise sensible steps, when in fact they might want to spend some of it on a big holiday or buying a new car,' says Coles.
'However, this sense of feeling duty bound to do the right thing may endure if they are given a legacy, so they feel the pressure to do something that their family member may have approved of.'
Inheritance tax is going to be levied on unused pension pots starting in spring 2027, as it is now on other assets such as property, savings and investments - scroll down to find out if your family will be hit by death duties.
Top 10 things people want their family to do with an inheritance
Top 10 things people would do with a significant inheritance
'There are some difficult decisions to make when you get an inheritance,' says Sarah Coles of Hargreaves.
'And while it feels like a nice problem to have, for many people it’s the only lump sum they’ll ever receive, so they want to make the biggest possible difference with the money.' She offers some tips...
1. Saving is often a very sensible first step, giving you time and space to make the right decisions. However, it’s important not just to leave the money in cash for the long term, says Coles.
If you decide to put it away for 5-10 years or more, it makes sense to at least consider a stocks and shares Isa, which has more opportunity to grow over the long term.
If you decide it’s something you might want for retirement, you could consider paying some into your pension.
2. If you’re saving towards a first home – and you qualify for one – using a Lifetime Isa would mean you get to take advantage of the 25 per cent government bonus.
Unsurprisingly, given how expensive properties are, people want to see their families secure in a home after they’ve gone.
3. When people are considering the legacy they’ll leave, it can be almost as important to pass on their knowledge about saving and investing as it is to pass on the money itself.
It means their family has the confidence to make this money work hard for them, to help them reach their goals.
For some people, the process can be overwhelming, and in those cases, it can make an enormous difference to get some financial advice.
This didn’t make it to the top ten of things people said they do with an inheritance – chosen by only 3 per cent of people. However, for anyone with an inheritance and concerns about doing the right thing, it could be an incredibly valuable step.
Inheritance tax is levied at 40 per cent on estates above a certain size.
You need to be worth £325,000 if you are single, or £650,000 jointly if you are married or in a civil partnership, for your loved ones to have to stump up inheritance tax.
A further allowance, the residence nil rate band, increases the threshold by £175,000 each - so £350,000 for a married couple - for those who leave their home to direct descendants. This creates a potential maximum joint inheritance tax-free total of £1million.
This own home allowance starts being removed once an estate reaches £2million, at a rate of £1 for every £2 above the threshold. It vanishes completely by £2.3million.
Chancellor Rachel Reeves said in the Budget these thresholds will be frozen until 2030.
> Essential guide: How inheritance tax works
> How are inherited pensions taxed at present
> Help with inheritance tax: Find out more with our partner Flying Colours
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