WEBVTT - What's Eating Away at Inheritance Money 0:00:02.720 --> 0:00:09.360 Bloomberg Audio Studios, Podcasts, radio News, Hey. 0:00:09.280 --> 0:00:10.479 Maren Talks Money listeners. 0:00:10.600 --> 0:00:13.000 Last week we had our subscriber event at the Bloomberg 0:00:13.039 --> 0:00:15.600 offices in London. It was wonderful to see so many 0:00:15.600 --> 0:00:18.000 listeners and so many readers there and thank you so 0:00:18.160 --> 0:00:20.239 much to those of you who did come to those 0:00:20.280 --> 0:00:21.239 of you who couldn't. 0:00:21.440 --> 0:00:21.919 Good news. 0:00:22.000 --> 0:00:24.560 We spoke to Sebastian Lion of Troy Asset Management and 0:00:24.600 --> 0:00:27.560 that conversation is in the feed already. But we also 0:00:27.640 --> 0:00:30.360 did a Maren Talks Your Money segment live and we 0:00:30.360 --> 0:00:34.000 welcomed back veteran financial advisor Paula Steele. So here is 0:00:34.080 --> 0:00:48.560 that conversation. Now we're going on to the Marin Talks 0:00:48.800 --> 0:00:51.680 Your Money section of the show, and those of you who. 0:00:51.800 --> 0:00:53.920 Listen to us will know what push you'll listen to us. 0:00:54.000 --> 0:00:55.720 But this is the weekly series where we talk more 0:00:55.760 --> 0:00:58.560 personal finance stuff. We talk about how to make the 0:00:58.560 --> 0:01:06.520 most of your money. So with me today you all 0:01:06.560 --> 0:01:08.959 know as John Steppeck Senior, a border and author of 0:01:09.000 --> 0:01:09.920 the Do You Want to Stay Yourself? 0:01:09.959 --> 0:01:13.360 John? What I need to sell Newslayer up? 0:01:15.000 --> 0:01:17.600 Thank you John. Also, we have Paula Steel. He will 0:01:17.600 --> 0:01:19.440 have heard on the podcast as well as well. 0:01:19.640 --> 0:01:23.320 I'm an introducer directorate at John Lamhill Oldridge and very 0:01:23.520 --> 0:01:26.440 very experienced. Now what we want to talk about today, 0:01:26.440 --> 0:01:28.240 Thank you Paul for coming on again. What we want 0:01:28.280 --> 0:01:32.080 to talk about today is the Great Wealth Transfer, which 0:01:32.080 --> 0:01:33.840 I'm hoping to be a beneficiary of at some point 0:01:33.880 --> 0:01:35.320 and I'm sure many of the rest of you are 0:01:35.319 --> 0:01:38.319 hoping to be a beneficiary of as well. And I 0:01:38.360 --> 0:01:40.959 spent some time looking today to see exactly how much 0:01:41.040 --> 0:01:43.480 money we can all expect, and it really does depend 0:01:43.680 --> 0:01:45.000 where you look at. Could be four and a half 0:01:45.000 --> 0:01:47.000 trillion over the next twenty years, could be five, could 0:01:47.000 --> 0:01:49.920 be seven pounds in the UK, so proper money. And 0:01:49.960 --> 0:01:52.960 in the US we're up into the hundreds of trillions, 0:01:53.040 --> 0:01:55.240 and we who knows. I found numbers ranging from eighty 0:01:55.280 --> 0:01:58.280 trillion to one hundred and twenty four trillion, So however 0:01:58.320 --> 0:02:00.760 you cut it, we're talking about a lot of money 0:02:00.800 --> 0:02:03.840 trickling down from the baby boomers to the next generation. 0:02:04.400 --> 0:02:05.600 So what we want to talk. 0:02:05.480 --> 0:02:09.800 About is how that money should get transferred. How do 0:02:09.840 --> 0:02:12.120 you do it efficiently, how do you do it with 0:02:12.240 --> 0:02:15.800 the least possible tax implications, and how do you do 0:02:15.840 --> 0:02:18.280 it without destroying the lives of your children by giving 0:02:18.320 --> 0:02:23.200 them too much too soon not something that happened to me. So, Pauler, 0:02:24.840 --> 0:02:28.000 let's say that you are a baby boomer with quite 0:02:28.040 --> 0:02:29.760 a lot of money and a house and a couple 0:02:29.760 --> 0:02:33.160 of kids. Where do you even start with thinking about 0:02:33.200 --> 0:02:34.200 how you transfer it? 0:02:34.919 --> 0:02:37.760 You think about how much money you need to keep, yes, 0:02:38.440 --> 0:02:41.000 before you start to give it away. And I think 0:02:41.040 --> 0:02:45.240 that although the baby boomers we're going to live longer 0:02:46.320 --> 0:02:49.200 and we're going to be very expensive, the last ten 0:02:49.280 --> 0:02:51.120 years of our lives are going to be very, very 0:02:51.120 --> 0:02:55.120 expensive in terms of care, and you can't afford to 0:02:55.120 --> 0:02:57.120 give it away. You need to keep it in terms 0:02:57.120 --> 0:03:00.760 of that. And I say, you know a lot of 0:03:00.760 --> 0:03:03.800 people do it lot of cash for modeling to show 0:03:04.600 --> 0:03:07.960 that you can afford to give it away. My experience 0:03:08.040 --> 0:03:11.320 is that most of the clients are not prepared to 0:03:11.360 --> 0:03:14.560 give away that much because and I think that one 0:03:14.600 --> 0:03:17.360 of the big issues is going to be the change 0:03:17.360 --> 0:03:21.600 in the pensions legislation. Yes, because when the pensions were 0:03:21.840 --> 0:03:25.440 inheritance tax free, they were your third line of defense. 0:03:25.800 --> 0:03:29.400 You always knew that the pension fund was there. It 0:03:29.440 --> 0:03:31.880 was inheritance tax free, so it could go to the kids. 0:03:32.760 --> 0:03:35.840 But if you needed it for care, it was there. 0:03:35.960 --> 0:03:38.560 It was that third line of defense because that that 0:03:38.720 --> 0:03:42.600 care issue for the baby boomer is the big elephant 0:03:42.600 --> 0:03:43.040 in the room. 0:03:43.760 --> 0:03:45.760 Do you think that maybe the numbers are just wrong 0:03:45.960 --> 0:03:47.880 because when we talk about four trillion, five billion, and 0:03:47.880 --> 0:03:52.440 six seven trillion, whoever coalates those numbers is not taking 0:03:52.440 --> 0:03:54.520 into account the fact that a lot of people are 0:03:54.520 --> 0:03:56.280 going to spend four or five years any care home 0:03:56.320 --> 0:03:58.200 it's going to cost one hundred and twenty grand a year. 0:03:58.880 --> 0:04:06.000 And the rest, oh okay, in a care home. Maybe 0:04:06.080 --> 0:04:09.680 if you have care at home, probably more right. If 0:04:09.680 --> 0:04:12.880 you need twenty four our care, that's three that's three 0:04:12.920 --> 0:04:17.480 shifts of staff. You're looking at probably twice that, okay. 0:04:17.680 --> 0:04:19.480 So a lot of people who are thinking that they 0:04:19.480 --> 0:04:21.520 have money to hand down and people who are thinking 0:04:21.560 --> 0:04:23.560 they have money to inherit may well not. 0:04:24.480 --> 0:04:26.920 I think you may well find. You know, it comes 0:04:26.960 --> 0:04:30.960 into the assisted dying, which is in Canada where people 0:04:31.000 --> 0:04:34.120 are being pushed and whatever ones you want a sister dying, 0:04:34.160 --> 0:04:37.120 And I personally think I would rather go if I 0:04:37.240 --> 0:04:40.320 was sort of half dead anyway, But nevertheless, but. 0:04:40.279 --> 0:04:41.920 You wouldn't want your kids to make sure you. 0:04:41.880 --> 0:04:50.080 Went okay, you know, but I think that I think 0:04:50.160 --> 0:04:53.520 that the first thing for anybody to think about is 0:04:54.440 --> 0:04:56.839 you're going to have enough money for care. I was 0:04:56.839 --> 0:04:58.960 talking somdly fun Enough the other day, and they were saying, 0:04:59.360 --> 0:05:02.120 it's a great place that we don't have a product 0:05:02.440 --> 0:05:06.120 that enables us to spend our pension, but gives us 0:05:06.120 --> 0:05:08.839 an income if we are if we survive to a 0:05:08.880 --> 0:05:12.200 sage ninety, because that's really what the pension was there for. 0:05:12.320 --> 0:05:16.680 It was giving you that longevity support so effectively. 0:05:16.680 --> 0:05:18.520 A delayed annuity of sometimes yeah, it. 0:05:18.640 --> 0:05:21.120 Used to call a contingent annuity doesn't exist in the 0:05:21.160 --> 0:05:24.320 market anymore. Sadly, it would be an interesting thing. 0:05:24.520 --> 0:05:26.920 Interesting that feels like the kind of product that might 0:05:26.960 --> 0:05:29.320 be coming back in the same way as the innuity 0:05:29.360 --> 0:05:30.599 market might be coming back. 0:05:31.120 --> 0:05:34.039 I think the innuity market is back, is it? But 0:05:34.040 --> 0:05:38.320 it's back in terms of an investment proposition, it's a 0:05:38.320 --> 0:05:41.560 different way of buying a fixed interest investment, getting a 0:05:41.600 --> 0:05:45.920 much better return. You're getting a fixed return and you're 0:05:45.960 --> 0:05:49.880 playing the longevity. For the client or for the advisors, 0:05:49.920 --> 0:05:56.000 they're playing the longevity the longevity game. I remember a 0:05:56.000 --> 0:05:58.599 client doing a next to release on his parents who 0:05:58.960 --> 0:06:03.040 were very elderly, and him saying, I'm doing an extry release. 0:06:03.279 --> 0:06:06.200 I'm going to buy an annuity because that handles my 0:06:06.400 --> 0:06:12.440 longevity risk on my parents' wealth, So which I thought 0:06:12.520 --> 0:06:13.880 was quite tough, actually. 0:06:16.520 --> 0:06:17.720 Has that is the annunity. 0:06:17.720 --> 0:06:22.320 If I've partly been helped by Patons and Helen's tax coming, 0:06:22.400 --> 0:06:24.520 then is that something that's in people's mains. 0:06:24.800 --> 0:06:28.240 I think people are given that the pension fund is 0:06:28.320 --> 0:06:30.440 now going to be you know, I've had people saying 0:06:31.640 --> 0:06:34.200 before it was tax free and now it's going to 0:06:34.240 --> 0:06:38.080 pay tax at sixty seven percent. It was never tax free. 0:06:38.240 --> 0:06:41.359 It was tax free from an inheritance tax perspective. But 0:06:41.520 --> 0:06:43.919 this to get to sixty seven percent, you've got a 0:06:43.960 --> 0:06:46.400 forty percent and then a forty five percent tax rate 0:06:46.520 --> 0:06:48.720 to get it out. The forty five percent tax rate 0:06:48.760 --> 0:06:51.240 to get it out if you died post seventy five 0:06:51.680 --> 0:06:53.280 was always there, but it. 0:06:53.279 --> 0:06:56.240 Provided options but to your heirs right and they can 0:06:56.279 --> 0:06:58.040 take it. They could withdraw from it when they had 0:06:58.040 --> 0:07:01.279 a lower encarment or lots of ways to make it 0:07:01.320 --> 0:07:03.839 a low tax event a lower. 0:07:03.440 --> 0:07:06.360 Well, no, because once you died, the pension fund had 0:07:06.400 --> 0:07:12.200 to go to somebody at that point. So you couldn't 0:07:12.200 --> 0:07:16.840 say your dad dies and you couldn't say, well, I'll 0:07:16.840 --> 0:07:18.600 have it. Actually no, I think I wanted to go 0:07:18.680 --> 0:07:20.640 down to the grandchildren. You had to make a decision 0:07:20.680 --> 0:07:24.400 at that point. It wasn't it was, but it stayed. 0:07:24.080 --> 0:07:24.640 In the wrapper. 0:07:24.880 --> 0:07:27.120 It's good with that for it at will. So you 0:07:27.120 --> 0:07:29.760 could choose to withdraw from it. You can show income 0:07:29.760 --> 0:07:30.600 period in your life. 0:07:30.640 --> 0:07:31.040 You could. 0:07:31.560 --> 0:07:34.000 Yeah, you could choose to withdraw it a lower and 0:07:34.040 --> 0:07:36.960 you can still choose to withdraw it as a lower thing, 0:07:37.080 --> 0:07:39.800 so you won't be paying sixty seven percent. I have 0:07:39.960 --> 0:07:45.480 seen more angry people about this, you know adell story. 0:07:45.520 --> 0:07:48.520 I've got a client and she's I don't know how 0:07:48.680 --> 0:07:52.240 they are. She's coming up to eighty and she's incandescent. 0:07:52.640 --> 0:07:54.560 She has one hundred and twenty five thousand pounds in 0:07:54.600 --> 0:07:58.360 her pension fund, and that is her money for her grandchildren. 0:08:00.080 --> 0:08:01.920 The fact there worth twenty five million isn't neither here 0:08:02.000 --> 0:08:02.240 all that. 0:08:05.280 --> 0:08:09.680 Should spend it on herself. Definitely, but nonetheless. 0:08:09.680 --> 0:08:11.040 So if you know that you're going to be paying 0:08:11.080 --> 0:08:12.880 that amount of tax, your family's going to be paying 0:08:12.880 --> 0:08:15.160 that amount of tax, you may as well buy annuity 0:08:15.160 --> 0:08:17.080 and have the security of that income flow upfront. 0:08:17.160 --> 0:08:20.720 Yeah, I think, and I think people will start to 0:08:20.720 --> 0:08:23.960 spend their pension funds down. Which if they are going 0:08:24.000 --> 0:08:28.800 to do that, there are two things in terms of efficiency. 0:08:29.080 --> 0:08:31.040 First of all, if you're joining income out of a 0:08:31.120 --> 0:08:34.360 pension fund, it is income if it is surplus income. 0:08:34.520 --> 0:08:37.000 And I've got clients who are joining and out paying 0:08:37.040 --> 0:08:39.880 the tax forty five percent tax, better than sixty seven 0:08:39.920 --> 0:08:43.400 percent tax, but it then gives them income which they 0:08:43.440 --> 0:08:45.920 can then give away. And because it is now a 0:08:45.920 --> 0:08:48.360 surplace income, it's clearly surplus income because they didn't have 0:08:48.400 --> 0:08:52.120 it before and they were living perfectly comfortably, they can 0:08:52.160 --> 0:08:54.880 give it away and it's immediately inheritance tax free. 0:08:55.000 --> 0:08:57.520 So you'll split it. You're stripping it over say. 0:08:57.360 --> 0:09:00.559 Three or five years, and I think it certainly we're 0:09:00.600 --> 0:09:04.760 seeing clients that are doing that kind of thing. But 0:09:04.960 --> 0:09:07.920 you need to do that. You need to have enough 0:09:07.960 --> 0:09:14.360 other assets. You're having to rethink your assets so that 0:09:15.000 --> 0:09:18.680 you are then thinking about, Okay, what I'm going to 0:09:18.720 --> 0:09:21.319 do is I'm going to spend this pot of money, 0:09:21.360 --> 0:09:23.760 but that will then mean that I've got this pot here. 0:09:23.840 --> 0:09:26.000 Yeah, So it's a general reshaping of the way you 0:09:26.040 --> 0:09:28.880 do it. It's reshaping. So let's go back to. 0:09:29.040 --> 0:09:32.720 Our our couple worried about their care bills and they've 0:09:32.760 --> 0:09:35.480 decided how much they need to keep, and that they've 0:09:35.520 --> 0:09:37.760 got a pot that they want to give away. Obviously, 0:09:37.800 --> 0:09:39.280 the best way to do that is just to give 0:09:39.280 --> 0:09:41.560 it away and not die for seven years. 0:09:42.280 --> 0:09:44.360 You'll buy an insurance policy to cover it. 0:09:44.360 --> 0:09:45.040 Can you buy insure? 0:09:45.080 --> 0:09:48.319 You buy an insurance quality to cover that, an expensive one, 0:09:48.360 --> 0:09:50.600 presumably depending on your edge depends how old. 0:09:50.600 --> 0:09:53.360 You asked about six percent of your eighty, about one 0:09:53.400 --> 0:09:56.559 percent of your seventy, and you pay that over seven years. 0:09:56.559 --> 0:09:59.199 So it's one percent over seven years. If you're seventy, 0:09:59.320 --> 0:10:01.640 I think that's cheap. Yeah, that does sound quite cheap. 0:10:02.280 --> 0:10:06.240 It's quite expensive if you're eighty. Yes, more more problematical 0:10:06.520 --> 0:10:08.359 is that you've got to pass a medical. 0:10:08.840 --> 0:10:11.719 Oh and okay, so there's only one percent if you're 0:10:11.800 --> 0:10:12.400 very healthy. 0:10:12.600 --> 0:10:15.600 You have healthy The insurance companies didn't put the price 0:10:15.640 --> 0:10:19.320 of life insurance up post COVID. What they did was 0:10:19.360 --> 0:10:22.880 they increased the bar. So where before we would have 0:10:22.960 --> 0:10:26.959 got standard rates for somebody, now they'll load the premium 0:10:26.960 --> 0:10:32.840 by fifty percent, so they've changed the pricing without looking 0:10:32.880 --> 0:10:34.200 as though they've changed the pricing. 0:10:34.720 --> 0:10:35.480 Good marketing. 0:10:36.000 --> 0:10:39.480 Okay, definitely, Okay, So give it away by an insurance policy. 0:10:39.520 --> 0:10:41.320 Give it away and give buy an insurance policy. 0:10:41.440 --> 0:10:42.680 What about bringing it in a trust. 0:10:44.320 --> 0:10:46.480 If you're going to put it in a trust, if 0:10:46.520 --> 0:10:50.520 it is agricultural land or business assets. Business assets are 0:10:51.200 --> 0:10:58.640 trading businesses which are unquoted, So there's a which is 0:10:58.760 --> 0:11:02.760 not property assets. If you constitute yourself as a builder, 0:11:02.960 --> 0:11:06.400 that is a trade. If you are holding assets for rent, 0:11:07.000 --> 0:11:09.680 then it is not a trading asset. I always say 0:11:09.679 --> 0:11:11.600 that's the easiest way to remember, because everybody knows what 0:11:11.640 --> 0:11:13.720 the builder is, and they know what holding an asset 0:11:13.800 --> 0:11:16.080 is for rent. So if it's a building, if it's 0:11:16.120 --> 0:11:19.320 a trading asset, and you give it away into a 0:11:19.400 --> 0:11:23.320 trust before the fifth of April, I haven't got long hair, 0:11:23.360 --> 0:11:26.960 have I got wrong, then you will not pay You 0:11:27.040 --> 0:11:29.240 will be able to transfer it without any tax. 0:11:29.720 --> 0:11:30.040 Okay. 0:11:31.440 --> 0:11:35.120 The neurals after the after what's only allows to that 0:11:35.440 --> 0:11:36.280 million pounds? 0:11:37.440 --> 0:11:40.559 They know that's only on death. You will be paying 0:11:40.559 --> 0:11:44.360 a ten percent entry charge on those assets. You've got 0:11:44.400 --> 0:11:47.120 three hundred and twenty five thousands of allowance which you 0:11:47.160 --> 0:11:53.080 can reuse every seven years. But apart from that, you 0:11:53.160 --> 0:11:56.480 will pay the ten percent as a lifetime entry charge, 0:11:57.400 --> 0:12:01.600 and you don't. The allowance is only on death. It's 0:12:01.600 --> 0:12:04.640 not a lifetime. It's all that's worth the bother de friends, 0:12:04.640 --> 0:12:11.640 how much you care about what the tax? I think 0:12:11.679 --> 0:12:13.600 you have some clients. 0:12:16.120 --> 0:12:16.719 Men didn't say. 0:12:17.480 --> 0:12:22.120 I largely spend my life doing life insurance and we 0:12:22.160 --> 0:12:25.559 look after a very large number of very large estates. 0:12:25.960 --> 0:12:29.240 And for them, inheritance tax and the transitioning of the 0:12:29.280 --> 0:12:32.800 wealth to the next generation is a key driver for them. 0:12:33.520 --> 0:12:35.760 And they know who's going to inherit it from the 0:12:35.800 --> 0:12:41.480 time that probably something is born, and they spend a 0:12:41.520 --> 0:12:43.920 great deal of time and they buy insurance to cover it, 0:12:44.080 --> 0:12:48.000 and they are making huge gifts of transfer of assets 0:12:48.040 --> 0:12:52.280 now and they care very much. I have other clients 0:12:52.679 --> 0:12:55.400 who maybe have made the wealth and they care very 0:12:55.480 --> 0:12:57.920 much about income tax and capital against tax, and they 0:12:57.920 --> 0:13:01.760 don't care about inheritance tax because from their perspective, what 0:13:01.960 --> 0:13:06.480 the children. They started with nothing, and they don't tend 0:13:06.480 --> 0:13:09.240 to then care of their children. They get sixty percent 0:13:09.280 --> 0:13:13.920 feet they'll be well off. That changes when they get 0:13:13.920 --> 0:13:21.600 grandchildren when staggeringly well, they're not prepared to earn their 0:13:21.600 --> 0:13:24.640 own children by giving them loads of money. They're delighted 0:13:24.800 --> 0:13:29.680 to the grandchildren and children. I've had lots of clients 0:13:29.720 --> 0:13:32.160 who you know, you've talked to for years and said, well, 0:13:32.160 --> 0:13:34.239 you ought to be thinking about giving it away. 0:13:34.320 --> 0:13:34.680 No. 0:13:34.679 --> 0:13:39.240 No, And particularly if it's business assets, there's much more 0:13:39.240 --> 0:13:42.560 of a problem because the giving away of the business 0:13:42.600 --> 0:13:45.760 assets is about succession in the business and transfer, and 0:13:45.800 --> 0:13:48.880 that's all about do you trust the children to do 0:13:48.960 --> 0:13:51.760 the transfer? Is that going to be appropriate? Are they 0:13:51.800 --> 0:13:54.319 appropriate for running the business? Are they interested in running 0:13:54.320 --> 0:13:57.160 the business, all those other things. So you may or 0:13:57.240 --> 0:14:00.320 may not want to give the asset away if it's 0:14:00.360 --> 0:14:03.800 a business asset and you don't want to earn them, 0:14:03.840 --> 0:14:06.080 and they must get on with their lives. And then 0:14:06.120 --> 0:14:09.560 these grandchildren arrive and boo if. 0:14:09.440 --> 0:14:11.920 They go, hof they go, it's all different. 0:14:12.400 --> 0:14:16.040 And if that's skipping a generation a good way to go. 0:14:17.000 --> 0:14:22.320 I mean that surely caused some friction between parents and 0:14:22.600 --> 0:14:25.840 their next generation if the money skips a generation. 0:14:26.840 --> 0:14:30.480 I haven't really seen that because I think if it's 0:14:30.480 --> 0:14:35.360 going down a generation, that the generations are being skipped 0:14:35.880 --> 0:14:41.000 tend to be involved. I think I think, as with 0:14:41.080 --> 0:14:43.800 all of these things, it's all about communication, because. 0:14:43.600 --> 0:14:45.960 I suspect, as we were talking about this earlier, that 0:14:46.040 --> 0:14:50.640 there's there's a there's a this missing generation when it 0:14:50.640 --> 0:14:53.760 comes to pensions, which is people born born sort of 0:14:53.920 --> 0:14:56.800 late sixties to late eighties or middle eighties, people who 0:14:56.840 --> 0:14:59.760 missed out on having a defined benefit pension and then 0:15:00.160 --> 0:15:03.080 had no pension provision at all until the introduction of 0:15:03.120 --> 0:15:05.480 water enrollment and so have pretty much no pench and 0:15:05.480 --> 0:15:09.040 provision at all and will generally be relying on inheritance 0:15:09.080 --> 0:15:10.800 to get through their last twenty years and pay for 0:15:10.840 --> 0:15:15.160 that care. So it would makes sense if the boomers 0:15:15.240 --> 0:15:17.160 left their money to that generation. 0:15:18.960 --> 0:15:22.200 They might all want might not realize that the boomers 0:15:22.240 --> 0:15:27.520 need the money. Well, no, no, because money has a 0:15:27.640 --> 0:15:32.760 you have a reference point. My father who's dead would 0:15:32.800 --> 0:15:36.440 be one hundred almost now. But when he started working, 0:15:36.520 --> 0:15:40.720 he earned fifty pounds a year working in Lloyds in London, 0:15:42.560 --> 0:15:46.240 and then you know, his first pay rise went to 0:15:46.240 --> 0:15:47.680 two hundred and fifty pounds a year. 0:15:47.840 --> 0:15:49.080 But it's very difficult, is. 0:15:49.080 --> 0:15:51.960 You spend two pounds fifty buying a cuff of coffee 0:15:51.960 --> 0:15:55.840 on the way to work for him to understand that 0:15:56.040 --> 0:15:59.320 he moved his reference point up. But I think that's 0:15:59.360 --> 0:16:02.200 that's in terms of the transfer of wealth. I think 0:16:02.400 --> 0:16:05.760 that that reference point that the children, you know, the 0:16:05.840 --> 0:16:08.400 children have got fifty thousand a year or so, they're 0:16:08.480 --> 0:16:13.880 fine because in their reference point, there's a point at 0:16:13.880 --> 0:16:16.600 which people stick yeahering. 0:16:16.680 --> 0:16:20.120 There's probably an educational need on both sides, right, And 0:16:20.160 --> 0:16:24.280 one of the things that you mentioned the inheritance is 0:16:24.400 --> 0:16:27.800 systems of bigger states and families that have been rich 0:16:27.840 --> 0:16:30.240 for generations have a system for passing wealth down and 0:16:30.280 --> 0:16:32.440 an education system as well for the recipients. 0:16:32.720 --> 0:16:33.880 But most people don't. 0:16:34.200 --> 0:16:36.960 You know, it's relatively new, this idea that a lot 0:16:36.960 --> 0:16:38.600 of people will have money to pass down and a 0:16:38.600 --> 0:16:41.880 lot of people will inherit and there's an education gap 0:16:41.920 --> 0:16:43.080 possibly on both sides. 0:16:44.600 --> 0:16:49.320 Yes, I think so, And I think that it was 0:16:49.360 --> 0:16:53.840 never talked about it So within the biggest states, it's 0:16:53.880 --> 0:16:57.360 talked about as a commercial thing. It's part of the 0:16:57.360 --> 0:17:00.000 commercial planning for the estate. They're very long term investment, 0:17:00.800 --> 0:17:06.160 and it's very long term planning and people are involved 0:17:06.200 --> 0:17:09.400 in it, and they also are quite good if they 0:17:09.480 --> 0:17:12.840 have a generation who aren't, who aren't maybe very commercial, 0:17:13.560 --> 0:17:16.440 they're quite good at finding a way around that, so 0:17:16.440 --> 0:17:18.199 that then they just get an income and they're not 0:17:18.240 --> 0:17:23.879 going to impact on the estate, not impact on the business. 0:17:24.760 --> 0:17:27.760 But it's a commercial, it's a commercial thing. They have 0:17:28.160 --> 0:17:30.600 a whole ramp of advisors who talk about it, and 0:17:30.640 --> 0:17:33.879 you just join that conversation which has gone on for years. 0:17:34.480 --> 0:17:36.679 I think what's much more difficult is if you've suddenly 0:17:36.720 --> 0:17:39.879 got what's really quite a lot of wealth and you 0:17:39.960 --> 0:17:42.879 don't have that sort of range of advisors and you 0:17:42.880 --> 0:17:47.800 don't have that forum, which is we discuss, you know, 0:17:47.960 --> 0:17:50.680 how we're investing for the long term. We discuss it, 0:17:50.760 --> 0:17:53.480 and we do it at the annual at the annual 0:17:53.480 --> 0:17:56.719 meeting at least. And there's almost always a trust so 0:17:56.760 --> 0:18:02.919 there are always external people. They're called the trustee, and 0:18:02.960 --> 0:18:04.920 they're probably outside the family. 0:18:05.840 --> 0:18:08.520 So how do you educate a new generation of inherited 0:18:09.240 --> 0:18:12.000 the fabulous opportunity for the wealth management community, right. 0:18:12.680 --> 0:18:16.080 I think they're trying. I think the wealth management community 0:18:16.160 --> 0:18:19.000 is trying, but I think they're trying more to get 0:18:19.080 --> 0:18:26.200 to the much younger ones. Certainly, the wealth management industry 0:18:26.240 --> 0:18:32.000 is going to lose. As things stand, they keep about 0:18:32.040 --> 0:18:35.720 twenty five percent of the wealth when people die and. 0:18:37.560 --> 0:18:42.360 Their population, so they get the cash. They go around 0:18:42.400 --> 0:18:43.920 with the wealth manager and they say, will you be 0:18:43.960 --> 0:18:45.919 looking after that gorgeously for forty years, but now I'll 0:18:45.960 --> 0:18:46.119 have it. 0:18:46.320 --> 0:18:46.520 Yep. 0:18:46.920 --> 0:18:49.240 Because they pay off the mortgage, they hand the money 0:18:49.280 --> 0:18:52.320 on to the next generation. They get the children on too, 0:18:52.560 --> 0:18:56.160 they pay off their student loans. They get the grandchildren 0:18:56.200 --> 0:19:00.479 onto because they don't need it, and if they do 0:19:00.600 --> 0:19:02.960 need it, they've got their own managers. 0:19:04.080 --> 0:19:05.760 Or swoop it up. That seemed to me, I was 0:19:05.760 --> 0:19:07.120 going to ask you. That seems to me to. 0:19:07.080 --> 0:19:09.640 Be one of the best possible ways to pass down 0:19:09.680 --> 0:19:13.320 some inheritance is to pay for all your grandchildren to 0:19:13.320 --> 0:19:15.320 go to university and pay all their living expenses so 0:19:15.359 --> 0:19:17.840 they don't leave with one of these awful that John 0:19:17.840 --> 0:19:18.960 conducting is about all the time. 0:19:19.280 --> 0:19:22.560 It's not tax deductible for an inheritance tax. If you 0:19:22.560 --> 0:19:26.359 pay your children's education, that is not considered a gift 0:19:26.560 --> 0:19:31.040 for the inheritance tax. If you pay your grandchildren's education, 0:19:31.680 --> 0:19:34.520 that is a gift, So it goes on the clock. 0:19:34.480 --> 0:19:36.560 Even if they're a surplus income. That's the way to 0:19:36.560 --> 0:19:36.760 do it. 0:19:36.800 --> 0:19:39.399 Well, if it's if you can create the surplus income yet. 0:19:39.280 --> 0:19:40.800 Then you can do it. 0:19:40.880 --> 0:19:43.560 You used to give people who used to give grandchildren 0:19:43.640 --> 0:19:46.439 quite a bit of money under deed of government and 0:19:46.480 --> 0:19:49.760 then which was a way to make it very tax efficient, 0:19:50.200 --> 0:19:51.480 but that was then shut down. 0:19:53.440 --> 0:19:55.680 Nothing left is that everything's been shut down. 0:19:56.840 --> 0:20:01.000 You buy insurance just to pay the tax, so paid 0:20:01.359 --> 0:20:04.920 the premium every year rather than paying forty percent of 0:20:05.000 --> 0:20:07.680 the bullet. You do think about putting some of it 0:20:07.800 --> 0:20:13.240 into trust. You can fund an insurance policy by drawing 0:20:13.280 --> 0:20:16.919 money as the pension fund. That's very efficient, and then 0:20:16.920 --> 0:20:17.600 you give it away. 0:20:18.119 --> 0:20:20.560 Okay. Ask a final question, do you think it's a 0:20:20.600 --> 0:20:22.760 good tax, inheritance tax? 0:20:23.840 --> 0:20:26.160 I think that's from where you are on the political spectrum. 0:20:28.920 --> 0:20:32.359 If you believe in the redistribution of wealth, then I 0:20:32.359 --> 0:20:38.000 think it probably redistributes wealth. If you think that people 0:20:38.119 --> 0:20:42.240 have worked terribly hard and paid an awful of tax 0:20:42.320 --> 0:20:43.719 to have accumulate his money. 0:20:44.680 --> 0:20:46.000 That's what makes Peel very. 0:20:45.880 --> 0:20:53.000 Cross Chavan who'd like to see inheritance tax abolished for 0:20:53.040 --> 0:20:58.760 those who aren't here, I say that's about forty percent. Yeah, yeah, 0:20:58.800 --> 0:21:00.840 I'm surprised that the young are putting up their hands. 0:21:00.960 --> 0:21:03.320 You did inherit more. You know, if it was it 0:21:03.359 --> 0:21:08.200 was abolished, not less, it'll be good. I have to 0:21:08.320 --> 0:21:08.639 leave it there. 0:21:08.640 --> 0:21:10.520 Although I didn't ask John, John, should it be abolished? 0:21:11.720 --> 0:21:12.400 Bad? 0:21:12.960 --> 0:21:15.560 I think in the moment, yes, yes, it's too it's 0:21:15.560 --> 0:21:17.800 too long. And don't think what is too many people 0:21:17.840 --> 0:21:21.800 at the low end, you know the thresholders. Yeah, there 0:21:21.840 --> 0:21:26.920 are too many people panic in the wrong about it. 0:21:27.119 --> 0:21:28.480 You shouldn't exactly. 0:21:28.560 --> 0:21:30.760 There are an awful lot of people and they will 0:21:30.800 --> 0:21:34.439 spend quite a lot of it. That that's when people 0:21:34.480 --> 0:21:36.639 really get into a panic is when you look at 0:21:36.680 --> 0:21:37.840