11 million people are planning on downsizing their home in the next 20 years
Are you one of these 11 million?
According to a recent survey, half of all pensioners are considering moving to smaller homes in the next few years and this number keeps growing.
Some of my clients are considering smaller homes as they no longer need the big house to accommodate their children, whilst others like the size of their house as they can cater for children and grandchildren coming to stay, but want to move to a cheaper area.
It is one of my plans to move out of Ascot when I retire as we will not need the good schools nearby but can benefit from the less expensive houses in nearby areas.
Other clients want to move completely and be by the seaside, or just somewhere quieter, like Devon or Cornwall. I am not sure that I could be that far away from a big shopping centre or climbing wall, but who knows in the future. North Wales does appeal if it wasnāt so far away.
If you consider that peopleās biggest āassetā is their house, why not release some of that money to live comfortably for longer, or go on bigger holidays, pay for family holidays, have more expensive hobbies, eat out more often. What would you value spending this money on?
Do you really need to leave your children with any money as inheritance? Shouldnāt you be enjoying your hard-earned cash yourself? I have told my parents that I expect no money from them. They should be enjoying it themselves. Though I am happy to be taken out for food!!
Letās say that you took Ā£200,000 out of your house, either by moving or by equity release. Assuming no growth, that money could fund you spending Ā£40,000 for an extra 5 years or give you an additional Ā£10,000 pa to spend for 20 years. Think of Ā£10,000 extra for holidays a year. Yes please. Especially at the moment. I just want to go to Center Parcs in August.
Alternatively, if you do not want to spend it all yourself and want to leave some to your kids, would they benefit from having some of it now rather than waiting until you have kicked the bucket? Could they be making good use of it by buying a house, paying off some of their mortgage, maybe sending your grandchildren to private school or paying for their hobbies.
Whichever option you choose; less money in your hands when you die means less inheritance tax to pay, which is always a good thing in my mind.
Letās say your house is worth Ā£700,000 and you have other assets (not pensions) of Ā£300,000 between you and your married / civil partner. If you leave your house to your children then there is no inheritance tax to pay on your death so your beneficiaries are laughing, with current rules.
Imagine now that your house was worth Ā£1,000,000 and you had Ā£500,000 of other assets (not pensions) between you and your married / civil partner. You get the first Ā£1,000,000 free of inheritance tax if you leave the house to your kids, but then you have Ā£500,000 of taxable assets, meaning 40% inheritance tax on that money.
40% of Ā£500,000 is Ā£200,000.
You have cost your beneficiaries Ā£200,000!!
That is a lot of money. However, if you had spent it or gifted it, there would have been no tax to pay.
