The survey of individuals aged over 45 also revealed that one in 50 are expecting a bequest worth more than £5m ($6.9m, €5.6m).
The figures reveal the financial impact of the UK’s massive wealth increase in recent decades, with rising stock markets and increased property values contributing to larger individual wealth and the expectation of substantial inheritances.
However, without financial planning much of the estate is likely to be lost in inheritance tax (IHT), which is currently 40% for assets above the available nil rate band £325,000 threshold.
On an estate worth £1m, over one fifth (£230,000) would be lost in inheritance tax, or roughly the equivalent of an average UK house price.
According to Canada Life, lack of awareness around IHT could mean inheritors end up paying more tax than they should.
Only one in 20 of those surveyed knew about the residence nil rate band tapering for estates over £2m, likely leading to greater tax bills for larger inheritances.
Talk to an adviser
Karen Stacey, head of distribution services at Canada Life, said: “People’s expectations are likely to be substantially wrong without financial planning, and it’s quite likely they could lose substantial amounts of money in tax.
“Yet it’s quite possible to ensure that, by using a straightforward trust, the entire amount goes where it is intended – the beneficiaries.
“For people expecting around £500,000 or more in inheritance, there is still a danger of losing tens of thousands of pounds in tax. It’s very much worth their while talking to a professional adviser or planner to make sure there’s a sound financial plan at work.”
