Home Education Inter-generational Financial Giving and Inequality: Give and Take in 21st Century Families
The Impact of Lifetime Gifts on Recipients and Donors
The impact of lifetime gifts can be considered from a range of perspectives. First, there is the impact on the recipient. What difference does it make to them and in which ways? Then, there is the impact on inequalities more generally. Do such gifts reduce, increase or simply maintain current levels of inequality? These are important questions and there has been much interest in the impact of lifetime gifts but relatively little research.
Hills et al. (2013) have provided some insight into the possible impact of gifts through analysis of the impact of the ownership of assets at certain ages. Such assets could be accumulated through gifts, through inheritance or through saving from income and so the research only provides some suggestions here. For example, Hills et al. (2013) analyse the impact of owning wealth at certain ages on life chances later in life and show some ‘asset effect’ independent of other factors (such as income). They also investigate the impact of receiving inheritance on wealth inequality with the conclusion being that inheritances widen ‘absolute’ wealth gaps but may in fact have a ‘mildly equalising’ effect on relative gaps because some (albeit very small) inheritances go to people with no, or very little, wealth. The overall impact is therefore likely to be to maintain existing inequalities. There is almost no quantitative research on the impact of lifetime gifts on recipients in terms of wealth inequalities, though Hills et al. (2013) reported estimates that lifetime gifts may account for about 11 per cent of the value of all personal wealth, with inheritances accounting for anything from 16 to 45 per cent of personal wealth.
Our survey asked a number of questions to explore the impact of lifetime gifts. First, we asked about the size of the gift in monetary terms and found, as shown in Chap. 4, that about one in five of those who had ever received a lifetime gift had received at least ?10,000, which is a substantial size of gift. However, a relatively small amount could still make a major difference to someone in great need. For example, a small gift might help someone pay off a debt which is causing anxiety or help someone make up the difference between their savings and a deposit to buy a property. A relatively large gift may not make so much difference to someone who already has a high level of income and wealth. So, we asked respondents how much difference the gifts had made to them. A third of the recipients said that the gift(s) had made a very great difference to them and a further 40 per cent said a ‘great difference’ (see Fig. 5.1). Only 7 per cent said they had made little or no real difference.
Gifts made most difference to younger recipients, with 43 per cent of those under 30 who had received one or more gifts saying that these gifts had made a very great difference to them (see Fig. 5.2). This could be because either gifts have become more important over time or perhaps older people had forgotten the importance of a gift received some time ago.
Table 5.1 also shows that the vast majority of those who received relatively small gifts still felt they made a great or even very great difference. For example, 28 per cent of those who received between ?500 and ?999 said the gift made a ‘very great’ difference to them. But the very substantial gifts (of over ?10,000) make more of a difference to people, not too
Fig. 5.1 Difference made to recipients from receiving a lifetime gift
Fig. 5.2 Those who said that a gift had made a 'very great difference' to them by age group
surprisingly perhaps. About half of those who had received such gifts said they made a very great difference to them.
Surprisingly, perhaps, there was little real, overall, difference in the subjective impact of gifts on recipients from different social classes
Table 5.1 What difference, if any, has/did (receipt of this/these gifts) make to your life at the time? (Column percentages)
even though we saw in the previous chapter that middle-class recipients received much larger gifts than working-class recipients. But perhaps this is because what looks like a large gift to someone on a low income looks like a small gift to someone on a very high income. If we focus on all those who said that gifts made a ‘very great difference’ to them and then look at different sizes of gift by social class (taking the broad middle-/wor king-class distinction because of relatively small numbers of working-class recipients with large gifts), we see that just over a quarter of middle-class recipients said that gifts up to ?1000 made a very great difference to them compared with 31 per cent of working-class recipients. Gifts from ?1000 to 4999 made a similar impact on middle-class recipients but a much greater impact on working-class beneficiaries (24 per cent compared with 39 per cent). Although Fig. 5.3 gives details of gifts over ?5000, only 34 working- class people in our sample had received such gifts and so there is a large margin of error around this figure which might explain the rather surprising result that such gifts appear less likely to make a very great difference to this group compared with middle-class beneficiaries. We have left the analysis in the figure to show that almost half of middle- class beneficiaries of these very large gifts said that they made a very great difference to them.
The questions in the survey did not go into detail about how the gifts made a difference but these issues were explored in our qualitative work.
Fig. 5.3 ho said that a gift made a 'very great difference' to them by
size of gift and social class
For example, some of the housing-related gifts made a big difference in getting young people on the housing ladder much earlier than they would have otherwise been able to do. For example, the baby boomer in the Jacobs Family acknowledged that:
God, it made a huge difference. It meant that we could buy a house earlier than we would have anticipated, and it meant we became home owners and got onto the property ladder very young. I think I was only 22. (Baby Boomer, Jacobs Family)
The baby boomer in the Henry Family spoke of the difference the financial support given by her parents to purchase her first home as a wedding present made to her in terms of mental health and generally making life easier:
Well to give me a help really, a hand up and again, to help me sort of sleep at night [laughs], no just to make my life easier really. (Baby Boomer, Family 9)
In terms of help with the costs of education, gifts enabled some people to go to university who would not otherwise have been able to go. Other gifts enabled those who went to university to live away from home and/ or live a less constrained life, financially:
Because of the way my student loan works I don’t get money for housing so dad does pay for the rent there which is absolutely brilliant I mean I don’t know what I’d do without that. (Younger Generation, Connelly Family)
This respondent was hinting that he might not have felt able to go to university without this financial help. Given the role university education plays in terms of careers, this might have had a major impact on his subsequent employment and income levels.
The baby boomer in the Bennett Family also received help from his parents, which enabled him to go to university. This help was not direct financial help but it involved more practical help and also allowing him to stay at home rent-free during vacation times at university:
They encouraged me to stay on and they effectively subsidised that with me living at home rent free and with meals. Whenever I came back from university I was getting subsidised and looked after. I got practical help, like getting lifts from dad backwards and forwards to university and that sort of thing. They really did their very best to support me at that stage. (Baby Boomer, Bennett Family)
As we saw in Chap. 4, financial help towards the cost of education was often seen as a way of helping younger family members achieve independence, particularly when it enabled the young person to move out of the parental home to live independently at university often for the first time: 
In a similar way, gifts related to cars often had the impact of enabling the recipient to become more independent:
they want me to pass as soon as possible so I can be man around the house really so they feel like if they pay for a couple of my driving lessons or whatever then I will pass quicker. (Younger Generation, Symonds Family)
In other cases, as we saw in Chap. 4 with the Bennett and Evans families (in relation to mortgage arrears and credit card debt), family support helped avoid serious consequences such as further costs, the need for a court appearance, bailiff action and possible house repossession. Support also helped to reduce the emotional/health consequences of debt problems which could be considerable:
I think it made a big difference because he was emotionally upset by it all and stressed out, and I think it would have made a big difference if he couldn’t have—he could have had time to pay it if he’d have gone to the court and asked for extra time and all the rest of it, but mentally it was stressing him out so it was better that it was—accept what the position is, pay it and then sort it and that’s it and get on with your life. (Older Generation, Rodgers Family)
While there has been considerable interest and some research into the impact of inheritance and lifetime gifts on recipients, there has been much less on the impact on the donors. Where do donors find the money to give? And how difficult is it for them to do so? In our survey, we gave donors a list of possible ways they might have found the money and asked them to choose one or more. Most donors said that they found the money from either regular income or liquid savings (32 per cent and 58 per cent respectively—see Table 5.2). Various other means were found, however, including selling shares/cashing in investments (5 per cent), using pension lump sums (5 per cent), taking out personal loans (4 per cent) and selling/downsizing property (4 per cent). The use of inheritance for such gifts is interesting as it effectively means that inheritances are ‘skipping a generation’.
There was relatively little difference in terms of how different groups of people found the money for lifetime gifts though the larger gifts were more likely to come out of existing savings rather than income.
Table 5.2 Which of these ways did you use to find the money? (Column percentages)
Middle-class donors were also more likely than working-class donors to find the money by cashing in investments and downsizing their property. Given rates of home and share ownership among different groups, this probably reflects the greater access to these resources among the middle classes. But the use of these assets also raises an issue about whether the desire to give a gift was the only or, indeed, any part of the trigger for downsizing or whether the downsizing came first and then those who had downsized decided to give part of the realised assets to their families. Presumably, this varied across families. Similarly, on retirement, if people received a lump sum, they may at that point have decided to give some of it to family members as well as keeping some for themselves. This may or may not be the point at which family members have most need of the money, but nevertheless, the opportunity arises at that point. Or perhaps, some people specifically decide to retire and access the lump sum because their families needed financial support at a particular point in time. The use of lump sums is interesting given reforms in 2014 which allow people to take more of their pension pots in the form of a lump sum rather than being forced to use most of it for retirement income. This could provide greater opportunities for giving gifts.
So how difficult was it for donors to find the money? Here, we asked about the largest gift if they had given more than one. Over a quarter (26 per cent) said it had been difficult (including one in twenty saying it had been very difficult to find the money—see Fig. 5.4). However, 43 per cent said it had not been very difficult and a further 28 per cent said it had not been difficult at all.
We might expect that donors who are giving the largest gifts, in monetary terms, would face the most difficulty finding the money but there was not as much variation in difficulty by size of gift as we might expect (see Table 5.3). Having said that, more than one in ten of those who gave between ?5000 and ?9999 said that it had been very difficult to find the money.
Fig. 5.4 Level of difficulty donors had in finding money for lifetime gift
Table 5.3 Thinking back to the largest gift, overall, how difficult was it for you, if at all to find this money? (Column percentages)
There was also some variation by social class, with more than a third (33 per cent) of working-class respondents saying that it had been difficult to find the money (despite the fact that, as we saw earlier, they gave less relative to other groups). Only 21 per cent of those in professional/ senior managerial occupations said they had had difficulty finding the money despite the fact they tended to give much more. Size of gift is likely to be linked to people’s resources but some groups appear to be giving more substantial gifts relative to their resources. We can explore this further by breaking the data down by size of gift and focus on those who had most difficulty in finding the money. We then see, in Fig. 5.5, that very few of the middle-class donors found it very difficult to raise the money for their gifts—even with the more substantial gifts of over ?5000. Working class donors, however, struggled more and one in five of those giving over ?5000 said that it had been very difficult to find the money.
Those who had difficulty finding the money for lifetime gifts were more likely than average to have been helping people pay off debts or
Fig. 5.5 Those who reported it was 'very difficult' to find the money when giving a lifetime gift, by social class and size of gift manage everyday living expenses. This group were also more likely than average to be helping with a wedding or the birth of children. They were also more likely than average to have taken out a personal loan or to have sold goods to fund the gift.
Our qualitative work provides interesting examples of the different ways people used to find the money for gifts. In the Jacobs Family, for example, and in line with many donors, the older generation used their regular earnings to help their children purchase furniture:
Well, in those days when my children started progressing I used to work and my husband used to work, so it wasn’t that difficult. As I said, we didn’t push a lot of money onto them. (Older Generation, Jacobs Family)
The older generation in the Evans Family sold her pub on her retirement and shared the money between her children and grandchildren,
I sold the house and I gave them all some money with what I got off the house. (Older Generation, Evans Family)
The older generation in the Rodgers Family used lump sum money from her retirement to help one of her son’s (a baby boomer) to build a home extension:
when I retired I was fortunate enough to have a reasonable lump sum and I gave [him] money to build an extension on his house at the time, so I gave him some money towards that. And I gave [my other son] the equivalent money. (Older Generation, Rodgers Family)
The older generation member in the Frederick Family received an insurance payment after the death of her husband, which she used to help her children purchase their first properties in the form of a gift:
when my husband died - we never had had a close relationship either - so whatever his money, when he died and left, I’d say I didn’t want it. So I divided it up among the children. (Older Generation, Frederick Family)
The Bennett Family also used insurance policies, though it is not clear what insurance policies these were, exactly, and if these had been taken out specifically for their children:
When the twins went to college, we helped them then. Yes, about ?2,000 towards the expenses. ... And [our son, the Baby Boomer], I know, covered both of his with insurance policies. They’d had them for years. (Older Generation, Bennett Family)
However, as we saw from the survey findings above, it was not always easy for people to find the money. The younger generation member of the Connelly Family was aware that his father had to find a ‘substantial amount’ of money to help him when he went to university and his father only found it ‘begrudgingly’:
initially I was applyingfor university and found out how student loans was going to work for me then that was really the, and I sort of discussed the financial aspect of everything with my dad really, as I say he’s more sort ofin charge of the financial things at home. And yeah I think we both sort of, we came to an agreement, like maybe begrudgingly on my dad’s part but yeah I think—it was a joint thing and I kind of do feel quite a responsibility to try and pay back my dad as much money as I possibly can because it’s—quite a substantial amount to sort of give to someone I think. (Younger Generation, Connelly Family)
The older generation in the Isaacs Family also recalled the time, decades ago, when he had decided not to go to university because of concern about the financial pressure it might place on the family finances. This is a clear example of how lack of financial support can make a major difference to someone’s life chances:
At one point they wanted to put me through university. I decided we couldn’t afford it but I didn’t ask them ... because ... because there was seven children, two parents. My father came over from Ireland because there was no work in Ireland, he was trying to bring up seven children. My mother didn’t work very much, she did a couple of little cleaning jobs but on the whole I’d say she didn’t really work, she doesn’t know what it’s like to be out in employed industry and that so it was a bit of a struggle. I think my own common sense told me they couldn’t afford to help me. (Older Generation, Isaacs Family)
It is interesting how the respondent refers to the fact that ‘we’ could not afford it at the beginning of this quote and then ‘they’ towards the end. The way that people see themselves as part of the family finances clearly varies at different points.
We have focused so far on the impact that gifts make on recipients’ and donors’ lives. Now we turn to see whether or not gifts have an impact on the relationships between donors and recipients. According to our survey research, the most common response from both recipient and donor was that the gift made no difference to their relationship. Indeed, seven donors and recipients in ten said that the gift made no difference to their relationship. More than a quarter of recipients and donors did, however, say that the gift made their relationship stronger, with just over one in ten saying that it was much stronger. Hardly anyone said that the gift weakened their relationship (see Fig. 5.6). So, on balance, both donors and recipients felt that gifts made relationships stronger rather than weaker.
There were some interesting variations by social class, with working- class recipients much more likely to say that their relationship with the donor was now stronger as a result of the gift. There was also a gender
Fig. 5.6 Difference made to relationship by gift difference here, with men more likely to say that their relationship with the donor was now stronger (35 per cent compared with 22 per cent for women). There was less variation by social class among donors, though, again, working-class donors were more likely to say that their relationship was much stronger as a result of the gift (see Table 5.4).
We also asked about loans to see how these affected relationships (see Fig. 5.7). When lenders were asked about the impact of giving a loan on
Table 5.4 What difference did this gift/these gifts make to relationships, by social class (Column percentages)
Fig. 5.7 Difference made to relationship by loans their relationship with the person they had lent money to, we again see that people report little impact. If anything, relationships again appear to be strengthened by giving loans, with one in four borrowers and one in five lenders reporting that the loan had strengthened their relationships. However, one in ten lenders did report that the loan had made their relationship weaker, something that did not really feature in relation to gifts. Interestingly, we got a different picture when we asked those who had received loans. Very few reported that the loan had weakened their relationship with the lender. Most said that the loan had made no difference to their relationship with the lender and a quarter said that it had strengthened the relationship. So, there appears to be some asymmetry in how loans affect relationships with lenders feeling a more negative impact than borrowers. Of course, our lenders and borrowers are not an exact match as our sample will have leant and borrowed from different people. But this difference is still interesting, and we can only speculate about whether or not borrowers are aware when lenders feel this negative impact or not.
There was also a slight variation by social class here with middle-class lenders more likely to report a weakening of the relationship following a loan perhaps linked, as we saw in Chap. 4, to middle-class borrowers being less likely to repay loans. Working class borrowers were most likely to say that the relationship had got stronger (see Table 5.5).
Table 5.5 What difference did this loan/these loans make to relationships, by social class (Column percentages)
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