A growing number of couples live a DINK (“dual income, no kids”) lifestyle instead of the historically ‘traditional’ family structure that includes having children. There has also been a rise in the “single income, no kids” (SINK) lifestyle.
Several factors contribute to the rise of the DINK lifestyle, including financial reasons, shifts in life goals or quite simply the active decision to be childfree. You might have experienced others who are hurt or disapproving of your decision to forego kids. There may also be questions to deal with from friends, or even strangers, such as, “When do you plan on having kids?” or even as intrusive as, “Why don’t you have kids yet?”
On the face of it, the DINK (and SINK) lifestyle seems easy and carefree – high income, the ability to save quickly and lots of free time to explore interests, hobbies and passions. However, like everyone else, DINKs (and SINKs) have their own, unique wealth planning challenges.
The misconception is that if you are childfree, then you do not need to be worried about succession or inheritance tax planning. If you don’t have children, you can’t possibly still want to plan for the future and leave a legacy, can you?
This is far from the truth. Here, we provide some wealth planning considerations for DINKs (and SINKs).
Estate/Tax planning
Everyone needs to think about Inheritance Tax (“IHT”). It is common for people to think that you don’t need to think about IHT if you’re childfree, however DINKs and SINKs actually face a higher tax liability than a ‘traditional’ family household because they have fewer exemptions or nil rate bands available. This makes tax-efficiency even more vital.
Under the rules of the Residence Nil Rate Band (“RNRB”), people without children miss out on this extra tax-free amount of £175,000 which is only available to people who plan to leave their main home to their children, step-children or grandchildren. The Nil Rate Band and RNRB can also be transferred between spouses or civil partners, which means that for the same sized estate, the IHT liability of someone who is married or in a civil partnership with children is significantly lower than someone who is married/in a civil partnership but childfree, or single and childfree. In theory, subject to tapering, couples who are married or in a civil partnership with children could have up to £1 million to leave tax free, whereas DINKs only have £650,00 and SINKs have £325,000.
Whilst for some IHT may not be an issue, for those who want to reduce their IHT liability, they need to think carefully about how to do this.
Why do I need a Will?
With no second generation for which to plan, DINKs and SINKs must put extra consideration into who will receive their assets upon their death. If you die intestate i.e. if you die without a Will, how do you know who will end up with your money? When you don’t have any direct descendants (children or grandchildren) or a spouse/civil partner, this can be a huge problem.
Wills are important regardless of whether you have children or not. They enable you to direct your estate to those you wish to benefit. A will ensures that your wishes are respected, and your estate is handled in accordance with your preferences. It provides peace of mind for you and clarity for your loved ones during a challenging time. You may consider giving to charities or friends and family members. If you have pets, a will is an opportunity to name a guardian or caretaker for them. This ensures that your pets are taken care of by someone you trust.
A will can also help prevent potential conflicts among surviving family members – the last thing you want is your siblings fighting over your estate when your intention was never to leave any of it to them!
Leaving a gift to charity may be important to you and a large part of your legacy plan. In addition to the obvious philanthropic benefits of donating a sizable sum, there are tax benefits too. If you donate more than 10% of your assets on death, your estate will only be charged 36% IHT on the remainder (rather than the usual 40%).
Alternatively, you may wish to spend down to your last penny during your lifetime, fully enjoying every bit of the wealth you’ve accumulated. While there is no right answer, there may be some planning involved to ensure you have sufficient funds to last your lifetime and/or your estate is distributed according to your wishes.
Lasting Powers of Attorney
Lasting Powers of Attorney (“LPA”) are important regardless of whether you have children or not. LPAs allow an attorney to make legal and financial decisions on behalf of another person in case of incapacity. It's important to choose someone trustworthy and capable of handling such responsibilities.
In addition, when compared to their siblings who are raising families, DINKs and SINKs sometimes end up being the first call when a family health or financial crisis occurs. This can result in additional responsibilities and potential financial obligations. It is something to think about when planning who will manage your own finances if you lose capacity.
Health and Later Life Care Planning
Healthcare planning and later life care planning for DINKs and SINKs can be more challenging because there are no children to depend on in a health crisis (children typically take on these responsibilities).
Planning for later life care fees is an essential part of any financial plan. One of the common misconceptions about long-term care is that it will be funded by the State, when often this isn’t the case. There are instances where the NHS may fund your care fees or you may be entitled to local authority funding (the latter is means tested and if you have £23,250 or more in capital, your local authority will not provide you with financial support and you must fund your own care fees).
Lasting Powers of Attorney for Health are therefore very important. You need to consider naming a back-up person who would be willing to make healthcare decisions and/or provide care if necessary. It’s also important to consider who will care for the surviving person upon the death or loss of capacity of the first person.
While the specifics of your future may vary based on your individual circumstances, having a comprehensive succession and wealth plan in place can provide peace of mind and ensure that your wishes are honoured, and you can leave a legacy regardless of whether or not you have children.
Seeking the advice of legal and financial professionals can provide valuable guidance in creating a succession plan tailored to the specific needs and circumstances for you as DINKs or SINKs.
further information
For further information on the issues raised in this blog, please contact a member of our private client team.
about the author
Diva Shah is an Senior Associate in the Private Client team. She is a full member of the Society of Trust and Estate Practitioners (STEP) and was awarded Woman of the Year for Future Leaders in CityWealth's Powerwoman Awards 2023.
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