Many grandparents are intending to gift their grandchildren financially, with recent research from Saga suggesting that more than £37bn has passed from grandparents to their grandchildren.
Part of this is down to the fact that older people are worried about their grandchildren’s future. The increase in cost of houses, cars and the day to day necessities mean they’re likely to suffer financially and be much worse off than those of generations gone by.
So how could you go about helping out your younger relatives?
Skipping a generation
According to the research, around 14% of parents are skipping a generation and are instead looking to leave assets to their grandchildren.
Making use of a gift allowance
In certain scenarios, grandparents are choosing to give money without causing a tax event such as a £3,000 annual gift allowance. This can cover financial gifts which can be passed over each year, free of Inheritance Tax. Additionally, grandparents can also give away up to £250 to any number of people each year.
Putting it in a trust
With a discretionary trust, it is up to the trustees to determine how and when any potential beneficiaries may be able to access the cash. You can appoint yourself as the trustee, so that you have final say over where the money goes, or you can go for an independent trustee. What’s more, the money within the trust is classed as separate from your estate, so it’s free of Inheritance Tax.
There are also bare trusts, which mean the grandchildren would be completely entitled to whatever is in the trust once they reach 18. Unlike the discretionary trust, the beneficiaries are fixed, so once the trust is declared it is not possible to add (or remove) beneficiaries.
It’s important that you consider where and to whom you want your assets to go to – a comprehensive will is the only place where you can formally set this out.
Don’t keep putting it off. Speak to legalmatters today to make sure that your final wishes are carried out. Call us on 01243 216900 or email us at firstname.lastname@example.org.