Help... Thinking about IHT, money for grandchildren etc. Any advice

Witzend

When they reach 18, don’t they have to go in the child’s name?

Irresponsible or not, they are then classed as adults.

I suppose some children are still immature at 50 or so, and can’t be trusted with money, but ….

I was talking to dd the other day about the Gdcs’ S&S ISAs - which incidentally so far have done very well - I was worried about the dangers of a substantial amount of cash at 18 - particularly for Gds- now 10. I’ve been having visions of him blowing a lot on an expensive car and then writing both himself and the car off….

Dd said she just wouldn’t tell them! Would leave it until they’re (say) 25.
That hadn’t even occurred to me! Dh says he can’t see why it wouldn’t work.

If you have surplus money from income after paying all your living costs, that can be given away to children/grandchildren without it attracting IHT provided it is a regular eg monthly amount. Give money away from savings etc as early as possible as if you die within the 7 years it all goes back in to be assessed for probate. My SIL has recently died, they downsized and she gave away a huge lump of money to her children and sadly died 6 years later, the executors are faced with a huge tax bill as the remaining estate wipes out the IHT free amount. There is a lot of confusion over the rules concerning "tapering" ie if someone dies within the 7 years, it is assumed that the tax will be tapered according to the number of years someone has outlived the initial gift but that is not the case as gifted amount will be assessed first and if it "wipes out" the £325K allowance, the rest of the estate will be assessed for IHT. It's quite complicated so I have copied an explanation and attached a link but it is something to be aware of.

"What are the most common misunderstandings regarding PETs?
Taper relief

Taper relief is often misunderstood as a significant tax-saving measure. Many believe that if someone survives just three years after making a gift, a large portion of IHT on the gift will be reduced. In practice however, very few people benefit from Taper relief.

For example, if a person makes a gift and does not survive the seven-year period, the gift becomes a “failed PET,” and IHT may be payable on it. While the donee (the person who received the gift) is typically responsible for paying this tax, the donor can specify in their Will that the gift is “tax-free,” meaning the tax would instead be paid from the donor’s estate.

When calculating IHT after death, “failed PETs” are taxed first, using up the donor’s nil-rate bands in priority to the rest of their estate. Taper relief only applies to failed PETs in excess of the available nil-rate band. As a result, unless someone has given away gifts exceeding their nil-rate band in the seven years before they pass, the relief does not come into play."

www.pricebailey.co.uk/guides/a-comprehensive-guide-on-potentially-exempt-transfers-pets/

I hope OP is sorted now, old thread.

Premium bonds when they are younger with a proviso to re-invest any winnings

At 18 I have advised them to cash in and go into a stocks and shares isa, there are several good companies with managed funds

From experience for some children getting a large sum of money at 18 causes more problems than it solves.

It’s really sensible to pause before making sizeable gifts. A solicitor or regulated tax adviser can confirm the current nil-rate and residence bands, annual exemptions, gifts from income, and what records you should keep—rules can be surprisingly specific. For grandchildren, agree with the parents what the money is for and who controls any account or trust, and keep a simple dated gift log. A Junior ISA or trust may be useful, but neither is automatically right for every family. Your own financial security comes first, too.

Cabbie21

D) the gift is outside of giving from regular income

Regular gifts, out of income, can equal generous amount, over time.

D) the gift is outside of giving from regular income

Tax is only relevant if a) the estate has to pay IHT and b) you die within 7 years of making the gift and C) you give over the annual limits

Chocolatenoodle 8
My understanding of the £3000 payment is that if you give more money than that amount in a lump sum tax may become involved.
If a regular payment is set up eg monthly it is not counted.

Just to add re trusts … I had an initial meeting with a wealth manager last year who was very keen on setting up a discretionary trust and it turned out he was a rep for St James’s Place. Not suggesting for one minute that there is anything wrong with them but am going to find an independent advisor.

If you think your estate may be subject to IHT please make an appointment with an independent financial adviser/wealth manager or have a chat with your accountant.
I have been dealing, as sole executor, for my father’s estate for the last eight months and have today submitted a probate application after paying a fairly eye watering sum to HMCE.
My problem now is that I need to sort out my own position so as not to leave my children with a big bill.
There are several ways to manage IHT but not all are right for everyone.

Jess20

assets.publishing.service.gov.uk/media/69c6934978ca1aa5a63609d9/IHT403-04-26.pdf

There's a bit here about regular gifts out of income, you need to record what you give and if you have cash spare without affecting your standard of living or drawing on savings, you can make regular gifts over and above the £3k annual limit or incurring the 7 year rule.

Regular gifts, out of income, is an easy way to give.

Newdawn

A query for Katekeeppruning... I read on Gransnet that Trusts were expensive to set up, had high management costs and were expensive when due to pay out. There were also comments about them being pressure sold by financial advisers. Was your experience positive?

We set up lump sum trusts for each of our grandchildren when we came into some money 5 years ago. It was all done through the NFU financial advisor who has guided us with our pensions and other investments. There were set up costs but overall they have increased well. Ours are "discretionary trusts" which means that we have a say over when the grandchild can have the money - it's not linked to a specific age. If we manage to survive 2 more years none of the money will be included for inheritance tax
It all really depends on how much money you can spare and how much control over it. You need professional advice.

Jess20

assets.publishing.service.gov.uk/media/69c6934978ca1aa5a63609d9/IHT403-04-26.pdf

There's a bit here about regular gifts out of income, you need to record what you give and if you have cash spare without affecting your standard of living or drawing on savings, you can make regular gifts over and above the £3k annual limit or incurring the 7 year rule.

The limit has been £3k for goodness knows how long! High time it was increased.

Not sure them getting lots of money,if it mounts up, at 18 will be good for them. So any tips ...

Just to say, don't cause yourself too many worries on that front. One of our more wayward children received a large some of cash at 18, no conditions attached, from a grandparent. We were terrified at the time that it would all be spent on handbags, shoes and tattoos!
18 year olds can be sensible and have wise heads when it comes to it. She bought a flat in London, and has since moved up the property ladder to a large detached house and runs her own business.

I'm not a big believer in tying money up too tightly in trusts, bonds, even shares. It's there to be spent at the time, imo.

So perhaps we should all put £10k in our grandchildren’s accounts as Pilmangrew has started to do.
Luckily I only have one 😀

Please don't give my family any ideas 😂

Junior ISA (parent opens it, of course) may be a nice start.

Pilgrimandrew

As well as the Junior ISA, you can also start personal pensions for them. These savings vehicles are often overlooked for young people, but the earlier you start, the greater the benefit of long term compounding. There is also tax relief available on contributions, subject to certain limits

There was an article in the Times this weekend. A money expert was explaining how the Government could solve future pension provision for future generations.
His idea was to put aside £10k at birth. Apparently managed well this could provide a decent pension.
So perhaps we should all put £10k in our grandchildren’s accounts as Pilmangrew has started to do.
Luckily I only have one😀

The answer to all your problems does not lie on GN but with a solicitor who specialises in wills and probate. They will have the answers to all your problems and will know about solutions that would never occur to any of us.

And thanks for other Grandsnetters tips

A query for Katekeeppruning... I read on Gransnet that Trusts were expensive to set up, had high management costs and were expensive when due to pay out. There were also comments about them being pressure sold by financial advisers. Was your experience positive?

assets.publishing.service.gov.uk/media/69c6934978ca1aa5a63609d9/IHT403-04-26.pdf

There's a bit here about regular gifts out of income, you need to record what you give and if you have cash spare without affecting your standard of living or drawing on savings, you can make regular gifts over and above the £3k annual limit or incurring the 7 year rule.

As well as the Junior ISA, you can also start personal pensions for them. These savings vehicles are often overlooked for young people, but the earlier you start, the greater the benefit of long term compounding. There is also tax relief available on contributions, subject to certain limits