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

MoneySavingExpert Martin Lewis is good place to start:

www.moneysavingexpert.com/family/reduce-inheritance-tax-gifting/

Here's his podcast on BBC Sounds:

Inheritance Tax & Probate: What you pay, what you needn’t pay, how to find the cash, trusts, probate, gifts & more.

www.bbc.co.uk/sounds/play/p0j4p5c7

We have been putting cash into Junior S&S ISAs for the Gdcs - now 11, 9 and 6 - for a few years now.
We just have to hope they’ll have the sense not to blow the lot at 18. I wouldn’t blame them for blowing a little of it, though….

I’ve already drafted letters for them, to be opened on their 18th birthdays, in case dh and I are no longer here! Emphasising how much harder it is to earn or save money, than to spend it, not mention that they’re unlikely to be given a similar sum any time soon, etc.

The simple solution is a junior ISA you can do lump sums or monthly payments, they get access at 18 no tax and a good rate of interest. For larger amounts you do need specialist advice.

Thank you really good ideas here. We aim to definitely make some arrangements this month.

First, can you work out whether IHT is likely to be relevant in your circumstances?
Money Saving Expert website and its Forum is an excellent source of information especially about savings.
I think I’m right in saying that a parent needs to open a child’s ISA, even if only the grandparents are contributing to it.
Another possibility is to save in your own names but earmark the funds. Gives you room for flexibility if circumstances change.

I think I’m right in saying that a parent needs to open a child’s ISA, even if only the grandparents are contributing to it.

My daughter and daughter-in-law have both opened their own savings accounts for their children.
I've set up a monthly standing order to each one. They were happy with this.

I have one grandson who lives abroad. He was born here and has retained his UK bank account. I set up a DD of £250pm giving him the maximum annual amount of £3,000

When DH drew down is 25% from pension it was put into trust funds for 2 youngest children and our grandchildren. As long as you survive 7 years from this date you will be ok tax wise, but, and I could be wrong, I think the money is best taken out before the 10 year mark.

For the older grandchildren they used it for gap years and uni, our 2 are using it towards house deposits (small rentals) and Uni.

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

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.

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?

And thanks for other Grandsnetters tips

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.

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😀

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

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 😂

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.

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.

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.

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

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.

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.

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.

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