Grandparent gifting money to grandchild?

Werdnal

My mother passed away earlier this year, and dad has now finally consolidated all the money they had in various ISA and savings accounts into one place in his name. He has more invested that he thought, and has made a few comments about setting up an investment for my child - his only grandchild. I have no problems with this and would rather he passed money on to them than me anyway.

However, I am a little concerned about his long-term need for care and how he can secure the money in my child's name, without there being some accusation of deprivation of assets or the powers that be claiming it back to cover costs of his residential care etc.

I haven't a clue about investments - got a small ISA myself, but never have enough spare to top it up! Is there a secure way to put the money aside for his grandchild without losing it again further down the line?

Thanks

Nicholas-bloody-Parsons

You can legally "gift" up to around £3k per financial year with no legal come back. You will need to check the HMRC website for the current amount. It may be more as its some years since this affected me.

Amounts given above this limit could be seen as an attempt to evade inheritance tax and could be clawed back or back taxed etc. Wedding gifts fall outside this limit. So when your children get married, feel free to give as much as you like.

xtinataguba

lucky grandchild! i wish i also had that kind of grandfather.

Mojisola

Nicholas-bloody-Parsons wrote: »

You can legally "gift" up to around £3k per financial year with no legal come back. You will need to check the HMRC website for the current amount. It may be more as its some years since this affected me.

Amounts given above this limit could be seen as an attempt to evade inheritance tax and could be clawed back or back taxed etc. Wedding gifts fall outside this limit. So when your children get married, feel free to give as much as you like.

These rules are for tax. Deprivation of assets works differently.

He may have enough to fund any potential care and set up a savings fund for his grandchild but, if not, be careful about giving money away.

CLAPTON

how old is he?
how is his health?
how much other money does he have?

if he has reasonable funds and is not in ill health at the moment then deprivation of assets is unlikely to be an issue


assuming the grandchild is young then it's best to invest is stock and share unit trust or OEICs or ETFs in a bare trust (cash will be eroded by inflation)

however if he is likely to have more than one grandchild he may wish to consider that possibility.

CLAPTON

Nicholas-bloody-Parsons wrote: »

You can legally "gift" up to around £3k per financial year with no legal come back. You will need to check the HMRC website for the current amount. It may be more as its some years since this affected me.

Amounts given above this limit could be seen as an attempt to evade inheritance tax and could be clawed back or back taxed etc. Wedding gifts fall outside this limit. So when your children get married, feel free to give as much as you like.

as well as referring to IHT (and not deprivation of assets) it is also very misleading and incorrect)

mania112

IIRC Grandad can give what he wants to whoever he wants so long as he lives for 7+ years after he did it.

Mojisola

mania112 wrote: »

IIRC Grandad can give what he wants to whoever he wants so long as he lives for 7+ years after he did it.

That only applies to IHT. The 7 year rule doesn't apply to DOC.

xylophone

If grandfather is currently in good health/ is not reliant on means tested benefits then I see no reason why deprivation of capital should be an issue - at that rate, nobody would ever give anything away lest he should need it later on.
http://www.ageuk.org.uk/Global/Age-Cymru/Factsheets%20and%20information%20guides/FS53%20Capital%20income%20and%20means%20tested%20benefits%20April%202012.pdf
http://www.ageuk.org.uk/home-and-care/care-homes/deprivation-of-assets-in-the-means-test-for-care-home-provision/

With regard to making gifts and IHT the rules are here
http://www.hmrc.gov.uk/inheritancetax/pass-money-property/exempt-gifts.htm Read this carefully.

See also http://www.hmrc.gov.uk/inheritancetax/intro/transfer-threshold.htm regarding using the spouse IHT exemption.

You do not say whether your child has (or is eligible for) a CTF or an ISA. https://www.gov.uk/child-trust-funds/overview

If you do not use the CTF/JISA, you will act as bare trustee for your child if grandpa's gift is used in savings accounts (see http://www.hmrc.gov.uk/tdsi/children.htm)or or perhaps in stocks and shares via an investment trust/OEIC.

Example of bare trust here here http://www.sit.co.uk/products/investing_for_children/features/questions_and_answers/

https://www.hl.co.uk/free-guides/investing-for-children2 might be worth a read.

If your child is a non-taxpayer, note the information re R85/10% rate if appropriate on HMRC link, bearing in mind that the allowance in the examples is out of date.

If the investments in any stocks and shares investment are interest bearing, then this can be reclaimed if appropriate.
http://www.hmrc.gov.uk/individuals/savings-income.htm

Remember that the gift into bare trust belongs to the child absolutely and he has the right to access at 16/18 as appropriate.

If any other type of trust were envisaged the tax treatment is more complex. http://www.hmrc.gov.uk/trusts/types/index.htm

Mojisola

Werdnal wrote: »

He has more invested that he thought, and has made a few comments about setting up an investment for my child - his only grandchild. I have no problems with this and would rather he passed money on to them than me anyway.

The other aspect to consider is whether the money will be handled well by an 18 year old. Not everyone at that age is going to be sensible with a legacy.

xylophone

The other aspect to consider is whether the money will be handled well by an 18 year old. Not everyone at that age is going to be sensible with a legacy.

If any other type of trust were envisaged the tax treatment is more complex. http://www.hmrc.gov.uk/trusts/types/index.htm

The information on HMRC site might be of interest.