passing money over to children, painlessly

[Deleted User]

I have been thinking for a while and observing my children in their financial struggles. They don`t waste money, they have mortgages, they shop at lidl and don`t run flash cars or go on expensive holidays. They all have steady spouses or long term partners and there are grandchildren. One needs a new bathroom with a proper vent, another needs a new roof and another needs to move nearer to work to get a better work/life balance

I am not going to make them wait until I die before they see some financial relief and believe me I have thought long and hard. I came from the run down terraced side of a northern town and life growing up was a real hard struggle, so did my deceased husband. It is almost a case of `it was hard for us and we coped etc` but today is harder for the younger ones, we could walk into a new job if we wanted a change. I can make a difference so I will

I was just wondering about your thoughts on you and your own family and if you can afford it, do you pass money or items over and how?

I give`downsized` items away to them and everything I give is welcomed with open arms. This weekend I have had a real good look at my finances and have set up monthly standing orders to each of them, all within the small gift tax allowance and in three weeks I have a maturing bond, it belonged to my husband, They will each get a cash lump sum from me.

They are in tears and speechless. I can only imagine the sense of relief and that is worth much more than money

Keep_pedalling

Being in the fortunate position of having enough assets that our estate would end up paying IHT, we have already gifted substantial sums to our children and will continue to do so. Apart from tax reasons it is nice to see that money we were never likely to spend in our lifetime put to good use by our children.

As long as doing this is not likely to leave you struggling financially in later life, and your children are responsible adults I see this as a good thing.

You mention "small gift tax" but there is no such thing. I assume you are referring to the allowable gifts you can make that are exemp from IHT in which case this is only of any consequence if your estate is large enough to be subject to inheritance tax. If that is the case you should keep a record of all non trivial gifts made in the last 7 years with your will to make life easier for your executors. If that is not the case then those allowances do not really need to be considered.

The other point to consider is depreciation of assets. Giving away assets to avoid care costs can backfire badly, but providing you are not signing your home away and / or giving most of your other assets away then it should not be an issue.

[Deleted User]

Keep_pedalling wrote: »

As long as doing this is not likely to leave you struggling financially in later life, and your children are responsible adults I see this as a good thing.

You mention "small gift tax" but there is no such thing. I assume you are referring to the allowable gifts you can make that are exemp from IHT in which case this is only of any consequence if your estate is large enough to be subject to inheritance tax. If that is the case you should keep a record of all non trivial gifts made in the last 7 years with your will to make life easier for your executors. If that is not the case then those allowances do not really need to be considered.

The other point to consider is depreciation of assets. Giving away assets to avoid care costs can backfire badly, but providing you are not signing your home away and / or giving most of your other assets away then it should not be an issue.

Thanks for the non-trivial gift help, yes re IHT. I keep records and a will in a safe place, having done probate myself. I will mark down the monthly gifts, which I hadn`t done. I assume that they will also be covered by the 7 year rule anyway, month on month

There will be no depreciation of assets for me. Excellent general advice. keep pedalling. Your username always makes me smile as my husband was a passionate cyclist all his life and actually died suddenly while cycling.

Mojisola

kittie wrote: »

Thanks for the non-trivial gift help, yes re IHT. I keep records and a will in a safe place, having done probate myself.

It's important to make sure that your executor (or some other trusted person) knows where your 'safe place' is and has access to it.

Keep_pedalling

kittie wrote: »

Thanks for the non-trivial gift help, yes re IHT. I keep records and a will in a safe place, having done probate myself. I will mark down the monthly gifts, which I hadn`t done. I assume that they will also be covered by the 7 year rule anyway, month on month

That depends, if this is money that is surplus to your requirements than that can be gifted without entering your estate, but you have to be careful with this, because if you do things like dip into your savings to pay for an annual holiday or buy large ticket items then it is really not surplus income.

This is where it is really worth paying for independent financial advice from an IFA.

We only hold copies of our wills, the originals are held with our solicitors. I email them an up to date copy of our gift records annually or if there has been a major change in the mean time.

Keep_pedalling

kittie wrote: »

Your username always makes me smile as my husband was a passionate cyclist all his life and actually died suddenly while cycling.

Yes I do love my bikes. Never raced or time trialled, but do love touring and audax rides, even if I did not come off too well a couple of weeks ago when loosing a battle against gravel and gravity resulted in some very nasty gravel rash.

luxor4t

kittie wrote: »

......I was just wondering about your thoughts on you and your own family and if you can afford it, do you pass money or items over and how?...........

When Dh's mother died he shared his inheritance with our children (all adult). It was not a huge amount of money but was a significant help to each one and I think she would have made that kind of provision anyway, but for complications amongst other beneficiaries.

Gers

You are allowed to give away as much as you want without tax implications - unless you do the deprivation of assets thing.

There's PET - potential exempt transfers - which is the seven year thing. That can be used to give larger lump sums and / or regular amounts out of your surplus income. Your standard of living cannot be reduced by this and it has to be a regular spend (i.e just what you are doing with the monthly standing order) and, preferably it must be able to be tracked.

See http://www.which.co.uk/money/tax/guides/inheritance-tax-explained/inheritance-tax-planning-and-tax-free-gifts/

and https://www.gov.uk/inheritance-tax/gifts

The helpful people on the Cutting Tax board are a mine of information about things like this. I am a recipient of PET monies so have been through the system.

Well done on you for planning ahead and thinking of your children's current needs. When my father died I spent a long time feeling guilty about my (small) inheritance as he did without a lot of things to leave it to me. We discussed this in his lifetime but was adamant that he wanted to pass it on, I think it's a generational view and he wouldn't be moved from it.

agrinnall

Just to be clear, the correct term is "deprivation of assets", not "depreciation of assets", it may make a difference if searching for information.

jennifernil

We are fortunate to have more coming in from pensions and savings interest than we can spend, even after long trips in our caravan, so our savings are increasing by a few thousand each year. Even after making gifts out of income, and giving away the IHT exempt annual gifts.

OH had a good lump sum from his pension, and I got a small inheritance from my Mother, and OH also got from his Mother, so we have more savings than we will ever need. Plus we have a large house.

Our parents helped us when we were in our 20s, so it gives us great pleasure to be able to help our children now.

We have given both our children the maximum exempt amounts for wedding presents, and for the last 8 years we have been giving them the exempt £3k from each of us to help with house deposits and mortgages.

We have 2 grandchildren, so do £25 each monthly investments out of income for them. And 2 years back started paying £125 per month towards both children's mortgages, and £100 per month into our daughter's pension, also out of income.

seven-day-weekend

We helped our son with the deposit to buy his flat and will do so again to extend the lease.