Grandparent paying for education

helpingmymum

Hi,

My 80 year old mother is considering paying for my daughter's school fees up front (for a 3 year period, totaling just under 30k, payment direct to school).

My mother sold her property a number of years ago and lives in rented accommodation. She has c120k in savings. Her income exceeds her outgoings.

I am unclear where this falls with regards either gifting of monies or deprivation of assets.

Do I need to seek professional advice or can this forum advise?

TIA.

Keep_pedalling

She is well under her IHT nil rate band there is no issues as far as tax is concerned.

As she will still have £90k in saving and those saving will continue to grow through excess income it is unlikely that this would be seen as deliberate deprivation of assets should she ever need residential care at some point in the future.

Savvy_Sue

Are you saying your mother is planning to pay 3 years of school fees up front? My big question about this would be, what if the school doesn't suit the child and they need to leave after a shorter period.

Keep_pedalling

Savvy_Sue wrote: »

Are you saying your mother is planning to pay 3 years of school fees up front? My big question about this would be, what if the school doesn't suit the child and they need to leave after a shorter period.

These schemes pay back unused fees if a child leaves early, the bigger issue is what happens if the school goes bust.

helpingmymum

Hi, yes, that is what I'm saying.

The school policy allows for that and will either return funds or transfer to A. N. Other school should you choose to move.

helpingmymum

Keep_pedalling wrote: »

She is well under her IHT nil rate band there is no issues as far as tax is concerned.

As she will still have £90k in saving and those saving will continue to grow through excess income it is unlikely that this would be seen as deliberate deprivation of assets should she ever need residential care at some point in the future.

One point of detail - her savings are split across accounts, ie current, bond, premium bonds etc. Is that in any way material? All can be accessed immediately should the need arise, they'd just forgo the interest.

Keep_pedalling

helpingmymum wrote: »

One point of detail - her savings are split across accounts, ie current, bond, premium bonds etc. Is that in any way material? All can be accessed immediately should the need arise, they'd just forgo the interest.

No, but if this comes about she should use the funds that pay the least interest.

xylophone

In terms of IHT, there is the possibility of a PET but it may be that after taking into account nil rate band(s), this would not be relevant.

https://www.litrg.org.uk/tax-guides/bereavement/what-nil-rate-band

Deprivation of assets is a different matter.

Your mother is already over eighty and while she may be fit and well at the moment, if she were to need means tested care at some point in the future, the gift could come under scrutiny.

I wonder whether it might be better for your mother to lend you and your spouse the £30,000 so that you could make the payment?

You would draw up a loan agreement and have it signed, dated and witnessed.

You do not have to pay interest but it would be wise to have a repayment schedule of a certain amount per quarter, perhaps the amount of a term's fees?

Tom99

Keep_pedalling wrote: »

These schemes pay back unused fees if a child leaves early, the bigger issue is what happens if the school goes bust.

Or nationalised.

Malthusian

"Upfront school fees" schemes are often a rip off, a means to get cheap credit by exploiting parents' financial naivety.

Examine carefully what discount they are offering you, compare that with the return you would project from an aggressively allocated diversified stockmarket investment (you are lending your money to an unlisted small business after all) and ask yourself whether the rate of return is sufficient for the risk of up to 100% loss.

There would also be less risk of a deprivation of assets query if the grandmother paid the school fees as and when they arose, instead of paying three years' worth up front.

Does she have Lasting Powers of Attorney in place?

helpingmymum

Malthusian wrote: »

Does she have Lasting Powers of Attorney in place?

Not yet, I’m on with that. Planning on doing them both myself rather than paying the c£800 solicitor fee per POA. Discuss...😀

What’s the tie-in to school fees?