Giving money away to children - pitfalls? Suggestions?

Langtang

metron said:

I do want, should the need arise, to be able to access money should we have some exceptional expenditure, but I'm happy to take my chances on that with son and daughter. I can't demand it, of course, but I'm pretty sure they'd oblige!

You mentioned the money to your son was to help him up the property ladder. I'd be concerned that if you did need help in the future, financially, that the money would be tied up in the property and not readily available. Unless you mean your son giving you some of his own money?

Sea_Shell

Are you wanting them to effectively "ringfence" this money, in case you need it again in the future?

It is not actually a gift in the true sense of the word, as they cannot do with the money as they wish? (which could involve paying down a mortgage, or blowing in on holidays).

You want them to keep it "available" just in case?

Aren't "gifts with reservation" still counted towards IHT?


Wouldn't this still put an onus on your executor, in the same way as the suggested "loan" arrangement?

metron

Langtang said:

metron said:

I do want, should the need arise, to be able to access money should we have some exceptional expenditure, but I'm happy to take my chances on that with son and daughter. I can't demand it, of course, but I'm pretty sure they'd oblige!

You mentioned the money to your son was to help him up the property ladder. I'd be concerned that if you did need help in the future, financially, that the money would be tied up in the property and not readily available. Unless you mean your son giving you some of his own money?

Thanks - yes he will have some spare (he'll need that for the running costs of the house they're buying!) and there's always the option of a further mortgage advance in extremis.  Loan to value only around 50%.

metron

Sea_Shell said:

Are you wanting them to effectively "ringfence" this money, in case you need it again in the future?

It is not actually a gift in the true sense of the word, as they cannot do with the money as they wish? (which could involve paying down a mortgage, or blowing in on holidays).

You want them to keep it "available" just in case?

Aren't "gifts with reservation" still counted towards IHT?


Wouldn't this still put an onus on your executor, in the same way as the suggested "loan" arrangement?

Not at all. The money is entirely theirs, to do with as they please.  No gifts with reservation - just gifts.  If they chose to help, in the very unlikely scenario of our needing help, it would be entirely their choice.

SouthCoastBoy

I think you are going to have to bite the bullet and what will be will be. Once you have gifted money the control of that asset has been relinquished 

Sea_Shell

metron said:

Sea_Shell said:

Are you wanting them to effectively "ringfence" this money, in case you need it again in the future?

It is not actually a gift in the true sense of the word, as they cannot do with the money as they wish? (which could involve paying down a mortgage, or blowing in on holidays).

You want them to keep it "available" just in case?

Aren't "gifts with reservation" still counted towards IHT?


Wouldn't this still put an onus on your executor, in the same way as the suggested "loan" arrangement?

Not at all. The money is entirely theirs, to do with as they please.  No gifts with reservation - just gifts.  If they chose to help, in the very unlikely scenario of our needing help, it would be entirely their choice.

So you want to gift it, with no strings, but at the same time protect it?

A gift is a gift and what will be, will be.

If you're having to over-think it, maybe gifting it isn't the best idea?

Albermarle

SouthCoastBoy said:

I think you are going to have to bite the bullet and what will be will be. Once you have gifted money the control of that asset has been relinquished 

Or keep some of it and 'risk' having to pay more tax on it .
As they say only two things certain in life - death and taxes ( and people trying to avoid paying them )

arnoldy

Giving money away in large quantities to your kids is bad news.

Especially if they are younger than 35-40. Bank of Mum and Dad kids fed on the nipple of family money generally never do well as they should, the money gives them a lifestyle they could never have afforded by their own endeavours - a sort of "fraud" lifestyle - and sucks the ambition and self betterment out of them.

At least wait till they are 35-40 - by then they will have by and large reached their "position" in life by their own endeavours, so more money wont spoil them.

Doc_N

arnoldy said:

Giving money away in large quantities to your kids is bad news.

Especially if they are younger than 35-40. Bank of Mum and Dad kids fed on the nipple of family money generally never do well as they should, the money gives them a lifestyle they could never have afforded by their own endeavours - a sort of "fraud" lifestyle - and sucks the ambition and self betterment out of them.

At least wait till they are 35-40 - by then they will have by and large reached their "position" in life by their own endeavours, so more money wont spoil them.

Something in that - though helping them buy their first house is an entirely different matter. Had we not done that, our two would still be renting, as against living comfortably in large houses.

mark55man

Is there not a spectrum of stuff you could be doing, rather than a binary gift it or not.  Its clear you do not trust D-I-L yet - so why not split the gift up into bits that you don't mind losing to the family and giving these annually until you do.  So each tranche would start the PET clock running and this would be better than contriving an arrangement. A possible advantage of the above is that gifts from surplus income are not IHT'able as long as the arrangement meets certain criteria.  Plenty of threads on that from people who have done it

It does smack to me like you want to both sides of the fence at once and as an earlier poster suggested you need to decide what's more important.  Maybe it is your legal background, but this strikes me as seriously over thinking