School Fees payments & IHT

baby_boomer · 16 April 2021 at 4:28PM

I was looking for a clarification about grandparents paying school fees. Specifically I wanted to check that this does not count as a gift that would create an IHT liability. My best guess is \NO as it doesn't go directly to the child and if it affected IHT there would be some humungous estate tax bills out there !

JGB1955 · 16 April 2021 at 5:16PM

I think it depends on whether it's a regular payment out of excess income, or a payment from capital.

baby_boomer · 16 April 2021 at 5:51PM

Thanks. Interesting. That would be my worst case scenario.

[Deleted User] · 16 April 2021 at 5:52PM

baby_boomer said:

Interesting. That would be my worst case scenario.

What is the potential value of your estate? Are you married?

Keep_pedalling · 16 April 2021 at 6:12PM

Whether you pay the fees directly to the school or to the child’s parents it is still a gift, so unless gifted from excess income it will be subject to to the 7 year rule, in which case you are better off transferring the fees as a lump sum to the parents as that gives you the best chance of all of it becoming exempt after 7 years.