Helping grandchild with Uni fees

Camper2

I was intending to give my grandchild (I will have a further grandchild at Uni next year too) £5,000 per year towards University tuition fees. I thought I would pay this directly so avoiding it being seen as a ‘gift’ and so liable to tax if I die within 7 years.
I know that the family will have difficulty paying the top up for the maintenance loan, especially with two children at University 24/25 and I want to help. 

Having read the advice about not paying fees up front, how can I best help my grandchildren without leaving them a possible tax burden should I die within 7 years?

DullGreyGuy

The tax on gifts is paid by your estate not by the recipient of the gift

The_Unready

.....and I'm not sure that you can pay his tuition fees directly. Aren't they managed via the student loan scheme, or is he not making use of that?

silvercar

A generous gesture, but I would suggest that the money could be better directed.

If the parents are going to struggle with the maintenance loan, why not give the money to your grandchildren as a top up to their maintenance costs rather than for tuition fees?

On top of that, there is a valid argument that (a) a large minority won't clear their loan in full and it will be written off after XX years, so you would be effectively giving money to the government rather than your grandchildren. They wouldn't even benefit by reduced student loan payments as the payments are 9% of their earnings over the threshold irrespective of their loan size. (They may or may not eventually benefit as their loan may be cleared earlier, but see (a) as that may not happen).

If your grandchildren can manage their time at uni by parental support for maintenance and/or part time jobs, would your gift be better spent on a house deposit?

 

theoretica

Camper2 said:

 I thought I would pay this directly so avoiding it being seen as a ‘gift’ and so liable to tax if I die within 7 years.

I don't think that is correct - whether you give money for a car (or fees) or pay for it and give the car (or uni course) it is still a gift with value.

Camper2

Thank you all for your very sensible and informative answers. 

Yes I think I will see how the family get on with paying the maintenance costs and perhaps divide the money into some help with maintenance and some invested for their future. Although how best to invest I’m not sure. 

Thank you again

kaMelo

Camper2 said:

I know that the family will have difficulty paying the top up for the maintenance loan, especially with two children at University 24/25 and I want to help. 

Just to add, when there are two children from the same household at university they will both receive an increased maintenance loan as the "expected parental contribution" is split between them.

Nick9967

To add (i have one at Uni now) if i were offered help like this then i would suggest the most applicable route to helping , and easiest, is to pay all or part of their accommodation costs, between 4 and 7k pa depending on where and what level, you can even set the 3 times per year (usually Oct, Feb & May) direct debit to come out of your bank and pay directly, this would allow your grandchild to use their maintenance loan to both top up this if required and/or to live on , would save your family forking out the average £60 per week for them to eat/live/socialise etc etc - just a thought!

EAPICKUP

Thinking of paying living accommodation uni fees for my granddaughter, not tuition fees. Intend to pay them out of surplus income so what records do I need to keep? And can I pay the uni direct.

Liz

silvercar

https://forums.moneysavingexpert.com/discussion/comment/81890080#Comment_81890080

You can pay the accommodation provider direct, it may not be the uni itself. Ask your granddaughter to forward you the bills.

I would write a letter stating you are paying this out of income and keep the letter with your important papers. Should you sadly pass away within 7 years AND your estate be subject to inheritance tax, your executor would need to complete the IHT403 form (https://assets.publishing.service.gov.uk/media/5f60b44cd3bf7f7234487bf0/IHT403-05-20.pdf) you could supply the details in a spreadsheet that you keep with your important papers.

silvercar

https://forums.moneysavingexpert.com/discussion/comment/79955157#Comment_79955157

There are special rules for supporting education being outside of IHT for parents, but not grandparents.

The details are here: https://www.legislation.gov.uk/ukpga/1984/51/section/11

Just posting this in case a parent has a similar query - it won't apply to grandparents unless their grandchild is a dependent relative ie they care for the child rather than the parent.