Paying into Son's LISA

6022tivo

Hello

Just looking at tax efficient ways to save on inheritance tax and other bits and pieces. 

Although my Son has bought his first house, his LISA remains open and my understanding is that he can access at 60, or before losing 25%. 

I think a very simple way of helping him and a little present to him when he is 60 (Maybe after I'm gone) is to just add £3k to his account every year? (Government will make it £4k). 

I've picked £3k as it will be my annual allowed gift which is not regarded for inheritance tax under the 7 year rule. 

I think it's a nice way to give him a little lump sum at 60 which is tax free and efficient?? 

Thoughts people?? 

wjr4

Why not a pension which he can access earlier (based on current legislation)? 

6022tivo

wjr4 said:

Why not a pension which he can access earlier (based on current legislation)? 

Yea maybe.. Under current legislation he can get to 25% of a pension at 57I think, likely to increase. 
 I feel that will just combine with his funding and is open to the risks of investment?? 

The thought on the LISA is just a nice little fixed chunk at 60 which is from me which he can think of as a nice gift for him and his family. 
The 25% government bonus + interest is not at risk (But understand this can lose value against other investments).   

I can just deposit it easily as well, and is not questionable for IHT or much else. 

Keep_pedalling

If your estate is actually within IHT territory  then £3k a year is not going to reduce it very much. What is your net worth and marital status?

eskbanker

6022tivo said:

I've picked £3k as it will be my annual allowed gift which is not regarded for inheritance tax under the 7 year rule.

Personally I'd go with the full £4K (maximum annual LISA contribution) - even if some of it was ultimately subject to IHT, it would have been if left in the estate anyway, but he'd benefit from the extra 25% uplift.

6022tivo

Keep_pedalling said:

If your estate is actually within IHT territory  then £3k a year is not going to reduce it very much. What is your net worth and marital status?

I think it is pretty close. I'm not 50 yet. I do have some left over from my late wife. So it calculates at around 700k I think that I'm allowed to have. 

Protecting the house in someway maybe worth doing, then that gives me loads of wriggle room. 

ColdIron

6022tivo said:

I think a very simple way of helping him and a little present to him when he is 60 (Maybe after I'm gone) is to just add £3k to his account every year? (Government will make it £4k).

The Govt. add 25% so only £750, not £1,000, to make it £3,750

I wouldn't use a cash LISA for 30 odd years, inflation will seriously erode it. A Stocks and Shares LISA makes much more sense even without a contribution from you

6022tivo

eskbanker said:

6022tivo said:

I've picked £3k as it will be my annual allowed gift which is not regarded for inheritance tax under the 7 year rule.

Personally I'd go with the full £4K (maximum annual LISA contribution) - even if some of it was ultimately subject to IHT, it would have been if left in the estate anyway, but he'd benefit from the extra 25% uplift.

TBH, we are having a crap time with an estate and the council, and the least figures and calculations to worry about on forms after my passing will make me feel better for my son when I go. The 3k rule is simple and he's no worry on potential probate forms. 
For the sake of 4k, he then has to put the annual gifts in, take off 3k a year and all that and although it's simple it's not worth it. 

Also myself putting in £3k allows him to chuck £1k into it himself which will be good for him if he can... 
I plan to do this for up to the next 30 years (or death, whichever comes sooner) 

He's currently taken on a chunky mortgage and plans a family soon, so saving is not currently his priority. 

6022tivo

ColdIron said:

6022tivo said:

I think a very simple way of helping him and a little present to him when he is 60 (Maybe after I'm gone) is to just add £3k to his account every year? (Government will make it £4k).

The Govt. add 25% so only £750, not £1,000, to make it £3,750

I wouldn't use a cash LISA for 30 odd years, inflation will seriously erode it. A Stocks and Shares LISA makes much more sense even without a contribution from you

Yes.. I made an error on the calc. I think I had it in my head that he will also add £1k to make it 4k. 

I didn't know a  stocks and share LISA was a thing.. I'm off to google now. 

Do they accept transfer in's from a Cash LISA do you know. 

Whilst I google the mass adverts that come back, any recommendations of a  provider? 

Keep_pedalling

6022tivo said:

Keep_pedalling said:

If your estate is actually within IHT territory  then £3k a year is not going to reduce it very much. What is your net worth and marital status?

I think it is pretty close. I'm not 50 yet. I do have some left over from my late wife. So it calculates at around 700k I think that I'm allowed to have. 

Protecting the house in someway maybe worth doing, then that gives me loads of wriggle room. 

Assuming you inherited all of your wife’s estate and your home is worth at least £350k you have a total of £1M in exemptions so you are well short of it at the moment. 

ColdIron

6022tivo said:

ColdIron said:

6022tivo said:

I think a very simple way of helping him and a little present to him when he is 60 (Maybe after I'm gone) is to just add £3k to his account every year? (Government will make it £4k).

The Govt. add 25% so only £750, not £1,000, to make it £3,750

I wouldn't use a cash LISA for 30 odd years, inflation will seriously erode it. A Stocks and Shares LISA makes much more sense even without a contribution from you

I didn't know a  stocks and share LISA was a thing.. I'm off to google now. 

Do they accept transfer in's from a Cash LISA do you know.

They don't have to but many do

Whilst I google the mass adverts that come back, any recommendations of a  provider?

Here's a list from Which! It looks fairly comprehensive. Hargreaves Lansdown and AJ Bell are the big players

https://www.which.co.uk/money/savings-and-isas/isas/lifetime-isas-a5OTi7J6jRz2#best-stocks-and-shares-lifetime-isa-providers-and-rates