Helping Grandchildren 20 years from now

dothenumbersaddup

Hello. I wonder if anyone has advice on the following. I recognise just how lucky we are to be in this position. My husband and I are 60, and have one grandchild under two, with another on the way.  We have cash as well as DB pensions, so are very fortunate. We would like to ensure that as they reach adulthood they have funds to learn to drive and buy a car - to open up study and job opportunities, and also that they have sufficient money for the deposit and any earnings gap on a house, so that they avoid rent premium.  Clearly we don’t know what the world will be like in 20 years, and the current inheritance tax, pension tax etc does nothing to give us confidence as to the best way of achieving this? As an example -  In a different world we would buy a house now, rent it, and give half each to the grand children when they reach 18,- but clearly this approach is riddled with tax, and legal issues, in the current environment.  I’m uneasy about stocks and shares, as I don’t expect the markets to behave as they have done in the past, although I acknowledge I could be wrong about this - and similarly feel uneasy that we might inadvertently render the grandchildren ineligible for student grants or entry to certain institutions because of the assets we give them. This is all leading me to a do nothing mentality which may well worsen the situation as the financial gifting regime tightens?  Thankyou for reading this post.

wmb194

dothenumbersaddup said:

…I’m uneasy about stocks and shares, as I don’t expect the markets to behave as they have done in the past…

They go up and down but over the long run they’ve gone up, I don’t see why the next 20 years should be any different.

If you want full control you need to save the money in your own names otherwise you can look at e.g., Jisas but of course you could do a mix of things. Complicated trusts should only be considered if you’re talking about a lot of money.

Albermarle

I acknowledge I could be wrong about this - and similarly feel uneasy that we might inadvertently render the grandchildren ineligible for student grants or entry to certain institutions because of the assets we give them

Student loans and grants are based on parental income.

The normal recommendation is to save for them each year in a Junior Stocks and shares ISA, due to the long time scale involved. Two providers offer them with no platform/management charge, although the investments will have their own charge of course.
Junior ISA | Invest in a Junior Stocks and Shares ISA | Fidelity
Junior ISA | Hargreaves Lansdown (hl.co.uk)

The downside for some is that the child gains access at 18. Hence the mention in the previous post of saving in your own name, or both.

horsewithnoname

Can you not just invest your money and make a Will leaving it to your grandchildren with some proviso as to age of inheritance so they don’t blow it on Barbie dolls or something if you are unfortunate enough to die young?

IanManc

dothenumbersaddup said:

 As an example -  In a different world we would buy a house now, rent it, and give half each to the grand children when they reach 18,- 

Thank goodness for your grandchildren that we're not in a different world". At 18 I'd have hated being dumped with the responsibility of a tenanted rental property and the de facto burden of running a letting business, half owned with a sibling with who I might or might not see eye to eye, when the alternative was that I might have been left a sum of money or a basket of investments which could I liquidate parts of as and when I needed it to help me through university or towards buying a car and then insuring it year by year.

dunstonh

 I’m uneasy about stocks and shares, as I don’t expect the markets to behave as they have done in the past, although I acknowledge I could be wrong about this

300 years of history covers most events except armageddon.   And in that scenario, nobody will be caring out money any more.  Using cash for 20 years would be a really bad option.   

and similarly feel uneasy that we might inadvertently render the grandchildren ineligible for student grants or entry to certain institutions because of the assets we give them.

And this sort of thinking is why tax keeps going up and why Labour want to tax people with excess wealth more.    Wanting wealth and benefits simultaneously is not how it should be.

Either you want to set up your grandchildren up for a head start or you don't.   That is really what it needs to boil down to.   Gifting in your 60s is statistically more likely to avoid IHT than gifting it in your 80s.  Even if limits change.  Gifts from income are exempt.   So, regular contributions to a Junior ISA would be fine.

Or you could just retain the money and gift it when you are older and risk rules that will almost certainly be different at the time but you have no way of telling what they will be.

Keep_pedalling

For our 3 grand children we got their parents to set up S&S JISAs as soon as they were born. We put an initial lump sum in to each of them and do a small top up each birthday. This is do what you like with it money and when they get old enough to have a bit more understanding (the oldest is only 7) we can use these ISAs to teach them a little bit about investing so by the time they are 16 they will be able to manage those accounts themselves effectively, whether that is for some short term fun or longer term use will be down to them. 

LHW99

As our current grandchildren (5,2) have JISA's that their parents contribute to, we set up a GIA each as bare trusts to which we add a small amount from income each month. They will have access at 18, but the amount isn't likely (even by then) to be immense, just helpful.

Oherwise we give small amounts for their parents to add to their childrens' BS savings accounts at birthdays / Christmas, that we hope they will learn to use sensibly as they get older.

Bostonerimus1

Gift generously and fund Junior ISAs for each grandchild. Also if you have DC pensions or can fund a DC plan like a SIPP do it as it won't be included in your estate for IHT purposes. You can leave the DC pensions to the grandchildren.

trickydicky14

dunstonh said:

 I’m uneasy about stocks and shares, as I don’t expect the markets to behave as they have done in the past, although I acknowledge I could be wrong about this

300 years of history covers most events except armageddon.   And in that scenario, nobody will be caring out money any more.  Using cash for 20 years would be a really bad option.   

and similarly feel uneasy that we might inadvertently render the grandchildren ineligible for student grants or entry to certain institutions because of the assets we give them.

And this sort of thinking is why tax keeps going up and why Labour want to tax people with excess wealth more.    Wanting wealth and benefits simultaneously is not how it should be.

Either you want to set up your grandchildren up for a head start or you don't.   That is really what it needs to boil down to.   Gifting in your 60s is statistically more likely to avoid IHT than gifting it in your 80s.  Even if limits change.  Gifts from income are exempt.   So, regular contributions to a Junior ISA would be fine.

Or you could just retain the money and gift it when you are older and risk rules that will almost certainly be different at the time but you have no way of telling what they will be.

And this sort of thinking is why tax keeps going up and why Labour want to tax people with excess wealth more.    Wanting wealth and benefits simultaneously is not how it should be.

100% agree with this

Albermarle

horsewithnoname said:

Can you not just invest your money and make a Will leaving it to your grandchildren with some proviso as to age of inheritance so they don’t blow it on Barbie dolls or something if you are unfortunate enough to die young?

To do this you have to do it properly, with discretionary trusts etc., so will be not simple or cheap.
It seems many people just make a statement in their will that money left to Niece etc should be withheld from them until they are 25 say, but it does not hold any water legally AFAIK. Probably these are DIY or cheap wills, rather than one drawn up by a solicitor.