IHT - early gifting to young children

RNV

Hello,

As an early thought gathering, would appreciate people's pointers on ways to try to approach early gifting in our situation and what to be aware of:

1.  pretty late with starting family, so 2 x children are still young teens and we are 53/63

2.  with SIPPs now included in estate and SE property values, we are deeply in IHT territory (3+ mln if we both die  Apr 27).
3.  if of any relevance, both of us are currently working and both in 40% IT territory

4.  we are gifting toward their JISAs up to allowable limit (9k);
5.  if they decide to go to university, we are saving for that separately

6.  would like to early gift £100k/ each child towards mortgage deposit. 
7.  IHT exempt gift from excess income does not sound feasible in our case as we will always be reducing capital. 

Considering doing  6. (and start 7 years ticking) as soon as they turn 18.  Appreciate it is too early but have to hope that we educate them well enough to use it wisely.

Potentially more early gifts later but will not be substantial - will depend on how our SIPPs hold in our retirement.

Thanks for your thoughts. 

penners324

Pensions aren't included in iht. There has been no official announcement 

RNV

oh yes, they are, unfortunately, from 06 April 2027. Last Budget news....

Notepad_Phil

Sounds as though you've thought things through. Just one thing I would add is that you could also think about adding £2880 (assuming current income tax rates remain) for each of them into a SIPP per year until they get through education. Though you would need to decide whether the big advantages of the money being added in a tax efficient manner along with a good start in their retirement investments outweighs the big downside in that your kids obviously wouldn't get access to that particular pot of money for a long time - to me it does as you're planning on gifting plenty of other money too.

Keep_pedalling

With that sort of wealth I think some professional advice would be in order 

RNV

Notepad_Phil said:

Sounds as though you've thought things through. Just one thing I would add is that you could also think about adding £2880 (assuming current income tax rates remain) for each of them into a SIPP per year until they get through education. Though you would need to decide whether the big advantages of the money being added in a tax efficient manner along with a good start in their retirement investments outweighs the big downside in that your kids obviously wouldn't get access to that particular pot of money for a long time - to me it does as you're planning on gifting plenty of other money too.

thanks - have been going back and forth with pension contribution decision but so far decided not to with such a long horizon and a huge uncertainty of the eventual outcome. Adding towards our own SIPPs  instead.

Albermarle

penners324 said:

Pensions aren't included in iht. There has been no official announcement 

They will be from April 2027. It was announced in the last budget. 
All unused DC pension pots will be included in IHT calculations, along with the rest of the estate.

RNV

Keep_pedalling said:

With that sort of wealth I think some professional advice would be in order 

thanks, have got wills but apart from that...Is there actually a scope for a professional advice?

Most of the value is not liquid, being our house (a modest 4 bed; so cannot downsize)  and 2 x SIPPs.  

Albermarle

OP - My immediate thoughts are can you really trust an 18 year old with that amount of money. If they go to Uni, they could be 25+ before they even think about buying a house.
Lots of temptations at Uni .....
Also why is one of you still working at 63, when you seem so financially secure ?

For a couple , IHT usually only becomes an issue on second death. That could well be 30 or 40 years away, so what is the rush? In any case there have been rumblings about restricting large gifts in the forthcoming budget, although if it happened it would probably be aimed at very large gifts, more than £100K.

RNV

Well, the rush is our ages and anticipated mental decline to leave any significant financial decisions until much later really....highly unlikely we have 30 years, even if not dead dead, will definitely be part-mentally dead...

And are we really "financially secure" to stop working ?  I wish I could stop tomorrow; DH enjoys what he does, now consultancy route, so reduced hrs.  We are still paying off our mortgage (2 years left) and would like to help kids as much as we could so going through a whopping £6.5k net / month (including savings, so not all wasted).  If we stop working now,  there will not be any room for any "substantial" help to kids.

DRS1

Assuming it will be years before they are likely to buy a house perhaps consider splitting the £100k over a period of 5 years and just put £20k pa into an ISA (may have to be an S&S ISA and some of it could go into a LISA) for each of them once they reach 18.

OK maybe that means the 7 year period starts a lot later for the last gift but if you find that one or other can't resist temptation then you can rethink your plans.