Rise in number of older Britons leaving money to grandchildren in Wills
New research suggests that an increasing number of older Britons are providing financial support to their grandchildren – whether this be in terms of regular gifting, or leaving lump sums and property behind in their Wills.
According to a study recently highlighted by Yourmoney.com, a growing number of grandparents are concerned about ‘intergenerational fairness’ and are exploring various ways to pass their wealth on to the younger generation.
The research suggests that almost half (42 per cent) of all financial gifts passed on by older Britons are intended to help their grandchildren to get on the property ladder.
This is because approximately 69 per cent of grandparents are concerned that their grandchildren would find it difficult to afford their first home without this financial support.
However, grandparents considering gifting or leaving money or property to their children in their Wills need to consider the Inheritance Tax (IHT) implications of such activities – and families should seek specialist advice if unsure.
In the UK, IHT is currently levied at a rate of 40 per cent on all estates valued at £325,000 or more.
Britons typically have an annual gift allowance of £3,000 on top of gifts for ‘special occasions’ such as birthdays. However, grandparents must survive for seven years after giving a gift in order for it to fall out of their taxable estate.
Those who wish to leave property to their direct lineal descendants (including grandchildren) can potentially tap into an additional tax-free allowance under new rules known as the residence nil rate band (RNRB).
These rules enable an additional £100,000 in property value to be passed on to grandchildren tax-free, but specialist legal advice must be sought in order to make the appropriate provisions in the grandparent’s Will.
Priti Shah, Partner in OGR Stock Denton’s Private Client team, said: “Specialist legal advice should always be taken to ensure that you pass on your wealth in the most tax-efficient way, making use of all available reliefs and avoiding any traps and pitfalls.”