Recent research on two thousand people, aged between 60 and 80 years of age, has revealed that 26% are willing to contribute money to support their grandchildren through a key life event. Examples included paying for a university degree, getting married or purchasing their first property.
As government income from inheritance tax has increased over the years, largely due to rising house prices, many parents or grand parents are looking at ways to gift money whilst they are still alive.
Under current rules, providing the donor lives for seven years after the gifts are made, the value of a gift is excluded from the value of their estate when they die.
Where traditionally grandparents have left their legacy via a Will, an increasing number are looking at ways to implement intergenerational financial planning by helping their family members out sooner rather than later. Some options include funding a Junior ISA (for 2020/2021 the limit is £9,000 per annum) or paying into a pension, as you can contribute a gross amount of up to £3,600 a year into a pension for a child.
The research also showed that 16% of those who took out a Retirement Interest Only (RIO) mortgage, did so to give their family a gift.
Nathan Mead-Wellings, Director at Finura, comments: “At Finura we have always been big advocates of intergenerational financial planning, as many inheritance and tax planning strategies are particularly effective when grandparents, parents and children work together. However, it is also important to ensure that those gifting the money protect their own financial position before gifting away large sums money. This is where our lifestyle and cashflow modelling software can really help clients to visualise what their future scenarios could look like and how much they can afford to gift to benefit younger members of their family.”
If you would like to discuss any of the above in more detail, please contact your Finura adviser.
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