Estate Planning For Grandchildren

Estate planning allows you to put down in words what you want to happen after your death. It will be invaluable for those that you leave behind and make things much easier for them when they are sorting out your affairs. This will include letting them know where you have stored your Will so they have easy access to it in due course. Estate planning for grandchildren does not have to be a complicated process. Providing for your grandchildren in a Will is a great way to contribute to their lives. Depending on what you are able to afford, this could be used to pay for private education or help them take their first steps onto the property ladder. Depending on their age, they might use the money to contribute towards their wedding, travel the world, or start a business. There can be tax implications to consider and in this article, providing for grandchildren in a Will, we take a look at the options open to you.

Free Initial Telephone Discussion

For a free initial discussion on how we can help you plan your estate and create your Will, get in touch with us today. We are experienced in dealing with estate planning for grandchildren and we will review your situation and discuss the options open to you in a clear and approachable manner. Early expert legal assistance can help ensure your final wishes are accurately recorded and also avoid the stress of dealing with these issues on your own.  A well-constructed estate plan can provide you with peace of mind and also help those administering your estate. Simply call us on 0345 901 0445 or click here to make a free enquiry and a member of the team will get back to you.

What issues should you consider?

Many grandparents will be thinking about how best to financially benefit their grandchildren. Some may be considering changing their Wills to include legacies to grandchildren and, in some cases, if the grandchild’s parents are already financially stable, then the grandparents might consider skipping a generation and leaving part, or all, of their estate directly to the grandchildren. This is good Inheritance tax (IHT) planning as it avoids assets going through the parents’ estates and thus a possible double charge to IHT.

How do you leave assets to a grandchild?

Children under the age of 18 cannot own property. With many mothers having children later in life, a grandparent could find themselves in their seventies or older having very young grandchildren. One method is to write a trust into your Will specifying how your gift will be inherited. Without this, your grandchild will automatically inherit at 18 years old which may be considered too young an age to handle substantial assets.

You can leave everything in a discretionary trust where it is up to the trustees to decide who gets what and when. However, this may not suit everyone as even if your offspring are the trustees and the grandchildren the beneficiaries, many elderly people worry that the son or daughter will succumb to pressure from an unscrupulous partner, anxious to get their hands on the cash in the trust under the guise of benefiting the grandchildren.

What are the tax implications?

As it currently stands, inheritance tax starts at 40% and it applies to any property you own over £325,000. You and your partner can combine your assets so it starts at £650,000. If your house is valued at over £650,000, inheritance tax will be due and it is a good idea to consult a suitably qualified tax adviser in order to mitigate the amount that will be owed.

As long as you live for another 7 years after you’ve gifted your property, the beneficiary won’t have to pay inheritance tax. If you don’t, it would still fall under your assets when you die and tax would have to be paid on it. If you die between 3 and 7 years after gifting your property, the beneficiary will still have to pay tax, but not the full 40%. This is known as ‘tapered relief’.

You must also take into account that property or any assets left in a discretionary trust, or in a trust until a specified age, may incur a potential inheritance tax charge every 10 years on a sliding scale of up to 6% of the value of the trust in excess of whatever the starting point for IHT is at that time. If money is not set aside to meet this charge, the trustees may be forced to sell the house to pay the tax bill.

If the main asset is a property, what some grandparents might want to consider is to leave the assets in trust, with the adult children enjoying the income from the trust until they die and the grandchildren inheriting the capital or the property.

Are there any other considerations?

It is useful from a taxation perspective to be clear about how much you intend to leave, how many and how old are your grandchildren, and for what reasons are you leaving them money. Different circumstances will dictate the best strategy to employ in order to mitigate any tax implications and also ensure your will reflects how you want to look after and provide for your grandchildren after you have died.

 The importance of a Will

A Will is a legal document that sets forth your wishes regarding the distribution of your property, other assets and the care of any dependent children and grandchildren. If you die without a Will, those wishes may not be carried out. Further, your heirs may end up spending additional time, money, and emotional energy to settle your affairs after you’re gone.

Wills can vary in their effectiveness, depending on the type, although no document will likely resolve every issue that arises after your death.

In theory, you can write your Will on the back of an envelope. However, as it is a legally binding document it must meet certain criteria. It needs to be witnessed and signed by two independent adults and dated. These witnesses cannot inherit anything from your Will or benefit from your Will in any way (although they can act as executors). Your Will should also name your executors, who are authorised to gather in your assets and divide them up according to your instructions. This process is known as probate. As long as the executor is not a witness, they can be a beneficiary of the Will.

How we can help

We have a proven track record of helping clients plan their estates and draft their Wills. This includes relatively straightforward estates but also complex estates where assets are held all over the world and where there are also business assets involved. We will guide you through all the necessary legal due diligence in a comprehensive and timely manner. We firmly believe that with the right solicitors by your side, the entire process will seem more manageable and far less daunting.

How to Contact our Wills and Probate Solicitors

It is important for you to be well informed about the issues and possible implications of planning your estate and writing your Will. However, expert legal support is crucial in terms of ensuring your final wishes are met as you would want them to be.

To speak to our Wills and Probate solicitors today, simply call us on 0345 901 0445, or click here to make a free enquiry. We are well known across the country and can assist wherever you are based. We also have offices based in Cheshire and London.

Authored by Ben Posted in News, Private Client Tagged as