Leaving money to 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 a 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, leaving money to 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 draft a will to ensure your grandchildren receive money from your estate, get in touch with us today. 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. Simply call us on 0345 901 0445 or complete our online enquiry form and a member of the team will get back to you.
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 have 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 leaving the assets in a 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 prospective 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.
How we can help
We have a proven track-record of helping clients draft their wills that provide for grandchildren. This includes relatively straightforward estates and also complex estates where assets are held all over the world. 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 writing your will in the best way to provide for your grandchildren. 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 allow a member of the team to get back to you by filling in our online enquiry form. We are well known across the country and can assist wherever you are based. We also have offices based in Cheshire and London.
Disclaimer: This article provides general information only and does not constitute legal advice on any individual circumstances.
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