Passing on your wealth before, rather than after, you die can help your children when they need it most, but there are some financial pitfalls to watch out for. Here’s everything you need to know.
It’s natural to want to leave some of your wealth to your children (and also absolutely fine to spend it all on yourself!), but did you know that you don’t have to wait until you’re gone to do it? Many people now prefer to give a ‘living inheritance’, where you pass on significant sums to family during your lifetime. That way, you get to see them enjoy the money – perhaps helping them on to the housing ladder, paying for private schooling for grandchildren or helping in other ways.
Gifting money can potentially help with Inheritance Tax (IHT) planning, too, meaning you can give more of your wealth to your children or grandchildren instead of the tax office. HM Revenue & Customs received a record £5.5bn in IHT receipts between April 2021 and February 2022, more than double that paid a decade ago in 2009/10 (£2.7bn) – in part due to rising property prices.
A survey by retirement adviser Key found that 45% of over-55s agreed with the statement: ‘Waiting to give children an inheritance is wrong; money should be given when it is useful.’ Key CEO Will Hale says: ‘People choose a living inheritance for a variety of reasons, including Inheritance Tax mitigation. For many, it’s more about the emotional benefits of giving their loved ones a financial step-up when they need it most and being able to see them enjoy it.’
Sheena Doherty, senior wealth management consultant at Sovereign Wealth, agrees: ‘I’ve seen an increase in older clients wanting to pass on their wealth to children or grandchildren now rather than waiting. The reasons are varied, but helping children with house deposits often features. I’ve also had clients gift a lump sum to grandchildren when they turn 18. It’s a lovely thing for anyone with wealth to help their family, but you do need a plan if you’re considering gifting.
Continue reading the full and original article from: Good Housekeeping
You might also like to read: Single or Joint Life Insurance Policies – What’s Best?