What should I consider if gifting money to my grandchildren?

06 July 2012

Huw Worthington provides legal advice on the consequences of gifting money to grandchildren to help with University fees

When making gifts during your lifetime you can give up to £3,000 per tax year which is immediately exempt from inheritance tax.

If you haven’t made any gifts in the previous tax year then you can carry forward the unused allowance to provide you with £6,000 which is immediately free from Inheritance tax. 

In addition to the £3,000 annual exemption you can make further additional gifts of up to £250 to as many people as you want. However, the £250 additional gift can not be paid to the same beneficiary as the £3,000 gift!

The current rules ,you could argue, don’t appear to be particularly generous so are there implications if you give your two grandchildren say £20,000 each.

I see two potential complications:

1-Inheritance Tax: If you do not survive seven years then the gift is included in your estate when calculating Inheritance Tax.

The gifts will use part of the nil rate band (£325,000 per 2011/2012 tax year) which is available to offset against your estate.

2-Nursing Home Fees: Assets cannot be given away deliberately to defraud the state – in other words you are not able to claim income support should you require Nursing Home Care if you have become “eligible” due to deliberately giving away all of your savings!

Huw Worthington is a member of the Society of Estate and Trust Practitioners, the leading worldwide professional body for practitioners in the field of estates, trusts and related matters. Our Wills and Estates department provide specialist advice on all matters relating to Wills and Estate planning solutions, as well as the administration of estates, contested Wills, Intestacy and Inheritance tax advice.


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