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Inheritence to DCs(18 Posts)
I read in the Times about how grandparents are now often leaving money to the grandchildren rather than their children, due to housing costs etc. I thought, that is a good idea. But difficult to speak to the parents about it.
What kind of advantages would it have over having inherited yourself and then passing on the money to the DCs? Just wondered if anyone had any thoughts on it.
My parents partly did this by leaving significant sums to the grandchildren (my kids).
Advantages are that it avoids the creation of a bigger inheritance tax 'pot' by skipping a generation. Many of our generation were able to get on the housing ladder in the 1980s and are now sitting on houses worth £500k+ (especially in the south east). My parents took the view that a) we didn't need their inheritance b) by helping our kids they would be indirectly helping us in later life (possibly helping with Uni fees or house deposits). And I think my parents also used it as a way to prevent my sibling from inheriting huge sums which they thought he would squander.
There are some problems though, as there's nothing to stop a wayward 18 year old from blowing an inheritance on drink, drugs and partying unless it's very carefully tied up in hard to access trust funds (or property).
As Jeng says it avoids adding to potential IHT.
Problems if there are uneven numbers of GC. For example I have one sister and she has one child to my two, so split would have to be 50/25/25. My DM is frail and has a very simple will and is too traditional to change it.
One thing you can do is to apply to vary the will after the death, so that might be what we will do. My DC are old enough and mature enough to manage the money, but otherwise you would set up trusts just as you would in your own will.
Thanks, that's interesting. We have three sets of parents to grandchildren each with two grandchildren each...so could be divided, and the parents in each case are reasonably well off. i suppose it might be difficult to get agreement from everyone though about it. Don't want it to lead to any kind of fall out!
So it may be possible to deal with it after, so say if the grandparents died and left money to their children (the parents) at that stage it can be altered. and trust funds could be a possibility. Is there such a thing to make sure it is set aside for example for a house deposit in the future?
It also depends on how old the grandkids are. It's a bit harsh if the will is written badly when everyone is still forming families (or written well, but used), and several kids arrive afterwards. My Mum inherited from her grandparents when she was a young adult, it has allowed my parents to take some risks, which have resulted in a comfortable life.
My grandmother (other side) left each grandchild a small amount each. Some of it has been redistributed, but not by a dead of the will. So it is reliant on my Dad surviving another 7 years together tax free. It has been distributed by perceived need rather than by equal division. I think it's the right thing to do - the 2 that got the money have had a very chaotic childhood, and not had the opportunities the rest of the cousins have, and as a result 4 of us are buying houses while 2 live hand to mouth.
One thing that might be an issue is benefits (including universal credit) - any inheritance over £16k would prevent them from claiming, so the money would just get spent on every day expenses rather than anything like a house deposit. From that point of view it's better to get an inheritance a bit later in life when a person is a bit more established and have enough savings that they wouldn't get benefits anyway, unless the amount is enough that they can make investments that is a bit more life changing. It might be better for it to go to the parents if they already have enough savings that would disqualify them from benefits, then they can pass it on to the dc when the dc are older and more financially secure. If the inheritance gets put into a discretionary trust then it won't count for benefits, but it costs money to set it up and administer so only worth it for larger amounts. Of course if the young people are high flyers who are likely to get well paid jobs and would never need benefits then it might not be an issue.
Wecks why split because of two children my gp left their three dc something and equal amount to all gc. Three on one side, four on the other. Each person is a whole person. Madness to give one 50% and others half that by virtue of being two of them. Depending on his much money there is, surely you can give urine everyone you want too!!
IamSlave Maybe I didn't explain what I meant.
The will is currently a 50/50 split between me and sis. It won't be changed, there is no question of the GC being left anything directly (and actually it's not a lot of money but we don't need it).
I have 2 DC and sister has one, so my DC share overall would be 50% between them. Sis needs the money so wouldn't be passing it on to her DC.
Not grandparents but similar. I supported a friend who died childless to write a will. She had two sisters with three kids between them and a couple of god children.
With the help of a solicitor she willed that her house would be sold and the money divided into 5 equal parts to be held in trust until each child was 25.
The solicitor recommended this age to minimise the risk of mad splurging.
Thanks it's all interesting. i think there may be some thing where they can't claim any benefits until 25? Not sure. I think it would be unlikely, unless they had children young. The trust sounds useful.
I suppose if we just inherited from the grandparents, which will probably be the case, then it is possible to gift half to each child at say 25.
One potential problem with inheriting and then regifting to DC, is IHT.
If your own estate will be over the IHT allowance, if you were to die within 7years, HMRC would count this gift as part of your estate, and it would be taxed at 40%.
If you're married , what you leave to your spouse is free of IHT, so that may bring your estate low enough . But the gift would still use up some of your IHT allowance, so would still be having a possible impact , when your spouse dies.
But maybe this is a more important factor if you are a single parent.
Trusts can be useful. Also can have tax implications.
Good idea to run any financial planning past a competent professional as regards tax implications. Always if IHT involved, as it is accurately described as an optional tax
inheriting and then regifting is not the same as varying a will after death. As long as all beneficiaries agree it is a legitimate procedure and the end result is the estate goes directly to the new beneficiary.
A lot depends on how old you are OP. If young and with young DC re-gifting is probably fine.
Get proper advice though. It may cost in the short term but worth it in the long term.
My brother and I actually spoke to my parents about this last year, we each have two children and aren't likely to have more.
They have since changed their wills so that my brother and I would get enough for a decent holiday and the remaining will be split between their 4 grandchildren in trust until they are older. It would mean that they would each get about 75-100k.
Dh and I have never inherited from family and won't in the future, but we have no debt and just 10 years left on the mortgage. We are happy in our house and are unlikely to want to move in the future, so it just makes sense to bypass a round of inheritance tax.
I think IHT would be OK, as is probably around 300K. Divided by three families (unless they have a hidden stash). I think that is roughly what their house would be worth. So between 6 grandchildren would be 50K each, good for a deposit for each of them.
I'm 40 now and our property possibly worth between 350-400K atm, due to location, so maybe possible to downsize in future. Mortgage due to be paid off in 5 years time.
My bachelor cousin died 2yrs ago, I had heard via another cousin he was thinking about leaving money to his cousins DC, rather than cousins (or friends/charity which he could well have done). Apart from my DB who has never worked, all cousins were relatively comfortable and early 50s upwards, so it made sense.
He did indeed leave to cousins DC, and given he was wealthier than anyone knew, they all got a sizeable amount. The beneficiaries ranged in age from my DD14.5, to mid-forties. It has been life changing for those I know, enabling some to get on property ladder for first time in 30s, or again after divorce, or substantially pay off mortgages.
The only downside was that no min age was specified (not sure why his solicitor didn't advise one) which meant my DS got his at 18, as will DD next year, and my niece inherited at 20. Fortunately my DC are fairly sensible, and have no problem in us helping them invest it for their house deposits when older. But I quite understand that for some 18yo, that might not be the case!
However, my niece, whilst sensible, has grabby parents who I think would take it all if they could!! I hope she still has a sufficient amount left to help her get on the property ladder in a few years. Indeed DB is the only cousin who complained it should have gone to our generation, so he could have had some! Even the cousin without children had no complaints, as they saw how it benefitted their nieces.
So, done properly, with minimum ages to inherit, I think it is a brilliant idea. Should we eventually have DGC, and our own DC be reasonably settled financially, I think we would consider jumping a generation.
Lovely - you joke about a hidden stash - but that is exactly what my cousin had - a lot of cash in normal bank accounts. We are not sure how it was accrued, as neither he nor my uncle had stellar careers, but we think his mum may have inherited from a sister (so one of my older cousins thought).
His house was actually a small fraction of his estate!
I was stunned when my DC got the summary of accounts for probate, we all were, esp those cousins closest to him. From thinking my DC may get 10-20k each, as quite a few beneficiaries, it was closer to 100k.
He certainly didn't live like he had a hidden stash - he was still in his childhood bungalow, not the smartest dresser, no mega holidays etc.
So, you never know!!!!
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