Grandparents leaving money to grandchildren?

[Honeysucklelane]

I read an article recently about the rise in grandparents leaving their will to their grandchildren instead of their children.

I believe my in-laws may be doing this and I’m not sure how I feel about it. On one hand thrilled for my children, but on the other worried they may come into a ton of money at a young age.

How do other people feel about this?

@PawsAndTails Do you know how student loans actually work? You need a far more informed discussion about what’s best use of a large sum of money, especially if there’s no more coming? House deposit or no graduate tax? Lots would take the former if there’s no change of saving for the latter. If you can give both, it won’t matter. My DDs got loans. 1 has paid it off one might never do so. Why would we have chucked all that money at her degree if it’s virtually free money?

We all make choices and plans. I started having kids in my teens and have a disabled child. I decided not to play fertility roulette and just be able to afford a house a bit later.

I don't know anyone who hasn't been able to get on the housing ladder by making judicious choices. We, for example, moved a few cities away from family who lived in an expensive city, so we could afford a house. We didn't think we'd ever have done it otherwise. Some people might not be willing to do that, but then have to rent.

All my married child's friends have their own homes by late 20s (though none of them have children yet).

Yes, I've had a student loan myself and it was awful. I've done all I can to avoid that for my children.

What is possible depends on the size of the inheritance. If you inherit a property from both sides, it should be possible to pay off student loans and help with a house deposit. I know not everyone does but I do know some people who have got that.

Yes. With big inheritances, after IHT paid of course, both are possible, However if it’s just £40,000 (say) I’d think twice. The new loans are 40 years but I’d still take the loan if that meant no house deposit. Young people do struggle to save. My DDs haven’t found the loan onerous. Millions still decide to have them to enter the jobs market and at the moment, the majority don’t repay them.

Yes, there's such a disparity. I don't expect to inherit anything from my parents. They don't have wealth or property. I know someone set to inherit 30 properties from their parents. And someone else who inherited from both sides, didn't know what to do with it, so started travelling (don't know what their children's situations are).

@TizerorFizz

the majority don’t repay them.

Statistics show the majority don’t clear them, I.e. capital and interest. But most will have made substantial repayments over their working lives, probably at least all the capital, but with compound interest, the total repayable to clear could be 2 or three Times the amount borrowed, so hardly surprising most don’t pay it off fully! It doesn’t mean they’ve not paid anything or only paid small amounts in most cases. Even someone earning average wages for a graduate wouldn’t pay it off fully, but would have paid enough to clear the capital originally borrowed and a hefty chunk of interest on top. There is a lot of false and misleading commentary about student loans and sleight of hand with statistics, like the “most don’t pay it off” assertion. Martin Lewis had a lot to be blamed for in this respect!

@Badbadbunny Look at the repayments for 30 years on the old schemes. Lower earners were not paying enough every month to repay or clear anything. This was the majority. To some extent interest didn’t matter as it was written off. If there was a better deal, students have not found it. The debt for students and taxpayers is £230 billion. We didn’t have to expand universities but we did. Grads have to pay for the opportunity which has been generously extended to 37% of school leavers.

Higher earners should just get rid as dd did. The government has changed the rules precisely so they get the money back from more students. If they were taking the money back in, why change?

Young people have a choice. It’s not obligatory to go. Most get a loan to go and pay - it’s that simple. If you get £40,000 inheritance, students should decide if it’s housing or fees. £50,000 a year earnings is £2250 per annum payments. The best advice if you are then on a career ladder is to climb up it readily and pay it off.

But hardly " youngsters" to who will be squandering as someone pointed out.

Besides I my on DC may not have paid off a mortgage by the time I did. Not that I have that sort of money to leave anyone. If I was to die tomorrow and leave everything I have to my DC there would be approximately 80 k each. If I left to GC there maybe 45k each. Maybe even less so hardly as huge inheritance.

Lots of youngsters are forced to go because so many employers regard a degree as minimum entry requirement!

Theyll usually be older graduates who got grants rather than loans or where uni fees were a lot less than they are now.

Pulling up the drawbridge behind them!

@Badbadbunny Do you know how grants and awards worked? No fees but parents were means tested and many paid - or refused. Where I worked, a small minority of parents paid nothing. Do you want to go back to 20% going to universities? Opening up HE in 1992 wasn’t sustainable. It was asking the vast majority of workers, who wouldn’t earn anywhere near what a grad could get, to pay for them. It’s right that grads pay but far too many jobs recruit grads that don’t need to. Neither would dc look at such jobs until now - they have been rebranded as apprenticeships .

My mum is leaving everything to me & my brother but has asked us both to give our children some of the inheritance. The bulk of what I get will be buying me a house, I'm in council housing & it's awful, I want to buy somewhere so that it will grow in value & when the time comes will give ds a good inheritance, he won't be getting anything from his dad & his other grandparents left him £5k a couple of years ago which he used to go travelling.

@Badbadbunny I agree that wills should be revisited and revised. We rewrote ours a few years ago once all DCs were adults.

Our problem now is that DM has left her estate in trust to benefit DGCs. Fine when all DGCs were children but they are all now adults. Also DM now has dementia, lives in a care home. She is burning through her estate. I can see us being stuck managing a trust fund with all that costs but which is worth buttons.

I think people can be quite naive when it comes to wills. Especially older people who may be the first generation in their family to have anything of value to leave.

A lot of people don't realise that a will is executed as it is written not what the person meant by the time of their death.

A will naming all the DGCs will only benefit those named. It will not benefit the DGCs born after the will is written even if the grandparent meant that all grandchildren should benefit. The GP may have forgotten precisely how the will was written and think they have all the DGCs covered because that is what they meant.

We are living longer and more people live on beyond the point where a will can be revised to account for changing circumstances (dementia, care costs). I am wondering if wills should have a 'shelf life' of say 10 years. If a will is more than 10 years old intestacy rules should be applied instead.

I agree with you that people need to update their wills regularly.
I also want to add that I am really really anti trusts with a very few exceptions.
My FIL left his money into a trust. He did not have a huge amount of money to put into it. The will trust needed a tax return every year and tax had to be paid. Solicitors are always quick to advise putting your money into a trust because when you die they can charge more for sorting out the trust.
I think exceptions for trusts would be if you are very wealthy or if you have a child with special needs that you want taken care of.

My DCs grandparents died when they were babies. They left a large cash sum to them that we invested, but the rest they left to us, which obviously has benefited the children as well. They know that when they come to use it the money is for getting on the property ladder.

Trusts used to be a lot more popular because of the IHT benefits when the threshold was lower and there was no residence nil rate band and before changes to inheritances and transfer of deceased nil rate band between husband and wife. It was very common for templates to automatically have a clause worded something like “the sum of the IHT exemption prevailing at the time of death to x”. With changes to IHT rules over the past couple of decades, the “need” for trusts had reduced substantially.

Also still common when one or both parties in a relationship want to provide for their children and don’t want to risk their share of their joint assets going to the surviving spouse’s new partner or children, hence why so many half shared of marital homes are put into wills trusts with survivor having lifetime only rights.

Yep, we have virtually exactly the same situation here. Under 18 children with thousands in the bank that they can't touch while we struggle a bit and miss out on things that we could have had or done if the money was ours to manage. And while we hope they will spend it on house deposits, cars or student fees, effectively we will have very wealthy 18yo teenagers who can legally do what they want.

I think it's stupid to leave it to GCs unless your children are literally alcoholic drug and gambling addicts. Parents look after their children.

@ZeldaFighter In the uk the estate pays IHT. Ie the person who dies. You can put money into savings for dc where you control the account but dc get control when you agree. No tax payable on these accounts but they are stocks and shares, effectively. We’ve used Witan Trusts. This was called a Trust but it essentially locked money away for, in our case, 25 years. There are also Junior ISAs. No tax to pay and certainly no IHT after 7 years as the accounts are in DC names.

And on the emotional side, I worry that my FIL is going to do this to my DH. In a kick in the teeth from beyond the grave, FIL will demonstrate deliberately that he doesn't trust my DH to manage money sensibly for his own children. DH is an only child, will be orphaned and will be devastated. It will really hurt him.

I really hope my FIL does the proper time-honoured thing and leaves his estate to his only son.

Edited to add - DH is in a professional job and in his 50s. A responsible, good person.

It wasn't until 2007 that the deceased's nil rate band could be transferred to the surviving spouse. It wasn't until 2017 that there was an extra residential property nil rate band.

That's why older wills generally more likely to involve trusts as the absence of those two changes meant that there was more likelihood of IHT liabilities, so people "planned" their wills with trusts and "nil rate band" legacies to reduce/eliminate the IHT.

The 2007 and 2017 changes largely removed the need for trusts and other planning steps for most estates.

That hopefully provides some context as to why lots of wills involved trusts, not only older ones, but even ones that have been updated more recently as lots would still carry mostly the same content with just a bit of "tweaking" rather than entire re-writes from scratch, so older, now unncessary wording/trusts etc remain even though no longer needed.

@GnomeDePlume

I am wondering if wills should have a 'shelf life' of say 10 years. If a will is more than 10 years old intestacy rules should be applied instead.

No!

Lots of people will suffer deterioration of mental competence, dementia, etc., so wouldn't be legally capable of making a new will, likewise lots will simply forget it needs to be reviewed/renewed.

Very few people would want their estate to be distributed via intestacy rules - if they were happy with that, they'd not have written a will in the first place.

Doesn’t have to be a binary choice. My parents split their estate in two, half split between the three children and the other half equally between the named grandchildren. There was zero chance of any other grandchildren at that point.
That seemed quite fair to us.

I agree - this seems like a good compromise.

Funny story - my older daughter inherited money while in utero, because my grandmother’s will left $5,000 (US) to each of her grandchildren and great-grandchildren. I
was pregnant with my daughter when my grandma died, and unborn babies legally count (in the US, anyway) under “lives in being when the testator dies.”

My parents are currently setting up some sort of trust for my daughters’ educations - they’re the only grandchildren - and I’m happy about it because it takes some pressure off my husband and me.

Someone said banks freeze joint accounts when the other half dies. My understanding is that they don’t

What is going to happen to your property when you die?