Inheritance to grandchildren bypassing children

[mucky123]

I just wondered if someone could shed some light on why I feel the way I do. It is absolutely none of my business. I freely admit any thoughts about it are unreasonable. If anyone should have anything to say its my bil/sil.

My dh and I are quite comfortable, not interested in an inheritance. We have 3 dc. My Bil not so comfortable but alright. Think they might have a tougher retirement than we do. They have 2 kids.

My ILs. Have some money not loads but are comfortable and very likely to leave readonable inheritance. They intend to leave everything between 5 grandkids. So my kids will get more of the pot than bils. I'm really irritated by this on every front (1) haven't discussed it with their sons, feels like a kick in the teeth for them, (2) gc will be inheriting fairly young. Will this discourage them ftom working, will they piss it up the wall or lose half on an unsuitable marriage, (3) it's like the parents aren't trusted to send the money on to their kids, and (4) it's unfair between brothers as our kids get a bigger slice of pot. That seems unkind to lovely bils family.
Partly also I'd like to be the one to give my kids a house deposit, pay for their wedding etc and this has all gone as they will now have a reasonable inheritance quite early.
I know I'm being unreasonable,

I agree with you Op. I'd feel very irked in your shoes. This set up only really works after it's been done for a few generations, because I'm sure you would be ok with this, if you and DH had inherited from your grandparents. But if you didn't, you are literally the only layer to be bypassed, and that doesn't feel fair at all.

Who cares whether you need it - it could be the difference between a frugal retirement or one of luxury. I do understand as well, that now it feels as though the grandparents have set the kids up for house deposits, and it should have been you. It would have been you, if they had willed their money to their children. You have been robbed of this, I think.

I think it's utterly stupid when parents leave differing amounts to people based on a snapshot in time of people's finances. Wealth (or lack of) can spin on a dime, based on so many things. I was wealthier than my sister a few years ago. A costly divorce (for me) and a huge inheritance for her (her DH's mother died) mean that now she is wealthier than me. If I look at my own kids - one was engaged to a multi million pound heiress at one point, but then they split up.

My own parents have willed £10k to each grandchild, and then the rest of the pot goes to their 2 children (me and sis). This feels like a fair compromise to me. That said, my sister and I both have 2 kids. Maybe it wouldn't feel fair, if my sister had, say, 6 kids. I mean, every time she had a kid, it would be costing me £5k!

How much will each GC get? I think this is relevant.

Things are harder for young people today than a generation or two ago. Back in the 80s/90s, housing costs were a much smaller proportion compared to wages. We've had a couple of decades where housing costs have risen faster than wages.

Grandparents (and many older parents) will have benefitted from the unprecedented economic growth, and windfalls etc., of the 90s and 00s. Today's younger generation aren't going to benefit from endowment mortgage windfalls, mutual building society/insurance firm privatisation windfalls, house prices doubling/trebling over the term of their mortgage, nor wage rises that keep pace with inflation.

If the parent is middle aged or older, has a small mortgage (or no mortgage) compared to their house price, has a good pension scheme in place, then there's not much "need" for them to receive a whopping inheritance from the grandparents. Especially when the grandchildren are £50k in debt due to student loans, will have to save for a decade to get a deposit together for their own home, paying half their wages in rents, and suffer much higher indirect taxes than their parents/grandparents suffered at the same age.

Says who? The person leaving the inheritance gets to decide where the money goes, and it has nothing to do with anyone else.

Personally, if my ds already has a decent house, and has cleared any student debt, I intend to leave anything I have to my future grandchildren. They can use it to pay their own university fees - helping my ds - or they can put it towards a house deposit. And if there is any IHT due, it will only be one lot, rather than two.

I do think people are missing the IHT point. Leaving money to the grandchildren (or great grandchildren) is an excellent part of long term IHT planning. This is because if left to the parent, who may already be financially sound with their own house, pension pots, investments, etc., may push their estate over the IHT threshold when they die. If the grandparents leave directly to the grandchildren, it doesn't form part of the parent's estate so kicks the IHT can down the road for a generation at least.

Given the fact that IF care of the elderly parent is required it will probably be their children doing the drudgery of the care, taking on the responsibilities of that care, possibly losing out financially, but definitely losing out in terms of time and opportunities to socialise, not to mention the stress of caring, unless there's a good reason like avoidance of tax, I find it very unfair to leave it to the grandkids who'll probably only be visiting granny when suits.

Inheritance should go to whoever the person leaving it wants it to go to. Fixed it for you

My grandparents were pretty well off; my grandfather left 50/50 to my father and his brother. My grandmother left 50/50 into two trusts for each set of grandkids, they got 1/3 of the trust each when they hit 25, we got 1/4 at the same age. It wasn't huge but it paid for my masters and a decent deposit. I'm very fortunate but think it was very well, and fairly, planned. My cousins got much more from their mother's side than we got from ours too, but I still think the pot per family is the fairest way.

Depends how old everyone is - no point 95yr old grandad leaving money to children in their 70’s really. It’d make much more sense to help grandchildren or even great grandchildren.
Or even more sense to gift while everyone is younger and able to make the most use of it!

Your first post said you don't need the money, and implied it should have been left to the next generation.

Your second post goes into reasons why you need it and why you can't just pass the money on as suggested by another poster.

Am I missing something?

We paid DCs’ accommodation costs through university (seven years in one case), gave them the deposit on a house and paid towards the wedding costs. Our house was the worst decorated house in the street, while we did so. DS paid off his student loan in his early thirties. It’s quite possible DD will never be able to work again, so won’t ever have to pay off her student loan. DS and DDIL’s OH both earn 6 figures.

We look after DGC, on the days DDIL is working.

What more should we do for DS?

Requirement to pay IHT is dependent on the amount left, not who inherits. Any estate above the threshold has to pay it.

I'm well aware that IHT is dependent on the amount left but it IS paid by those who inherit if the amount is £375K+ or £500K if the deceased's home is left to family member(s). If the estate is large enough for IHT then it does make some sense to bypass the (adult) children and leave it to the grandchildren.

How does that make sense? The IHT has to be paid whoever inherits it.

It puzzled me too so I didn't respond😁

It avoids IHT effectively being paid on the same money twice - firstly when it is passed to the children and then again when the children pass the remainder to the grandchildren.

That’s assuming none of it’s spent, used on care or given away in the interim.

Yes but how many family really fully know each other's circumstances?

We're in our late 40s but - still have a £200k mortgage (didn't get on the property ladder when prices were cheap), have 8 more years uni costs to pay for and don't have much tucked away in savings.

My parents have no idea though and probably assume we have loads in savings and have nearly cleared our mortgage.

Or, as the DIL, she could realise she has no business suggesting to her PIL what they should do with their own money.

SOME grandparents. Personally the 90s brought repeat redundancies and unstable temp jobs for the breadwinner a disabled child who could not be cared for outside the home to enable me to work.
14 year career gap resulted. No pension from those years means I currently live partly off the dividends from my inheritance.
DS1 will get his Dad's spare pension and what remains when I go. Has already had something towards a house from family money.

True, but that is more about preventing the need to pay IHT a second time if the beneficiary dies shortly afterwards.

An example; a widowed grandmother dies at the age of 90 and leaves a really large estate worth £1.5 million to her only daughter who is divorced and is aged 65.

Assuming grandmother could make use of her late husband's allowances then there would be £200k inheritance tax (IHT) to pay and the daughter would receive £1.3 million.

Suppose the daughter already owns a house and she is worth £500k before the inheritance. With the inheritance, she now has assets worth £1.8 million in total.

Unfortunately, the daughter becomes ill and dies seven years later at the age of 72. The daughter leaves her estate to her own children.

Having already paid out £200k on IHT, seven years earlier, there is now IHT to be paid out again which, this time, will be £520k.

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If grandmother's estate had passed directly to the grandchildren then there would still be the initial £200k in IHT to pay but there would not be a further bill when the daughter died as her estate at death would only be £500k.

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There would also be less IHT to pay if grandmother left a lot less. Suppose grandmother left an estate worth £500k to the daughter. This time there is no IHT to pay on grandmother's estate.

When the daughter passes away, her estate before the inheritance was worth £500k and, assuming she leaves her home to her children, there would be no IHT to pay. However, with the £500k inheritance that means that her estate now has to pay IHT.

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Of course, the daughter may well "spend, spend, spend" and have a great time blowing the lot before she dies. In which case, no need to worry about IHT.

The daughter might also think about giving her own children some of the money but, apart from some specific circumstances, if a person dies within seven years of giving a gift then that gift is counted as still belonging to the estate for IHT purposes when IHT is calculated.

Not your money, so you get no say.

It's a common way to avoid a lot of inheritance tax. If the money goes through you first then it will eventually be taxed twice to reach the same people. Families with money often do this if the parents are comfortably off. It also takes the pressure off parents to help out their young adult children so they hold onto more of their own money. They may well have been advised to do this.

I went to Uni in the 90's - I remember them as difficult and grim - we were definitely not living in the land of milk and honey, both dh and I had severe belt tightening times but in the end we made a nice life for ourselves post 30 - but it's bollocks to suggest life was easy. My kids have never known hardship - I've plenty of stories to tell them - but they rather believe we've never had to struggle.

There would be a point if the 70 year old didn't have a good pension - or are you thinking they are nearly dead so it doesn't matter they are live out their end of days in an old shit hole? People of working age can improve their circumstances by working - a 70 year old can't.

Yes it's their money to piss away. But now they are mid twenties - so only a few years later, they can't get a deposit for a house. £75,000 I presume would have been a solid deposit. I'm not sure they regret that. Can only think from my prospective that I'd wish some of it was held back so I could put it towards to owning a property.

Agree, give money away while you are alive. It reduces the IHT liability.

People hoard money and then whine about IHT. There's an easy solution. Give some of it away in plenty of time - if you are that rich there will still be enough for care fees if you need it.