Considering leaving our money only to grandchildren

[parsagadae]

Hello,

Just wanted some quick advice from people on here. My husband and I have been retired for some time. We are fortunate to have lived financially secure lives due to buying at the right time, inheritances, etc. My husband headed up his 3rd generation family business, which he sold on for a pension pot (it was no longer really profitable by the end)

We have two children, both put through private schools, university etc. DD1 lives abroad and is a house wife due to ill health/ husband's (very lucrative) demanding job.
DD2 lives nearby and opted for the simple life.. modest house, old cars, nothing flashy etc but lots of time for her allotment! She's going to retire early.

We have four grandchildren, two from each daughter (they are approaching 50 so no more coming!)

We are considering leaving all our money to our grandkids. If we did this, it wouldn't be gazillions but probably about £300k each. They have it so much harder than we did (no really!). House prices anywhere decent are ludicrous, and they will be leaving university with huge student loans.

Has anyone else's family had this set up?

My MIL found out by chance that PIL is planning to do this with his small fortune (none of it shared with his wife, btw, but that's another story).

My dh is very hurt. To him, it just underlines how little his father thinks of him.

I think so much of this comes down to communication: if there is a healthy and open relationship between the parents and children, then that's great. If the children agree to being 'passed over' in favour of GCs then that's fine.

But if the children haven't been made aware of the arrangements and the reasoning behind them, then it can surely only end in upset .

My parents have discussed doing this - but haven't told me and my siblings directly - heard it from a shit- stirring in-law. I'm hoping very much that they don't go down this route. We all have different numbers of kids and it will bring up some very painful issues around fairness and parity. Also would feel like a kick in the teeth and as though they didn't trust us to see our own kids right. Don't feel I can raise it with them as feels grabby and not right as it's their money to give away in whichever way they see fit. Mostly gained on London house price rises but we all grew up as children in some poverty and learned to be anxious about it. So money is emotional and bound up with all sorts of feelings of security and planning for the worst.

Let the children decide if they would prefer their children to have the money. Eg £300k could allow each of 4 grandchildren to have a £300k house for example which is let out until they reach say 21. Their parents could use the rent for their education, university costs etc as one option. The risk is that your children are alienated.

Take advice on inheritance tax too as if the sum is £1.2m presumably the state will take a massive chunk of a good bit of it and next year we all expect huge tax hikes so IHT might go well above 40% and current exemptions and bands for it might go entirely.

I definitely want my 5 children to inherit equally and not grandchildren and then each child can decide if they want their own children to have anything - it's simpler.

I think it's got to be discussed and considered alongside the temperament of the grandchildren.

You have enough money to leave your daughters £400k each and your grandchildren £100k, or some other arrangement. It's definitely the most tax efficient option to leave it all to grandchildren and your children may be on board with that.

I don't think all children will necessarily be frivolous with inheritance. I inherited some money (£10k, so not half as much) at that age, and I spent university saving and adding to it so I was able to put down a house deposit a year after I graduated. Options like putting it in trust until GCs are 25 with the option to extract earlier to.use for sensible things might work?

My Dad intended to do this I think, he inherited from his grandfather as his father died young and he thinks it is better to have the money when you are in early to mid adulthood, not retirement. I think it's a great idea. Saying that, he has also generously been able to pass on various amounts to us children throughout our adult lives. BUT I think he is reconsidering - my sister has no children and is not well off, my brother is not well off due to paying school fees after periods of redundancy, ddad's wife's daughter lives near them and supports them a lot and doesn't have children, me and my husband are very comfortable but might be the only ones who would like his original plan. Who knows? It sounds like it would work for you.

”You cannot disinherit children (biological or adopted) from certain things. With regards to money you can will to leave it to whoever you wish but property and other items like that (vehicles and shares for example) they have a legal claim over and can take their case to court and be awarded their share pretty easily if they so wish.”

Don’t know where OP is but it is my understanding that in England and Wales the only way a child could realistically challenge being disinherited is if they are a dependent.

You can disinherit children but not in Scotland. Where I believe children are entitled to one third of cash but not property.

You are estimating 1.2M.

Maybe have a look at the overall impact of IHT along with current and likely exemptions and, of course, costs for care in later years.

I am using a platform called Kwaetus that allows me to create my will online and share my expression of wishes to my loved ones in the event of my death. Definitely worth recommending when it comes to be open and have heritance conversations with your loved ones.

Have you accounted for the fact you may have to pay for care in your later years?

To be honest - I’d give generous gifts to the grandchildren (maybe now / soon but held in trust till they’re 21 or more) and then leave a traditional “inheritance” to your daughters.

Like it or not it will be seen by some (extended family etc) as “cutting them out of the will” Or “disinheriting” them which comes in society with a stigma of you not loving or not trusting them.

I would have honest and open discussions with your dd's over this and base your decisions on how they feel.

My gut thinks to divide into 6 so DD's and DGC all have an equal amount each.

I don't think younger people have it do much harder. I do however think that having to work until 67 is very tough. Saying that, if both your daughters can do so and enjoy a decent life in retirement, why not. It would be terrible though for them to struggle whilst their children have it good in their early 20s.

I don't think younger people have it do much harder

The data disagrees with you there

I’d have no issue with this and think it’s a lovely idea.

If grown children are depending on an inheritance or would get upset when they find out they aren’t getting one it would tell me I’d made the right decision.

Your money OP, do as you see fit.

It is a good idea because it saves on inheritance tax but I would put the money into trust for the gc in case they make a bad marriage etc! I think there is definitely a trend for inheritance to skip a (my!) Generation. Maybe because our parents had us young and we had our kids late.

It's entirely up to you but I wouldn't personally. I'd be gutted if my own parents had done this, think how you'd have felt if you had been left out by your parents, and if your 3rd Generation company had been given to the GC or sold and profits gone to them without consideration of you and your husband. Is honestly feeling it would sour my memories and also
Make me think they didn't trust me to do the right thing

Why don’t you leave it to your grandkids and your 2 daughters equally. 4 x 300k is 1.2 million so split 6 ways the grandkids would get 200k each as would each daughter. That would give you’re lower earning daughter a huge boost financialy to help make her retirement a lot more comfortable and the grandkids would all still have a really good start and your other more affluent daughter wouldn’t feel left out

My parents intend to do this.

They both inherited from their parents and they were retired by 55 mortgage free and with enhanced pensions (lucky timings). They have had 30 great years in retirement.

I have never told them as it is their money but I am a bit sad/let down by this, I don't really understand why they have done it. I am Executor. I did ask that they leave myself and DSIS some of the family jewellery and don't cut us out completely- I hope that they have done that.

My DSIS and I are both financially sound but inheriting from them (they are both now unwell-1 terminal) would have enabled me to retire mid 60s which would have been great and DSIS at 60- -she has a life limiting condition and so probably wont live past 70 at most.