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Five ways to support your children and grandchildren

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Summary

What are the best ways to provide for your family?

3 min read

Whether it’s when they go to school, buy a house or get married, there are plenty of opportunities to help your children and grandchildren financially. But are you supporting them in the best possible way?

Here are our five top tips to help provide for your family.


1. Set up a trust 

You may be able to put up to £325,000 into a trust for your children or grandchildren with no immediate inheritance tax to be paid. For couples, each partner may be able to put in up to that amount, allowing a total of £650,000 to be settled into a trust.

You can retain control over how and when the money is used to help your children – and the flexibility to make changes if necessary – but it remains protected should their circumstances change.

This can be used to pay for school or university fees, help them buy a house or for any other purpose you think will benefit them. If you are still alive seven years after giving them the money, it should stay free of inheritance tax. You can even set up another trust at that point for a similar sum.

2. Use your "gifting allowances" regularly

Regular giving now can save inheritance tax later. A valuable financial benefit often overlooked is the ability to make regular gifts from your excess income – which are free of inheritance tax.

You are entitled to gift an amount equal to what’s left after deducting your normal living expenses, and taxes, from your total income each year, as defined by inheritance tax law. You must be able to demonstrate that this is truly excess income and that you haven’t dipped into any of your capital to cover your living expenses.

Subject to the level of your income, there is no limit on how much you can give. You can pass it on to your descendants outright or put it into a trust over which you retain control.

3. Think about charity

Many of our clients want to get their children and grandchildren involved in supporting the causes they care about. This gives them a greater understanding of the family’s values as well as managing wealth.

One of the best ways to do this is to set up a family charitable trust. Adult family members can become trustees, but even those under 18 can get involved, perhaps by nominating a favourite charity to donate to each year.

“Many of our clients want to get their children and grandchildren involved in supporting the causes they care about.”

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4. Check your will

It’s always a good time to have another look at your will and make absolutely sure it meets your wishes for your family. Protection, privacy and flexibility are key issues to consider, and the questions you should ask yourself include:

  • at what age should your children inherit? 
  • do you need to appoint guardians? 
  • who will look after your money in the meantime?

You should also think about your grandchildren and whether any separate provision should be made for them. It might even be worth skipping a generation to prevent extra inheritance tax issues for your children.

5. Help them manage their own money

You can simply set aside funds for your children and grandchildren who are under 18 by transferring money to them and letting them manage it – which can help them learn about finance.

It’s worth keeping in mind that you lose control over this money. It belongs to who you give it to and they can do as they please with it once they’re over 18, allowing for any restrictions that come with the vehicle you use. Also bear in mind that you will not be able to access any of the funds for your own financial benefit, and if you give substantial amounts to children under 18 you may still have to pay income tax on the income it generates.

For more information on how we can help you provide for your family, speak to your Coutts private banker or call us on 020 7957 2424.

Key Takeaways

Trusts, regular giving, charity, your will and simply transferring funds are five key things to think about when looking at providing for your family.

About Coutts Institute

We understand that wealth means more than money. The Coutts Institute focuses on the governance of wealth - helping family businesses succeed, helping clients fulfil ambitions for their philanthropy, and preparing the next generation for inheritance.

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