Passing Money to Dependents Before Death
Discussion
The in-laws have just been sorting their joint wills out where the whole estate is divided amongst 4 grandchildren. Now contrary to the usual chatter on PH we're not talking a massive wedge and no property is involved because fortunately I own that so I'm sorted.
However despite my suggestion they should spend it on themselves for some reason they don't have the appetite as they are both near 80. My view of leaving a lump sum to grandkids (some of whom they're never seen or have any interaction with) is not necessarily helpful so what about the option of gifting it now or having it administered to pay out monthly in eqaul amounts to each of them? I'm more supportive of the latter as my daughter's dream of throwing the money into an Evoque when still at University doesn't sit well with me. Neither does bunging money at kids who don't appear to contribute to enrich their lives - but that's their choice.
Let's say they save some money for themselves and decide to gift £80k split amongst 4 to give £20k each, but how easy is it to put the £80k into something that still has potential to make some money yet will allow 4 x equal monthly payments to different persons? Ideally someone needs to administer it otherwise it can become a complete PITA which they don't want.
Assets, all cash based, are under the inheritance tax threshold and as such I don't believe the 7yr gifting rule is relevant.
However despite my suggestion they should spend it on themselves for some reason they don't have the appetite as they are both near 80. My view of leaving a lump sum to grandkids (some of whom they're never seen or have any interaction with) is not necessarily helpful so what about the option of gifting it now or having it administered to pay out monthly in eqaul amounts to each of them? I'm more supportive of the latter as my daughter's dream of throwing the money into an Evoque when still at University doesn't sit well with me. Neither does bunging money at kids who don't appear to contribute to enrich their lives - but that's their choice.
Let's say they save some money for themselves and decide to gift £80k split amongst 4 to give £20k each, but how easy is it to put the £80k into something that still has potential to make some money yet will allow 4 x equal monthly payments to different persons? Ideally someone needs to administer it otherwise it can become a complete PITA which they don't want.
Assets, all cash based, are under the inheritance tax threshold and as such I don't believe the 7yr gifting rule is relevant.
Armitage.Shanks said:
The in-laws have just been sorting their joint wills out where the whole estate is divided amongst 4 grandchildren. Now contrary to the usual chatter on PH we're not talking a massive wedge and no property is involved because fortunately I own that so I'm sorted.
However despite my suggestion they should spend it on themselves for some reason they don't have the appetite as they are both near 80. My view of leaving a lump sum to grandkids (some of whom they're never seen or have any interaction with) is not necessarily helpful so what about the option of gifting it now or having it administered to pay out monthly in eqaul amounts to each of them? I'm more supportive of the latter as my daughter's dream of throwing the money into an Evoque when still at University doesn't sit well with me. Neither does bunging money at kids who don't appear to contribute to enrich their lives - but that's their choice.
Let's say they save some money for themselves and decide to gift £80k split amongst 4 to give £20k each, but how easy is it to put the £80k into something that still has potential to make some money yet will allow 4 x equal monthly payments to different persons? Ideally someone needs to administer it otherwise it can become a complete PITA which they don't want.
Assets, all cash based, are under the inheritance tax threshold and as such I don't believe the 7yr gifting rule is relevant.
I see this as 2 separate questions which perhaps is why no-one has answered?However despite my suggestion they should spend it on themselves for some reason they don't have the appetite as they are both near 80. My view of leaving a lump sum to grandkids (some of whom they're never seen or have any interaction with) is not necessarily helpful so what about the option of gifting it now or having it administered to pay out monthly in eqaul amounts to each of them? I'm more supportive of the latter as my daughter's dream of throwing the money into an Evoque when still at University doesn't sit well with me. Neither does bunging money at kids who don't appear to contribute to enrich their lives - but that's their choice.
Let's say they save some money for themselves and decide to gift £80k split amongst 4 to give £20k each, but how easy is it to put the £80k into something that still has potential to make some money yet will allow 4 x equal monthly payments to different persons? Ideally someone needs to administer it otherwise it can become a complete PITA which they don't want.
Assets, all cash based, are under the inheritance tax threshold and as such I don't believe the 7yr gifting rule is relevant.
The usual what to do with 80K to make money - to which there is generally no good answer.
Then the inheritance / gifting one which is a bit different.
Why not open a cash savings account and an interest paying cash current account and set up a bunch of standing orders. Setup once, no ongoing administration required.
Something like open a Santander 123 a/c with 20K in it, paying Monthly interest of 1.50% AER / 1.49% gross (variable) (with a £5 pm a/c fee).
4 Monthly standing orders set up to pay each of the kids and a separate monthly payment in from a savings a/c elsewhere with the remaining 60K restoring the balance of the Santander a/c to 20K each month.
Boring but works.
Bob
Thanks for the replies
The Satander savings/current account will be a PITA for them. Pension plan makes sense but some of the beneficiaries won't have any interest in that idea.
Also I think they're looking for some way it can be automatically administered every month. As it stands you need instant access savings which gives very little interest to access cash out monthly but then need to divide it up yourself. Better interest rates are fixed term so no access.
As it stands they're only getting high street savings rate so not bothered about making a decent return but there must be something better than sticking it into a current account and arranging 4 x standing orders per month?
The Satander savings/current account will be a PITA for them. Pension plan makes sense but some of the beneficiaries won't have any interest in that idea.
Also I think they're looking for some way it can be automatically administered every month. As it stands you need instant access savings which gives very little interest to access cash out monthly but then need to divide it up yourself. Better interest rates are fixed term so no access.
As it stands they're only getting high street savings rate so not bothered about making a decent return but there must be something better than sticking it into a current account and arranging 4 x standing orders per month?
I'm not sure your idea of splitting it down into regular monthly payments instead of a lump sum is a great idea. It would likely just end up just being used as a bit of an income supplement/boot. And given the amounts involved, would probably end up being whittled down to nothing with very little to show for it. It could just be used to fund an Evoke on PCP/lease instead!
Not sure how to advise investing it from growth/returns (that'll depend on how you wrap/package it to some extent). But by the time it's split up into 20k each, the growth on that is never going to generate an annual return large enough to to draw out as a significant income by itself, you'd have to eat into the capital for that.
If you/grandparents want to keep some control over it, then the simplest way would just be to gift the money to the parents with instructions on why/when to let the kids get their hands on it. But that assumes a level of trust and agreement, and could lead to a falling out in the "but gran/grandad would have let me have the money to buy that" scenario.
What about putting it inside of a trust, with the grandparents and parents (i.e. you) in charge of how it is released. The kids come up with an idea of what they want to do with it and then you/grandparents decide if it's how the money should be spent. Assuming family relations are all ok, grandparents cease to be trustees on their death, but they get the reassurance as that the parents take over as a trustees.
What age are the 'kids' now? You could just put it in trust until they reach a certain age (21 or even 25) when they hopefully will have a better head for deciding how to spend it. If they're under 18 it could be put into a junior ISA, but then it's totally theirs to do with as they please as son as they turn 18.
Starting a pension of some kind for them would be a very good idea, although the kids themselves probably won't see it that way, at least until they turn 40 or so! A SIPP could be a useful way to do this because they could be given control of the investments within it, which might help to educate them about savings and investments.
A Lifetime ISA wrapper could be a good choice as well, they get a good bonus if the withdrawal is used to buy a first house or when they hit 60. Only two drawbacks in your case - max deposit to it is £4k per year, so it'd have to be dripfed in, and you/grandparents couldn't stop them withdrawing the money to spend on anything they like (but they'll lose the 25% bonus on it, which might be enough of an incentive to make them think carefully). I'm not sure if it's possible, but maybe there's a way a LISA could be held in trust for them?
If you/grandparents want to keep some control over it, then the simplest way would just be to gift the money to the parents with instructions on why/when to let the kids get their hands on it. But that assumes a level of trust and agreement, and could lead to a falling out in the "but gran/grandad would have let me have the money to buy that" scenario.
Not sure how to advise investing it from growth/returns (that'll depend on how you wrap/package it to some extent). But by the time it's split up into 20k each, the growth on that is never going to generate an annual return large enough to to draw out as a significant income by itself, you'd have to eat into the capital for that.
If you/grandparents want to keep some control over it, then the simplest way would just be to gift the money to the parents with instructions on why/when to let the kids get their hands on it. But that assumes a level of trust and agreement, and could lead to a falling out in the "but gran/grandad would have let me have the money to buy that" scenario.
What about putting it inside of a trust, with the grandparents and parents (i.e. you) in charge of how it is released. The kids come up with an idea of what they want to do with it and then you/grandparents decide if it's how the money should be spent. Assuming family relations are all ok, grandparents cease to be trustees on their death, but they get the reassurance as that the parents take over as a trustees.
What age are the 'kids' now? You could just put it in trust until they reach a certain age (21 or even 25) when they hopefully will have a better head for deciding how to spend it. If they're under 18 it could be put into a junior ISA, but then it's totally theirs to do with as they please as son as they turn 18.
Starting a pension of some kind for them would be a very good idea, although the kids themselves probably won't see it that way, at least until they turn 40 or so! A SIPP could be a useful way to do this because they could be given control of the investments within it, which might help to educate them about savings and investments.
A Lifetime ISA wrapper could be a good choice as well, they get a good bonus if the withdrawal is used to buy a first house or when they hit 60. Only two drawbacks in your case - max deposit to it is £4k per year, so it'd have to be dripfed in, and you/grandparents couldn't stop them withdrawing the money to spend on anything they like (but they'll lose the 25% bonus on it, which might be enough of an incentive to make them think carefully). I'm not sure if it's possible, but maybe there's a way a LISA could be held in trust for them?
If you/grandparents want to keep some control over it, then the simplest way would just be to gift the money to the parents with instructions on why/when to let the kids get their hands on it. But that assumes a level of trust and agreement, and could lead to a falling out in the "but gran/grandad would have let me have the money to buy that" scenario.
All the above sound like a pain in the neck to me and could involve fees which will quickly diminish the point.
Why dont they just gift it to the parents who pop it in an ISA with a decent fund invested. The money can then be handed over when the kid hits 30 or something. You might even be able to do the ISA in the kids name but not sure what the repercussions are of them being able to access etc.
Why dont they just gift it to the parents who pop it in an ISA with a decent fund invested. The money can then be handed over when the kid hits 30 or something. You might even be able to do the ISA in the kids name but not sure what the repercussions are of them being able to access etc.
NorthDave said:
Why dont they just gift it to the parents...
Certainly that's what my FIL intends to do, although he's doing a pretty good job of getting rid of his money himself and he's nearly 90. He recently cut all the grandchildren out of his Will as he doesn't see some of them - I'm a bit pissed about that as our kids make an effort to see him and he's quite involved in their activities where it's possible.Gassing Station | Finance | Top of Page | What's New | My Stuff