Wealden Times | WT171 | May 2016 | Restoration & New Build supplement inside

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Planning for school fees
The soaring cost of private
education can be a serious
burden on family finances
but there are ways of
lessening the impact, says Kate
Arnold of law firm Cripps. Here she
explains how this can be done.
What options do I have to
make provision for my
children’s school fees?
Some private schools have schemes
in place that enable you to put down
lump sum deposits with the school
to pay school fees a number of years
in advance, and obtain a discount.
However, such schemes carry a risk
if the school closes or if you decide
to move your child to a different
school. Given the substantial cost of
school fees, you are making a large
deposit and you should therefore
seek specialist legal advice on how
to structure such an agreement.
Regular saving as soon as your child
is born and obtaining independent
financial advice on the most appropriate
way to invest those savings can be
invaluable to help you pay school fees
for your child’s entire education.
Many schools are charities and offer
bursaries and scholarships for those
with limited financial means, which can
assist substantially with education costs.
What is the most tax efficient way for
my parents to assist with the payment
of my children’s school fees?
If your children are already at
school your parents could make
those payments direct to the school.
They may be able to make use of an
exemption from inheritance tax that
is available where regular gifts are
made out of excess income. This would
ensure any such gifts would not form
part of their estate for inheritance tax
purposes, even if they died within
seven years of making the gifts.
To assist their executors in claiming
the relief, your parents would need to
keep clear records of the gifts they are
making, as well as their income and
expenditure. It would also be sensible
for them to write a letter confirming the
payments they will make as evidence
of their intention to make regular gifts.
Your parents could also set aside a
lump sum to be used for your children’s
education in the future. Instead of
giving the money to you directly, they
could set up what is known as a ‘bare
trust’, which holds the money on your
children’s behalf. However, once they
reach 18 they will be able to demand
access to any money remaining in
the trust and spend it as they wish.
A more sophisticated trust structure
might be sensible if your parents
want to ensure the money can be used
purely for your children’s long-term
future. Assuming your parents survive
seven years from making the gift into
trust it shouldn’t form part of their
estates for inheritance tax purposes.
My father has just died leaving
a large amount of money to
me. Is there a tax efficient
way this can be used to pay
my children’s school fees?
You could enter into a deed of
variation of your father’s estate within
two years of his death, directing
that the money passes to, or for the
benefit of, your children. The deed
of variation will mean the money will
be treated as a gift, as the transfer
of funds is being made direct from
your father’s will to your children.
It can therefore be used to pay for
their education without forming part
of your estate for inheritance tax.
What options do I have to finance
my daughter through university,
whilst ensuring she does not
use the money unwisely?
You are of course able to pay for her
accommodation and tuition fees direct.
However, given relatively low interest
rates on student loans it may be better
for your daughter to take a loan to
assist with those costs. You could then
provide financial assistance in the
future when loan arrangements may
be more costly, such as when your
child wishes to purchase a property.
Alternatively, you could consider
purchasing a property for her to occupy
while a student. Using an appropriate
trust or loan structure would protect
the value by preventing your daughter
from selling or mortgaging it without
your consent. There may also be the
added bonus that your daughter could
rent out rooms to other students to
generate an income from the property.
Kate Arnold
Partner - Private Client Division
D - 01892 506 337
M - 07501 683 395
F - 01892 598 537
E - kate.arnold@cripps.co.uk
Nationally recognised for both its private client
and commercial work, Cripps focuses on wealthier
families, entrepreneurial businesses and the real
estate sector. As a key regional law firm, Cripps has
offices in Kent and London.
www.cripps.co.uk @crippslaw This article gives examples and is intended for general guidance only