Aroundtown Magazine January/February 2024 edition

FAMILY
Legal
talk
With Elmhirst Parker Solicitors
Leaving money to family in a will
The realm of financial planning,
wills and inheritance tax can be
a confusing subject.
People are often unsure of the best way to
pass on their wealth. Should they wait until after
they die to leave the monetary bequeaths in a
will? Or is it better to gift their loved ones while
still alive?
There is no right or wrong answer. But if you
are in the fortunate position that you are able
to give younger relatives a head start towards
financial freedom, here are some options that
are available.
Outright Gifts
An outright gift is the most straightforward
type of gift. It simply involves the outright transfer
of assets from one person to another with no
restrictions.
This type of gift is most suitable for people
who want to pass over modest amounts or give
to responsible and capable adults whom they
trust won’t squander the money. If the beneficiary
is under 18, the money will be held in a trust until
they turn 18.
The downside to outright gifts is that they
can be seen as a matrimonial asset so could
be lost in divorce. They can also be used to pay
creditors if a beneficiary becomes bankrupt. If
a beneficiary is a young adult, it puts a lot of
responsibility on them with very little protection
from the monies whittling away.
Remember also that you must explicitly state
in your will that you would like any grandchildren
to benefit from your estate; without saying so,
there is no legal obligation from their parents to
distribute your money to them.
Age Contingent Gifts
If you have young adult relatives you want
to leave money to, you can opt for an age
contingent gift. This is where you specify that
they cannot receive any monies until a certain
age, usually 21 or 25.
The advantage of this option is that you
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prevent money from being spent unwisely by a
young person who you feel is not mature enough
to deal with it responsibly. The monies will be
held in a trust until the beneficiary reaches the
contingent age.
However, there can be tax implications with
this option, so you should seek legal advice
before adding to your will.
Discretionary Trust
This option may work for you if you have
multiple beneficiaries, such as more than
one child or grandchild. Instead of a single
beneficiary that’s entitled to an asset, there is a
‘class’ who could all benefit.
The trustees have control over the trust fund
and can distribute to any of the beneficiaries
whenever they deem it appropriate. You can
leave a letter of wishes in your will for what you’d
would like the primary focus to be, such as
paying education fees or for house deposits.
A discretionary trust can protect money from
being spent unwisely, being lost in a divorce or
bankruptcy, or being squandered through any
other means.
Gifting while still alive
Many people would prefer to see their money
being used and enjoyed by loved ones while
they’re still here.
So long as you don’t die within seven years,
you can gift any amount of money to relatives
and avoid paying Inheritance Tax on those gifts.
If you would prefer not to risk that, there are
other tax-free options.
You can gift up to £3,000 a year with what are
called lifetime gifts. But the disadvantage is that
it is £3,000 in total, not per person, which may be
an issue if you have multiple descendants.
If your child or grandchild is getting married,
you can gift them £5,000 or £2,500 towards
the wedding.
You can also send regular amounts to a junior
ISA with a limit of £9,000 a year. Only parents
can set up a junior ISA, and the regular payments
must not be detrimental to your personal cost
of living.
Top 3 things to
remember about
Inheritance Tax:
• Anything left to a spouse is exempt
• You don’t pay IHT on the first
£325,000 of an estate; anything
above that is taxed at 40%
• This total increases to £500,000
if you pass your main property to a
child or grandchild
*This is not legal advice; it is intended to provide
information of general interest about current legal issues.
• Civil litigation
• Residential conveyancing
• Family and matrimonial
• Probate and estates
• Wills • Lifetime planning
Speak to one of our experts on
01226 282238
17/19 Regent Street, Barnsley, S70 2HP
(also in Royston, Selby and Sherburn-in-Elmet)
www.elmhirstparker.com