Thinking of leaving money to grandchildren in a will?
While you could name your children as the sole beneficiaries of your estate, passing on some of your wealth to younger family members can give them greater financial security and help them meet important milestones.
Here are three things you should consider if you want to leave your grandchildren an inheritance.
Leaving money to grandchildren in a will UK
1. Set up a discretionary trust
A discretionary trust, also known as a will trust, is a legal agreement created within a will. This kind of trust can give you more control over how your assets are distributed when you’re gone.
You can set terms and conditions in the trust, naming your grandchildren as beneficiaries and specifying how much they should receive and how often. You could also set conditions your grandchildren need to meet if they want their share of the inheritance. If you want, you may even be able to prevent beneficiaries from losing the money through divorce.
When you pass away, a trustee will be in charge of looking after your assets on your behalf and administering them according to your wishes.
While you can appoint a family member or friend as your trustee, asking an accountant or solicitor to take on the role can help ensure money is paid out to the right people.
Appointing a professional can also help you avoid potential legal disputes between beneficiaries.
2. Gift money at a specific age
If you’re thinking about leaving money to younger grandchildren, you could consider gifting money at a specific age using a trust.
When setting the terms and conditions of your trust, you can specify the age a grandchild should receive their inheritance, such as 21 or 25. The money or assets you leave to that beneficiary will remain in the trust until they reach that age.
This can be particularly beneficial if you believe your grandchildren are too young to spend their inheritance wisely. Waiting until they have matured could help ensure the money is put to good use.
These terms don’t necessarily need to be set in stone. In some cases, you can set up your trust to allow the trustees to distribute funds earlier if they believe your grandchildren are financially responsible.
However, there can be drawbacks or adverse tax implications to gifting money at a specific age. Working with inheritance tax specialists can help you protect your wealth without falling into any unexpected tax traps.
3. Pass on wealth in your lifetime
Leaving money in a will is not the only way to leave money to grandchildren. In some cases, it may be more tax-efficient to gift assets while you’re alive.
There are specific rules on giving gifts in your lifetime. Outright gifts received more than seven years before your death will be exempt from inheritance tax — unless they are part of a trust.
Gifts may be subject to inheritance tax if you pass away within seven years of giving them. Exemptions include:
- Wedding gifts — you can give each grandchild a tax-free gift worth up to £2,500 when they get married.
- The £3,000 annual exemption — you can give away up to £3,000 each year without it being added to your estate.
- Regular payments out of income — certain payments you make to help with someone’s living costs are tax-free.
Planning your estate
Wills can be complicated documents, particularly if you have a large family or a lot of beneficiaries. Seeking financial and legal advice from professionals can help ensure your loved ones are as financially secure as possible when you’re gone.
As wills & probate experts, we can give you peace of mind by creating an estate plan that puts you firmly in control of your assets.
Contact us today to find out more about leaving money to grandchildren in a will in the UK.