Legal News | 14.01.21

Handing out to help out?

There is every chance that grandparents are offering (or being asked!) to help out financially at the moment. For everyone, times are difficult and for many finances are tight.

If you are advancing funds to one or more of your children at the moment, it’s worth deciding is it a gift or is it a loan? As both are treated differently on your death.

If it is a gift then it’s outright, no strings attached, and will not form part of your taxable estate for inheritance tax purposes if it falls within allowable exemptions or if you survive 7+ years from making the gift.

If it is a loan then it is repayable and continues to be an asset of your estate, and taxable as such for IHT purposes on your death.

So, with that in mind it is worth asking yourself again: is it a gift or is it a loan?

If there is no realistic prospect of the money being repaid (and the bank of mum and dad knows only too well about those sort of advances ….) then possibly it is worth making a gift rather than a loan. If the loan has already been made then consider a document writing off the loan and converting it to a gift.

You may have made a gift to one child during your lifetime and therefore be concerned about inequality as to the distribution of your estate after your death. Your usual contact at Wansbroughs will be more than happy to review your Will to see whether any changes need to be made to ensure lifetime gifts are brought back into account in order to equalise the eventual division of your estate.

If it really is a loan, then we advise a written record of its terms (interest, repayment schedule, any security being taken, etc). Again, we at Wansbroughs are happy to help you get the terms of the loan written down and clear for all parties.

To find out more or if you require any further information or advice, please contact wealth@wansbroughs.com.