Legal News | 18.07.24

Helping AggraVATed Parents

The King’s Speech formally announced Labour’s policy to end VAT exemptions for private schools. For some parents with children in private schools, this will require a review of their finances, and some may seek additional financial support from extended family members, particularly grandparents. Families may look to intergenerational wealth transfer to manage the additional financial burden.

Here are some key considerations for parents and grandparents contemplating gifting:

• Annual gift allowance: Each individual can gift up to £3,000 per year without incurring inheritance tax (IHT).
• Regular gifts from surplus income: Gifts made from surplus income (income that exceeds the donor’s normal expenditure) can be exempt from IHT, provided they do not affect the donor’s standard of living. This can be a strategic way for grandparents to assist with school fees, but detailed records should be kept.
• Larger outright gifts: Although larger lump-sum gifts may be subject to IHT if the donor passes away within seven years of making the gift (see last week’s newsletter on this here Is your estate planning The Weakest Link… goodbye? – Wansbroughs LLP), planning well in advance can mitigate potential tax implications. However, it is worth taking advice as to structuring of the gift (and why grandparents might want to avoid paying the school direct); we can help.
• Trusts: Establishing a trust can be an effective way to manage and distribute wealth over generations while ensuring funds are used for specific purposes such as education. Trusts can offer tax advantages and provide a structured method for supporting grandchildren’s education.

Wansbroughs can help you plan and ensure family wealth can benefit all generations.