Passing down wealth to your children

We all want to help our children get on in life. In the past, people often expected to leave their children an inheritance after their death, but rising house prices, university tuition fees and an uncertain jobs market have all created extra pressures for younger adults. Parents may wish to help by passing down some of their wealth to their children at an earlier stage than they might have done in the past. If you are considering passing some of your wealth to your children, there are different avenues you can explore.

Passing down wealth using a trust

There are a number of different types of trust you can utilise, all with different advantages, but they can be an excellent way of passing wealth to your children in your lifetime. Trusts are flexible, enabling you to change the beneficiaries or their provisions. As the rules governing trusts are complex, it is always advisable to seek legal advice so you can make the best decision for your family's circumstances.

Other ways you may be able to help your children include making gifts. You are allowed to make gifts of up to £3000 to either one person or split between two or more people each year without it affecting inheritance tax. It may also be possible in some circumstances to give property away without it being subject to inheritance tax, but only if you live for at least seven years following the gift. You cannot continue to use any property you have given away to your children; for example by living in it, or it will be subject to inheritance tax if its value is high enough to be liable.

Passing down wealth after your death - make sure you make a will

Many people put off writing a will. This may not seem surprising; after all people are often reluctant to discuss dying. However, if you have children and want to ensure they are provided for after you die, then you need to understand the rules and regulations governing inheritance and make adequate provision.

If you die without a will, this is termed dying intestate and a set of intestacy rules will govern who inherits what after your death. We dealt with some changes to the intestacy rules in a previous post, but there are some other issues you may want to think about, such as the age of your children when they inherit.

Under the current rules, children can inherit once they reach the age of 18, but some parents would prefer them to inherit at a later stage, perhaps when they are 21 or 25. This can be done through trust arrangements, and legal advice is always recommended.

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