The next generation arguably facing the most difficult financial outlook in the UK. Prudence with money isn’t just enough and many will require smarter decision making with their finances. Some of the key issues impacting the next generation range from
- Increase in university fees.
- Higher housing cost.
- General living cost.
- Care cost for those planning for a family
- For some the cost of looking after elderly relatives
Many parents and grandparents want to help with some of these issues by setting aside money for when the time is right. That naturally leads to questions around tax, and how best to arrange your affairs. People looking to pass on assets to the next generation may wish to consider tax efficient structures like a Junior ISA (JISA) or bare trust. A bare trust is often used to pass assets to young people and is structured in a way that the assets are held in the name of the trustee (typically a parent or grandparent) until the beneficiary reaches a certain age, often 18, or 16 or over in Scotland. Its is therefore important to understand the exemptions available to use within the planning process, rules on transfers and most importantly the differences between the options available.
Inheritance Tax Exemptions
£3,000 annual exemption.
Gifts in consideration of marriage
- £5,000 from a parent.
- £2,500 from a grandparent or one of parties getting married.
- £1,000 from others.
£250 small gifts exemption.
Normal expenditure out of income exemption.
The most common concern with JISAs or bare trusts is what happens when a child reaches the age of 18. At this point, the child will have access to, and control over, any assets, with there being little anyone can do if the money is going to be squandered. The trustee of a bare trust has a duty to tell the beneficial owner of the trust’s existence at the age of 18 and, given that any income should be reported on the beneficiary’s tax return, it is virtually impossible to pretend that the trust does not exist.
Do you need help planning for school fees funding, gifting deposit for a property, saving for a special occasion or buying a holiday property. Speak to one of our financial advisers by completing the link below
