Wanting to save for a grandchild? – here are some of the options.
Many grandparents want to save money for their grandchildren, but it can be difficult to find the most tax-efficient product and to understand the tax rules that apply.
Grandparents can give away £3,000 per annum (each) free from inheritance tax. Larger gifts can also be made, but these payments could be subject to inheritance tax if the grandparent does not survive for a further seven years.
A key factor to consider at outset is whether you are happy to make an absolute gift and lose access to the funds you are parting with. Assuming so, there are several options available that take advantage of tax allowances available to the grandchild which include:
- Junior ISA
- Lifetime ISA
- Premium Bonds
- Savings Accounts
In considering the options we would begin by exploring your preferences and questioning the following:
- Are you happy to lose control / access to these funds?
- Are you happy for your grandchild to gain control / access to the funds?
- How much can you afford, both now and in the future / how many more grandchildren might you have?
- Do you want to commit to a regular sum, or would you prefer a one-off gift / ad-hoc sums?
Having detailed just a few of issues to consider, it is clear to see why deciding which option is right can be a difficult task. If on reflection, retaining some control over larger one-off gifts is desired then the option of using a trust would be worth considering but again this would come with numerous further options to explore.
When helping clients with such requirements, our role as financial planners is to provide some insight regarding the options available and through identifying personal preferences determining the best way forward.
Of course, we would encourage everyone to seek professional financial planning advice before making any financial decisions.