Lending a hand – the bank of parents and grandparents

12th December 2022


by Seema Solanki, Solicitor, Private Client Department

With sharp rises in food and energy bills coupled with a hike in mortgage rates and petrol costs, it is no surprise that the younger generation will be hit the most with the worst cost of living crisis in the last 60 years. It goes without saying that we are all in some way affected by the living crisis, but the youngest generation will be hit the hardest.

So just when you thought about getting on to the property ladder or making your start in life there are many external factors affecting your journey – it is therefore becoming common for the bank of one’s parents or grandparents to come into play to help the younger generation make their way in life. For example, in the last six months 1 in 4 UK adults have given money to their grandchildren to buy a house. Research also shows that for many, gifting has become necessary to help with everyday living costs never mind being fortunate enough to help getting on the property ladder.

For those of you that are in the financial position to help your children or grandchildren financially through the form of gifting, it is important to be aware of the rules that surround this area so that you can make an informed decision. The wish to help ones loved ones is quite strong for many families, however, the tax implications and the effect of this in one’s estate and tax planning is often not considered or considered too late.

When one makes a gift for their child or grandchild to buy a home, this act of kindness could be triggering an Inheritance Tax cost for the recipient of the gift and possibly also trigger Capital Gains Tax and Stamp Duty Land Tax for themselves, depending on the nature of the gift.

Lifetime giving can therefore affect the Inheritance Tax payable in your estate. It is therefore essential that before one makes a gift that legal advice is sought to fully be aware of the tax implications and potential reliefs and exemptions available. For many of us, we are concerned about the transactional part of the gift but forget that one needs to survive a period of seven years in order for the value of the gift to fall outside of one’s estate for Inheritance Tax purposes.

There are many options to consider when it comes to gifting or helping one’s children or grandchildren, especially in hard times such as now. There are of course many tax planning opportunities for making lifetime gifts and this is often one of the common forms of estate planning that we consider with our clients.

Our Private Client team at Fraser Dawbarns are here to help you navigate your way through these matters so that the process is seamless and fully considered before the act of gifting takes place. If you would like any more information or advice, then please do get in touch with us.

Find out more about Seema Solanki here

Find out more about Wills & Estates here

This article aims to supply general information, but it is not intended to constitute advice. Every effort is made to ensure that the law referred to is correct at the date of publication and to avoid any statement which may mislead. However, no duty of care is assumed to any person and no liability is accepted for any omission or inaccuracy. Always seek advice specific to your own circumstances.  Fraser Dawbarns LLP are always happy to provide such advice.

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