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Generous grandparents aim to pass wealth on

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22/11/2018
The over-55s have been key beneficiaries of the housing boom and gold-plated pension schemes, but they are increasingly handing wealth to their children and grandchildren.  

More than three out of four homeowners (76%) are looking to help their children financially and more than one in five are helping out grandchildren (22%), finds new research from equity release adviser Key.

The average pre-inheritance gift is £17,000 for children and £11,300 for grandchildren. Nearly half (46%) have already helped children and another 30% plan to do so. Key said this was equivalent to around 8.6 million homeowners helping out their families financially. The study found around 4% have made financial gifts to grandchildren and another 18% plan to do so.

Homeowners in the North East are the most generous to their children with 94% having already given or planning to give. The grandchildren of homeowners in London are the most likely to receive financial help with one in three (34%) expecting to give cash.

Gifting to children by region

REGION HOW MANY HAVE ALREADY THEIR HELPED CHILDREN? HOW MANY PLAN TO HELP THEIR CHILDREN? TOTAL
North East 56% 38% 94%
London 43% 43% 86%
Wales 53% 32% 85%
South West 52% 31% 83%
Scotland 43% 29% 72%
West Midlands 47% 34% 81%
South East 40% 35% 75%
East Midlands 53% 19% 72%
Yorkshire & Humberside 48% 22% 70%
North West 47% 20% 67%
East  Anglia 37% 29% 66%
GREAT BRITAIN 46% 30% 76%

 

Will Hale CEO at Key said: “With more than three out of four planning to help children and one in five helping grandchildren there is clearly is a real desire among this group to support younger generations and a recognition of some of the financial challenges they are facing. Despite recent reports pointing to a growing intergenerational divide our experience is that families continue to offer financial support when it is needed across the generations. The over-55s have done well out of property wealth growth and many may be benefiting from generous company pension schemes.”

Key’s research found 78% of over-55s are worried that by gifting now they might run into financial trouble themselves in later life, while 76% are worried about the possible tax implications.

The rules on gifting:

Gifts between husband and wife are automatically exempt. Gifts to non-married partners, however, and to anyone else, are potentially caught by the rules.

You can give away £3,000 worth of gifts each tax year. Note, however, that the limit applies to you, not to each gift. You can give £3,000 to one person, £1,500 to two people and so on. You can carry any unused annual exemption forward to the next year – but only for one year.

In general, you are safe – within reason – on birthday or Christmas presents or small gifts out of your regular income. If you can prove that giving the gift made little difference to your day-to-day living, then it is probably within the rules.

There are a number of other exemptions. Each tax year, you can give wedding or civil ceremony gifts of up to £1,000 per person, rising to £2,500 for a grandchild or great-grandchild and £5,000 for a child. You can also make payments to help with another person’s living costs, such as an elderly relative, or a child under 18. Gifts to charities and political parties also fall outside the IHT net.

Other gifts are considered to be ‘potentially exempt transfers’. There’s no limit on the value of a potentially exempt transfer, but if you die within seven years, or you retain use of an asset (such as your home), it goes back into your estate. It will then be subject to inheritance tax to the extent it exceeds the various nil rate bands (currently £325,000 for the 2017/18 tax year, plus a £100,000 allowance for your main residence).

 

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