Support the Next Generation Financially | Curtis Parkinson

Supporting the Next Generation

14 January, 2025 3 minutes reading time


The Best Ways to Support Your Family Financially

Want to give the next generation a financial head start? You’re not alone. Recent research from Savills shows that families funded over £9 billion worth of property purchases in 2023. Furthermore, a study by the Institute for Fiscal Studies found that over an eight-year period, around 30% of adults in their 20s and early 30s received at least one substantial gift or loan from family members. However, with different options available, parents and grandparents face a financial dilemma. What is the best way to support the next generation financially?

Making a Gift

Gifts are often the preferred choice, and for good reason. They’re simple, and if you survive for seven years after making the gift, they’re inheritance tax (IHT) free. This means more of your money goes directly to your loved ones.  According to HMRC, gifts play a significant role in inheritance, with billions of pounds being passed on in this way each year. However, before making a gift, you should always consider your own financial circumstances. Remember that once a gift is given, it’s challenging to retrieve it if your circumstances change.

Providing a Loan

Perhaps you want to help without simply giving money away. Loans can be a good way to do this while teaching younger generations about financial responsibility. However, to ensure your loan is handled responsibly, it’s crucial to have proper documentation. Without it, your money could be at risk. It’s common to stipulate in a loan agreement that the outstanding amount should be deducted from the borrower’s share of any future inheritance. While this isn’t inherently problematic, it must be documented. Formalising the arrangement, including all terms, interest rates, and a repayment schedule (if applicable), is essential to ensure both parties are clear on their obligations.

Setting up a Trust

Trusts offer the greatest flexibility for financial support but are also the most complex option.  They aren’t exclusive to the rich, either. Trusts can protect assets for future generations and be tailored to your specific needs. This makes them a powerful tool for long-term planning to ensure the money is used for a particular purpose, such as education or a first home. While statistics on the number of trusts in the UK are difficult to pin down, government data suggests that millions of trusts are in operation, highlighting their popularity as a long-term planning tool. If a trust seems the best fit for your situation, consider the costs involved and who you would appoint as trustees. Being prepared and aware of these responsibilities can help you make an informed decision.

Our Advice

By considering your unique situation, you can empower yourself to make the right financial decisions for your family. Factors to consider include your age, health, the amount of money involved, your relationship with your beneficiaries, and your overall tax situation.

Please note that all views, comments or opinions expressed are for information only and do not constitute and should not be interpreted as being comprehensive or as giving legal advice. No one should seek to rely or act upon, or refrain from acting upon, the views, comments or opinions expressed herein without first obtaining specialist, professional or independent advice. While every effort has been made to ensure accuracy, Curtis Parkinson cannot be held liable for any errors, omissions or inaccuracies.

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