When you are reassessing your Family Wealth Plan, you may identify some modifications that you wish to make. If, in the intervening period between making your Will and now, some significant changes were to affect various people named within your plans, you may choose to gift now rather than later.
The beauty of working with many members of one family, as I often do, is that some decisions the different parties can make are especially satisfying.
David & Heather
Take David, who was fast approaching 90, and Heather, in her mid-80s, a married couple I had known for several years.
They were independent people and mostly in good health, but their mobility was shrinking: they found it difficult to drive a couple of miles to the shops. This led them to sell a large semi for a smaller place in the middle of town with immediate access to all the facilities. Friends and family thought they were making a big mistake. “They would miss the garden”, said one. “They won’t like a smaller kitchen”, said another.
I discovered that neither of these mattered at all; quality of life was paramount, and they wanted to preserve this. I urged them not to be concerned about what others might say, even though they meant well.
They had hardly touched their investment portfolio in all the time I had known them. So, when they asked me what they should do with the money they now held after downsizing, I did not hesitate in suggesting they give it to their two children, Harry and Fiona. Harry wanted to build an extension on his home, and it was clearly going to cost. I knew that Fiona’s businesses had been facing difficulties, whilst their children were still at university.
The benefit to David and Heather was witnessing the surprised delight of their children and what a difference this money made to their lives. Of course, David and Heather had a Family Wealth Plan, so they knew that, despite this generous gift, their financial future was secure, and they would have no need of the money themselves. They are happy to be in their new home, too, and settled there well.
They have documented the two gifts and hope they will survive them for seven years, saving their children 40% in IHT; and in any case the taper relief will begin after three years. Had the couple left the money in their estate, no doubt it would have grown, and the ultimate tax bill with it. The children would have appreciated their legacy, but certainly not as much as while David and Heather were still alive.
Staying in control
This is not the first time I have suggested gifting excess capital to your children during your lifetime, and it will probably not be the last.
If you would like some guidance on how to handle excess funds and gifting, or if you would like to get started right at the beginning with your own financial plan, please do not hesitate to get in touch.
This excerpt is reproduced from Cascading Your Wealth: How to build a family wealth plan for the next generation (2021) by Marlene Outrim. If you are a client of UNIQ Family Wealth and would like a free copy, please email us at email@example.com to request one.