Financial planning can be a family business by considering how to use wealth in the best and most tax-efficient way.
The emergence of the ‘Bank of Grandma and Grandad’ has helped fund childcare costs, school fees or university tuition fees for the next generation - for their grandchildren.
School and tuition fees in particular can be a huge financial strain on even high-earning parents, but grandparents can make a significant difference by helping to pay from assets which would have been left to their son or daughter later on anyway.
Passing down wealth through the generations can be very tax-efficient - and the earlier you start, the better.
For gifts to beneficiaries or trusts, the likelihood of surviving seven years is greater when you start earlier. Plus, if you’re using Discretionary Gift Trusts this could be done every seven years as the NRB is reinstated.
It is also possible to take advantage of tax perks that come with certain investments which become IHT-free after a two-year qualifying period. These can help older people to save IHT successfully, as long as they are comfortable taking higher levels of investment risk.
Wealth planning can help identify the potential IHT on an estate. It’s possible to explore other options that may include protecting the potential IHT on large gifts, a range of trusts, whole of life assurance, and investments that qualify for IHT relief.
Starting earlier can also help get better value life assurance policies since premiums are typically lower when people are fit and healthy and tend to increase substantially with age.
*From Barclays Bank