Why are people being warned about unexpected tax bills when they give money to their children or grandchildren?
According to a poll conducted by financial adviser Killik and Co, nearly half of those surveyed were unaware of inheritance tax rules.
The pandemic has hastened many people’s plans to leave money to their children or grandchildren.
They are, however, cautioned to ensure that they do not end up giving some of those funds to the taxman.
The indiscriminate nature of Covid-19, according to Tim Walford-Fitzgerald of the accountant HW Fisher, has made many people consider their own mortality.
“While the exact numbers will never be known, anecdotal evidence suggests that more wills and lasting powers of attorney are being drafted than previously,” he said.
More than a quarter of UK adults who responded to a survey by financial adviser Killik and Co said they planned to increase the financial support they give to family members.
A fifth said they began transferring wealth and assisting children or grandchildren earlier than expected.
Instead of leaving money in a will, nearly four out of ten people said they wanted to help their loved ones now.
Two out of ten people said they wanted to help because they had seen their children or grandchildren struggle emotionally and financially as a result of the pandemic.
Cash was the most popular type of financial assistance, with 40% preferring it.
Twenty percent said they planned to assist by paying a deposit on a home, while 19 percent said they would assist with wedding expenses or university fees.
Other types of assistance included helping to pay off an existing mortgage, and 12% wanted to put money into a junior Isa.
However, giving money as a gift can result in unexpected tax bills.
According to the survey, nearly half of those polled were unaware of the rules and limitations governing the 40% inheritance tax.
According to Shaun Robson, head of wealth planning at Killik and Co, it’s critical that parents and grandparents understand the ramifications of giving large sums of money to relatives, and that they secure their own financial futures first.
So, what can relatives give? Here’s my list of suggestions:
According to Colin Dyer, a client director at abrdn, the residence nil-rate band (RNRB), which went into effect in 2017, made things easier.
UK news summary from Infosurhoy.
Why are people warned about unexpected tax bills if they give money to their children or grandchildren?
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