Unveiled – the Winner of Bank of the Year 2013...
The preferential interest rates offered by the bank, a cashier that always smiles as she hands you the cash and loans that require no repayment make the ‘Bank of Mum and Dad’ a popular winner!
On a serious note – one of the most frequent enquires that we handle, come from parents (and grandparents) who wish to help their children financially in one-way or another. As our wonderful politicians keep telling us these are tough times for ‘hard pressed, hard working families’ so parents / grandparents want to help where possible. So what measures can be taken to help children without sacrificing your own financial well-being.
Here are just a few ways that you may be able to help should you be inclined:
• The annual Inheritance Tax gift exemption is often overlooked and this can be back-dated for one year. If used on a regular basis this is an effective method of reducing your family’s potential Inheritance Tax liabilities.
• Offsetting savings against your child’s mortgage liabilities – this can earn you an effective interest rate of 4.49% without forfeiting access to capital should it be required
• Act as guarantor on your child’s mortgage – this is not a straightforward option and comes with obligations and complications
• Junior ISAs were introduced in November 2011 and are a popular way for parents and grandparents to save for either University fees or maybe a deposit for a first property. This allowance each year is often overlooked and lost at the start of the next tax year
• Regular (or irregular) gifts from income can be free of Inheritance Tax on your estate and have no Income Tax liability in the hands of your family.
• Writing assets and plans under trust for a member of your family often has benefits and ensures that in the event of your demise wealth is passed to the right person(s) in a timely fashion
• Funding a pension for a member of your family means that 20% tax relief can be received even if you are not a tax payer yourself
Please remember that Inheritance Tax planning is a complex issue and gifts should be carefully documented to ensure that they qualify for tax privileges. Professional advice is recommended.
If you, or a member of your family, are interested in inter-generational planning then please feel free to contact Atherton York (Chartered Financial Planners) on 0845 475 9009 for a discussion on this without obligation. It is pleasing that we often represent two generations of families in their financial affairs which has the additional benefit of assisting us in legacy planning issues.