When is the best time to give your children their inheritance?

Grandparents With Grandchildren On Walk In Countryside Relaxing

Most people want to financially support their children and grandchildren at some point in their lives, but tax rules are complex and change if money is passed down before or after death.

SEE ALSO: Should you give away your inheritance before you die?

SEE ALSO: 10 celebrities who won't leave anything to their children

Here we discuss the factors that determine when your money should be handed over.

How long will you live?

The key point when gifting to children in your lifetime is how long you live after the gift is made. If death occurs seven or more years after the gift will be completely free of inheritance tax. If, on the other hand, seven years haven't elapsed the gifted amount is included as part of the parent's estate.

Inheritance Tax

Every individual has a personal allowance of £325,000 which is free from Inheritance Tax. As of April this year everyone now has an additional £100,000 as part of their residence nil rate band. This means one person's estate, including a main residence, up to £425,000 will be free of inheritance tax - which is charged at 40% on any amount over. A married couple or a surviving partner can pass on £850,000 in the 2017/18 tax year.

Gifting during your lifetime

If you can afford it and are confident you will survive for the next seven years then gifting during your lifetime is likely to be the best course of action. You are limited to gifting £3,000 per tax year, however certain gifts are exempt from this limit, including wedding and birthday presents.


You can also set up trusts to pay for specific events, such as a discretionary trust to pay for university fees. Like individuals, each trust has a £325,000 nil-rate band for inheritance tax purposes. There are various types of trust and the tax liabilities of getting it wrong are horrendous. You should take the time to speak to a specialist solicitor if you are unsure. Set up fees are at least £1,000 and there are annual admin fees. As a result of this, trusts should only be considered for amounts of £100,000 or more.

Vintage money-saving tips
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Vintage money-saving tips
Back then there was no choice, because the mass-produced microwaveable meal was just a glint in a marketing guru's eye, but now, cooking from scratch can save substantial sums.
The older generation learned that there were meat-free days of the week to save money, and that if you had meat you''d stretch mince with breadcrumbs, or buy cheaper joints and use every scrap.
Perfect fruit and vegetables and top-of-the-range brands are a new phenomenon. Buy generic non-branded food and fruit and vegetables in whatever size and shape is most affordable

Nowadays we rush around the supermarket grabbing things we like the look of - with little idea of what we're going to do with it. Making a list and thinking about what you buy can save you thousands of pounds over the course of a year.

There's no such thing as 'left-overs' there's just the ingredients for tomorrow's dinner. The remains of the meat can be stir-fried the next day, the vegetables blended into  soup, and the potatoes saved for bubble and squeak.

Try an experiment and eliminate everything from your life with the word disposable in the title. Not only will you save money, but your bin will take far longer to fill too.

Before you bin anything, think twice about whether you can give it a second life. Think carefully, does your granny have her tried and tested tips that she has a habit of mentioning, for instance, washing out freezer bags? If you mock, you're missing a trick and wasting money and resources.
Cutting out draughts and insulating your home properly can cut 10% off your heating bill.
Back in the 1940s when no-one had central heating, people got used to wearing another layer at home. Try lowering your thermostat gradually, and only stop when those around you start to notice - you'll be surprised how much you can save.
If you save your washing and dish washing until you have a full load every time you'll save energy and save money.
Over the generations we have been sucked into believing the hype. In the days when adverts were few-and-far between, we managed without many of the things we consider essential nowadays. Re-consider what you buy, and why. Without advertising, would you buy any of it?
It's always cheaper to save in advance and plan a purchase than to rush in and borrow - which could end up costing you hundreds of pounds more in interest.
Older generations typically withdraw what they can afford to spend in cash and then leave their debit card at home or deep in their wallets. This has the advantage that they don't tend to reach for a debit or credit card and spend more than they can afford.
Because the older generations couldn't borrow their way out of trouble, they tended to plan more. Give your family a financial safety and a nest egg for the future.
Back when there were only a finite number of items of clothing to go around in a neighbourhood, people borrowed from each other for special occasions. Nowadays swapping and sharing can save substantial sums
Back in the 1940s when no-one had central heating, people got used to wearing another layer at home. Try lowering your thermostat gradually, and only stop when those around you start to notice - you'll be surprised how much you can save.
There was a time not so long ago when no-one could actually remember anyone who had actually bought a bike. They were passed through the siblings, then across family and friends networks, so that decades later, children were still learning to ride a bike for free. Of course it helps if you buy something gender-neutral, then you can hand it down, and reap the benefits as others hand expensive toys on to you.
In previous generations, neighbours would think nothing of asking each other to babysit, walk their dog, or to borrow a ladder. Nowadays we pay handsomely for babysitters and dog walkers, and each have an expensive ladder gathering dust in the shed.
The army of people who come to our homes to do odd jobs is a new phenomenon for all but the very wealthy. You may well have the skills required to complete these jobs, so get stuck in.

Ditch going out for dinner or browsing round the shops for taking a walk, visiting the beach with a picnic, or holding a family DVD night.

Nowadays we're constantly striving for a bigger TV, a flashier car and a better kitchen. Generations ago people never considered that they would ever be able to afford bigger, flashier and better, so they got on with the business of enjoying what they had.

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