Creating A Financial Legacy For Your Family
Raising a child is a costly business – nappies, clothes, pocket money and school trips are just the tip of the iceberg.
The results of a survey indicated that by the time your child has reached 21, you would have spent an average of £222,458 on their upbringing (Source: LV=, January 2013).
It doesn’t get any easier once they reach adulthood. The chances are high that they will need fi nancial help to fund a gap year, or to get a foot on the property ladder.
But looking after your children doesn’t end when they start carving out a career and have a family of their own. In all likelihood, you will want to create a fi nancial legacy to ensure that the wealth you have created is preserved, protected and passed on to them.
Preserving as much of your wealth as possible requires careful estate planning; otherwise you may not pass on as much wealth as you anticipate.
Only with an appropriately drafted Will can you be certain that your estate will go to the right people. If you do not have a valid Will, you risk depriving your family of their home, increasing the inheritance tax (IHT) burden and leaving parts of your estate in the wrong hands.
In addition to Wills, Trusts can also help you to protect and preserve your estate as they allow you to give away assets but restrict or direct how and when they are used.
There are many different types of Trusts, some straightforward and others very complicated. A common use of a Trust is to hold assets on behalf of a child until they are old enough to look after their own money. However, it is vital that you seek expert help before you take the plunge because there may be income tax or capital gains tax as well as Inheritance Tax implications that need to be considered.
You can gift up to £3,000 a year, which can be divided between as many people as you like. You are also allowed to use the previous
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year’s allowance if it has not been used. Parents are each allowed to give away £5,000 to their children when they get married, while grandparents can give £2,500.
Meanwhile, if you are saving on behalf of your child or children it makes sense to ensure that the method used is as tax-effi cient as possible – and to start as early as possible.
A Junior ISA offers parents, grandparents, other relatives and friends the opportunity to invest regular contributions or lump sums on behalf of a child in a fl exible and tax-effi cient way.
Setting up a pension for a child (you are allowed to invest a maximum of £3,600 gross a year on their behalf) is one of the most tax effi cient fi nancial gifts you can make. You get tax relief on the contribution and the child benefi ts from tax-free growth. Because the money is invested over such a long term – up to 55 years or more – you have the luxury of taking a unique long view on the investment strategy, which presents the opportunity to really go for maximum returns.
Being a parent brings with it rich rewards, from watching your children walk their fi rst steps, to applauding them when they walk on stage to collect their graduation scroll. But such rich rewards do not have to be only emotional; they can be real too, with a little foresight and some expert fi nancial help.
Please visit my website or contact me to receive a complimentary guide covering Wealth Management, Retirement Planning or Inheritance Tax Planning.
Scott Symes 01202 951227 07885 899742
scott.symes@
sjpp.co.uk www.scottsymeswm.co.uk
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