“How much can we afford to give to our children?”

Our clients have both recently retired and are enjoying spending more time travelling and with their children and grandchildren. Their primary objective is to maintain their lifestyle in retirement. This includes both essential expenditure and discretionary spending, such as regular holidays and a new car every three or four years. Our clients are mindful that later-life care costs could be expensive and they want to ensure they have the resources to meet these.

Their secondary objective is estate planning. Given the need to fund their retirement and later-life costs, they are wary of giving “too much too soon.” At the same time, they would like to see their family benefit from their wealth while also minimising their inheritance tax (IHT) exposure.

Our approach

We built a comprehensive cash flow plan for the couple, taking into account their asset base and income and expenditures. We then “stress tested” their plans, showing what higher inflation and lower-than-anticipated investment performance might mean for them. The clients used this information to build a sufficient “buffer” into their plans.

They were then in a position to look at the impact of a gift of capital of £1m to their three adult children.

As the gift of capital does not fall within one of the IHT Gift Exemptions, it will be treated as a Potentially Exempt Transfer (PET). Provided our clients survive for seven years following the date of the gift, the amount will fall out of their estate for IHT.

We advised the clients to keep a comprehensive record of the gifts made (amounts, dates and recipients). We also advised our clients to speak with their solicitors to review and update their wills and put Lasting Powers of Attorney in place.

Our clients should regularly review their position, together with their wealth planner and portfolio manager to accommodate any changes in circumstances and objectives.

For information purposes only and nothing in this article/on this slide should be deemed to constitute the provision of financial, investment or other professional advice in any way. Statements concerning taxation are based on our understanding of the taxation law in force at the time of publication. The levels and bases of, and reliefs from, taxation may change. You should seek professional advice for your individual circumstances.