Increasingly our clients consult us about gifting assets to their offspring and family during their lifetime, rather than on death by Will.
There are a number of advantages to giving this course of action consideration. Many would prefer to see their beneficiaries receive the gift during their lifetime or perhaps the beneficiary has an urgent need for the financial support. It could be that a child or grandchild requires money for a deposit for a house and our clients often feel a desire to offer a helping hand. Lifetime gifting can also be important as far as inheritance tax and estate planning is concerned.
Frequently our clients are concerned about the improper use of the money gifted. Perhaps they wish to ensure the funds are put towards a specific purpose. Instability or suitability of a beneficiary’s relationship and the capability of a beneficiary to manage their money can also cause concern.
A solution is to transfer the funds into a Trust, rather than make an outright gift and instead of directly transferring ownership of the funds to the beneficiary, a formal document is put in place with a set of conditions and rules. The client decides who should be the recipient of the funds and who should be responsible for ensuring the conditions are met and the rules adhered to. They are known as the Trustees and careful consideration should be given to this choice.
The amount of flexibility in decision making given to the Trustees is also determined by the way in which the paperwork is drafted. It is possible to give the Trustees wide discretion over the decisions they make and they are guided by a Letter of Wishes. This flexibility allows the Trustees to make decision about the funds in light of a beneficiary’s changing personal or financial circumstances and with continuing consideration to changes in legislation.
The popularity of this course of action is increasing and specific, tailored advice should always be taken.
If you would like to discuss this further with a member of our experienced Private Client team, please do not hesitate to contact us.