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Giving your loved ones financial gifts

Expert tips for passing on your money

Want to help give the younger generation a boost? Discover our expert tips on the most efficient ways of giving financial support without negatively impacting your own finances.

It’s natural to want to help out the family and, if you’re able to give a financial boost – whether it’s a loan or a gift – to the younger generation, it can be enormously rewarding for you, too. But what’s the best way of going about it? Should you give a lump sum or a monthly allowance? When’s the best time to do it? And what about inheritance tax (IHT)? And what may be the implications of doing so? Whether you’re thinking of sharing a nest-egg between grandchildren or helping a younger relative get a foot on the housing ladder, read our useful Q&A1.

1. How much can I give away tax free?

Lee Platt, a Barclays Wealth planner, says you can give away up to £3,000 a year which won’t be added to your estate for IHT purposes. This is known as your ‘annual exemption’. 

“As a grandparent, you can also give a wedding gift of up to £2,500 and as many gifts of up to £250 to anyone who hasn’t already benefited from any other tax exemption.”

You can also give away a bigger one-off sum, Lee explains.

“At the moment, tax rules mean you can make a gift of any size and – as long as you live for seven years afterwards – it won’t be liable for IHT. However, these gift allowances can change, so it’s important to check the latest limits before you decide to do it. 

The rules around so-called ‘gifting’ can be complex and it’s key to keep clear records of what you give away. Always consider seeking advice before you start to make any such gifts.

2. What’s the best way of giving money to my younger grandchildren?

While birthday money is bound to go down well, you can make a longer-lasting impact by investing in your grandchildren’s financial future. Before you commit to anything, make sure the parents are on board.

I’d always advise discussing financial gifts with parents. Mostly the gifts will be hugely appreciated and gratefully received, but it is always wise to check.

Annie Shaw, money expert and financial agony aunt

One idea is to invest a lump sum in a Junior ISA. A child’s parent or legal guardian must open the account and it will be held in their name, but anyone can contribute as long as the total stays under the annual limit (£4,368 for the tax year 2019-20).

Find some useful information about Junior ISAs on our website.

3. How can I help my student grandchild with uni costs?

“A monthly allowance for a cash-strapped student could be a lifesaver,” says Annie, and she advises not to be too prescriptive about the way it’s spent. “Oldies are never going to agree with their younger family members about what constitutes essential spending. You only have to recall the gigs you went to and the clothes you wore at their age to realise that! Some ‘mis-spending’ is part of growing up.”

You could offer to pay directly for a particular expense – whether it’s accommodation costs or a monthly supermarket bill; this way, you’ll know your gift is going towards something worthwhile.

And get the timing right. Transferring money to a student in freshers' week is probably not the best move. Instead, think about making smaller, regular payments into a savings account to keep their finances topped up throughout the year, but make sure first that this won’t have a negative impact on your own finances. Find details of our savings accounts here.

4. How can I make sure my loved one is responsible with the money I give?

If you’re feeling unsure about handing over a lump sum to your loved one or would like them to learn more about how to look after their money, you could suggest that they have a chat with a Barclays Money Mentor.

Our team of money experts provide 45-minute mentoring sessions in branch, by video and over the phone, where they chat to young people about their money goals – no matter how big or small. Your relative could pick up impartial guidance and practical tips to help them create a plan of action for their finances, and learn about budgeting, saving, credit scores and how to reduce debt. They don’t even have to bank with us to book a session.

Another option for you to consider is a trust – particularly if you want to hand over larger sums of money and have a say in what, and when, it’s used.

Lee says

With changing family dynamics, a trust can provide further options for flexibility and control when making large cash gifts. It can help give you a choice of financial support you offer to loved ones in the future. However, this is a complex area and professional advice should be sought.

5. How can I help my younger relatives get on the housing ladder?

Helping out with a deposit for a first home can make all the difference to a younger person. Discuss any gift openly with them in advance so you can make sure you are giving them money when they need it most. You can gift the whole sum, or just a percentage but, if the amount is more than £3,000, you must live longer than seven years to avoid IHT (see above).

If you’re planning a deposit gift for a younger relative who’s buying a home with a new partner, it’s easy to feel nervous about handing over money to someone you don’t know well. To give you peace of mind, you can suggest that a Deed of Trust is created to protect your family’s share in the purchase. This means that if the relationship ends, you can make sure your money stays with you or your loved one. If you’re still feeling concerned, seek legal advice.

Alternatively, you could offer a loan but, before you commit, check first that a loaned deposit is acceptable to the mortgage provider.

Another way of helping a younger relative onto the property ladder is with a Barclays Family Springboard Mortgage. This lets you provide a deposit to help them get a mortgage to buy a home. You’ll get your money back after five years, with interest, as long as the homeowner keeps up their mortgage payments.

Barclays’ own research has shown that many first-time buyers view the money for a deposit as a ‘gift’ that doesn’t need to be paid back. The Family Springboard Mortgage has been specifically designed to remove the financial burden from parents and grandparents to ensure they receive their deposit with interest at the end of the five-year fixed-rate period

Barclays Head of Mortgages, Hannah Bernard

6. I want to make sure I’m leaving things in the best way for my family, what should I do?

“Having a properly-drafted will in place can ensure that your loved ones won’t be left in a difficult situation,” says Independent Age, a charity providing clear, free and impartial advice for older people. “If you die without making a will – known as intestate – UK law will specify who inherits, and your possessions will not necessarily be distributed in the way you would have wished.” 

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