When we are drawing up Wills for clients who have children and grandchildren, we find that most of our clients want to benefit their family, and if possible pay as little Inheritance Tax as they legally can, so that future generations can benefit from the value of their property and their life savings.
A recent survey however has suggested that nearly a third of grandparents have concerns about passing on inheritances to their married children due to the possible implications of divorce – either their children had already separated or divorced, or the grandparents had little confidence that the marriage would last.
It appears that there is a real fear for many people that giving too much to the children either in terms of lifetime gifts or by way of inheritance on death means there will be little left for grandchildren.
Traditionally many grandparents have considered generation skipping (i.e. missing out the children and going straight to the grandchildren) an inheritance to save Inheritance Tax, but it seems now that more and more people are considering benefiting their grandchildren because of concerns of money leaving the family as a result of divorce.
Ironically of course if the children get divorced, they may well be in a much poorer financial position and would have welcomed the gift or inheritance to perhaps pay off a mortgage or fund their retirement.
In addition there is no guarantee that the grandchildren will make sound decisions both financially and in terms of marriages in their own lives so there is no guarantee that leaving the inheritance straight to grandchildren will keep the money in the family.
Often the solution for a family is to consider leaving some assets to a Discretionary Trust – this is a mechanism whereby the grandparents choose Trustees to look after the inheritance (or gift if the trust is set up during lifetime) and the Trustees can decide which family members to benefit and when, and hold assets for the benefit of all of the family and future generations.
As always we are happy to talk to all of our clients about any particular concerns they may have.