Business experts

Expert opinion: Lifetime gifts can help young family members when they really need it

Written by Teresa Norsworthy.

Teresa NorsworthySince World War II most people growing up in advanced economies have been able to correctly assume they will be better off than their parents. Now that positive income trend has reversed.

There has been virtually no income growth in the past decade. Millennials – those born roughly between the 1980s and 1990s – are earning the same as those born 15 years before them were at the same age.

The difficulties faced by the ‘squeezed middle’, responsible for supporting growing children, have been well documented.

Many Britons are acutely aware of the financial pressures their children and grandchildren are under and are doing what they can to help.

The recently published Brewin Dolphin Family Wealth Report 2018 reveals that more than half (54 percent) of people aged 55 and over have gifted or lent money to their adult children and one in three (34 percent) expect to do so in the future.

Rising living costs, low interest rates, the struggle to get on the housing ladder – the financial pressures facing the modern family can be overwhelming. But against this backdrop families are pulling closer together and that is going to have many positive impacts.

Traditionally, most people have waited until death before passing on their wealth through their wills. However, there is a growing recognition that this is likely to be too late to make a life-changing difference to the wealth of younger generations. The average age of receipt of an inheritance is 61 – usually too late to help with the challenges of home buying, child rearing and education.

Lifetime gifts can enable you to assist your loved ones when they are most in need. When asked, 19 percent of 18-to-34-year-olds said they feel that major life goals, such as home ownership, seem so unachievable that this has discouraged them from saving.

Nearly a third (30 percent) of the 35-to-54 age group say they are saving nothing at all, highlighting the pressure that many are under.

It may be possible to make a huge difference to a child or grandchild’s life by contributing to an ISA or pension on their behalf. A gift used as a home deposit could open the property gateway, enabling your children and grandchildren to get on to the housing ladder and to engage in longer-term saving.

Another benefit is that gifting wealth while you are still alive can save inheritance tax (IHT). If a gift is regular, comes out of your income and does not affect your standard of living, any amount of money can be given away and ignored for IHT.

You may hear some people express reservations about making lifetime gifts. Of course, you don’t want to hand over money to your children only to be forced to ask for it back later in life when your own finances run short – and you don’t want to end up sacrificing your lifestyle.

The challenge is knowing how to strike a balance between your own potential needs and your desire to help your children or grandchildren now. By gifting relatively little and often, for example, by making regular contributions to a Junior ISA or pension, you could make it easier to strike that balance.

These gifts may be relatively small, but by helping your younger relatives to save now, they can benefit from compound interest and compound returns on their investments – something that might not be possible if an inheritance is received later in life. If your circumstances change, you can also reconsider what you can afford to pass on.

Teresa Norsworthy is a chartered financial planner at Brewin Dolphin Marlborough. Contact Teresa on 01672 519600 or email This email address is being protected from spambots. You need JavaScript enabled to view it.