The pros and cons of giving money to loved ones during your lifetime

In the past, passing on wealth to loved ones usually involved leaving an inheritance. However, more parents and grandparents are choosing to give financial gifts during their lifetime. It can help family members achieve milestones, but it also needs careful consideration around how it’ll affect your financial security.

Older generations are gifting billions of pounds each year

Research shows that older family members are gifting billions of pounds each year to provide day-to-day support for loved ones.

According to Legal and General nearly half of older people provide some sort of financial support to family members. Around four in ten (39%) of young adults receive regular support that helps cover monthly outgoings. The average amount provided is £113 per month, collectively adding up to £372 million each month. This amount increased even further in 2020 as families faced financial pressures caused by the pandemic. It’s estimated that an extra £1.9 billion was gifted to younger family members in 2020.

Rising costs and stagnant wages may mean some younger family members are struggling to make ends meet. As a result, you may want to help by providing a regular gift to supplement their income.

Many parents and grandparents are also providing a lump sum gift to help younger generations reach milestones. As house prices have increased, it’s become common for first-time buyers to rely on the Bank of Mum and Dad. According to Legal & General, one in two house purchases among under-35s are made with the support of family. It’s expected that older generations will lend £2.1 billion to support homeownership plans in 2021 alone.

On average, the Bank of Mum and Dad provides £19,000, with 71% of first-time buyers saying they would not have been likely to buy without financial support. In most cases, this support is a gift – just 30% are expected to pay some of it back.

Why lifetime giving could be valuable

1. It could help loved ones tackle challenges they’re facing now

The appeal of giving during your life is that it can help loved ones overcome the challenges they face now and set them up for greater financial security in the future.

Giving a house deposit is a good example of this. A lump-sum gift during your lifetime can mean children or grandchildren can get on the property ladder. It could help reduce monthly outgoings if they’re currently paying rent and mean they’re mortgage-free sooner in life. Helping pay for educational costs can also make sense and help loved ones achieve career aspirations.

Giving during your lifetime also means you get to see the benefits your wealth brings to loved ones.

2. It could reduce Inheritance Tax liability

If Inheritance Tax (IHT) is a concern, gifting during your lifetime can also form part of the solution.

If the value of your estate, which includes all your assets, is over £325,000, IHT may be due. An additional allowance can increase this threshold to £500,000 if you leave your main home to children or grandchildren, so it’s important to think about who you’d like to inherit assets when considering IHT. In some cases, gifting to reduce the value of your estate can make sense from a tax perspective.

However, it’s important to keep in mind that not all gifts will be considered outside of your estate for Inheritance Tax purposes immediately. Some may still be included for up to seven years after they are given. If IHT is one of the reasons you want to gift during your lifetime, it’s important to understand allowances and rules. Please get in touch to discuss your options.

Drawbacks to consider before gifting

1. It could affect your financial security later in life

Before you gift money, it important to understand how it could affect your plans. Taking a lump sum out of your pension to act as a deposit for a child’s house, for example, could mean you’re not able to achieve goals in your later years. Before deciding to provide gifts, you should take some time to assess the impact it will have. This step means you can lend support while safe in the knowledge that your plans are still on track.

You should also assess the impact if something unexpected were to happen. Even the best-laid plans can be affected by unforeseen circumstances. For example, would you still be able to afford the type of care you’d prefer if it were needed after gifting? Or would your pension now be able to stretch for another ten years if you lived longer than expected? Answering these questions can be difficult, but we’re here to help.

2. It could affect the inheritance you leave behind

It’s also important that you keep in mind how gifting now could affect the inheritance you leave to loved ones. In some cases, gifting now could have a significant impact on your assets later in life. Deciding what your priorities are before gifting can help ensure that the decisions you make reflect your goals.

If gifting now will affect the inheritance you leave, you should consider speaking to your beneficiaries. They may be expecting an inheritance to help them achieve goals later in life, such as providing a more comfortable retirement. Knowing what they can expect can help loved ones create a financial plan that suits them.

Balancing family support and your plans

When you want to lend financial support to loved ones but aren’t sure how it’d affect your plans in the long term, it can be difficult to know what to do. Financial planning can give you confidence in the decisions you make. Using cashflow planning, we’ll help you see how making regular or one-off gifts will affect your security, including if something unexpected happens. It can mean you’re able to support the people important to you while knowing your own plans are secure.

Please contact us if you’re thinking about financially supporting your family and would like to understand the long-term implications.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

Levels and bases of, and relief from, taxation are subject to change.

The Financial Conduct Authority does not regulate estate and tax planning.

PRIVACY NOTICE

Blue Financial Group Ltd (referred to as ‘we’ or ‘us’) takes the privacy and security of your personal information seriously. This policy sets out the basis on which any personal data we collect from you or you provide to us, will be processed. Please ensure you understand our policy and practices in relation to holding your personal data and how we process it.
By visiting our website or engaging with us, you consent to the practices laid out in this policy.

DISCLOSURE OF YOUR INFORMATION

We may share personal data we hold about you with other parties. however, this will only be with companies who we work with on your behalf and for a legitimate purpose, which is necessary to ensure that we remain compliant with our legal and regulatory responsibilities. Steps will be taken to ensure that the information is accurate, kept up to date and not kept for longer than is necessary.
We will ensure your data is safeguarded against unauthorised or unlawful processing. The information you provide is subject to the Data Protection Act 1998 (the ‘Act’). By signing our Service Charter, you consent to us or any company associated with us processing your personal data. We will not share or sell personal information about you with third parties except to provide the information, products or services you have requested.
Under the Data Protection Act and General Data Protection Regulation individuals have a Right to Erasure (‘right to be forgotten’) which can be applied to personal data, in specific circumstances, and is a right that you may be able to exercise for the data that we hold for you. However, we can refuse to comply with a request for erasure where the personal data is being processed to comply with a legal obligation. Under FCA regulation we have a mandatory requirement to retain your data for specified periods (and for some products, such as occupational pension transfers, we are required to retain this data indefinitely) which may impact your Right to Erasure.
If at any time you wish us, or any company associated with us to cease processing your personal data or sensitive personal data, or contacting you for marketing purposes, please contact The Data Protection Officer on (01403 334455) or in writing at Best Practice IFA Group Ltd, Broadlands Business Campus, Langhurstwood Road, Horsham, West Sussex, RH12 4QP. Subject to certain exceptions, you are entitled to have access to your personal and sensitive personal data held by us.

SAFEGUARDING DATA

We are required to follow procedures with regards to maintaining the confidentiality of your personal information. We will continually review these procedures to ensure your information remains safeguarded and will make changes as we deem it appropriate to do so.
However, when sharing information via the Internet, due to its open nature, we cannot guarantee the security of such information that you transmit via our website.

INFORMATION WE MAY COLLECT FROM YOU

We may collect and process the following data about you:
• Information you provide – You may give us information about you by completing our contact form on our Website or by engaging with us via phone, email or in writing. The information would likely include your name, address, email address and any other contact information. It will also include other detailed financial and personal information about you if you engage with our services.
• Information we collect – When you visit our website we may collect the following information:
o Technical information including your IP address, browser type and version, pages visited, geographic location and your device information.

HOW WE MAKE USE OF THE INFORMATION

We may use your personal information in the following ways:
• To provide you with any services/products you request from us and notify you of any changes. This includes carrying out our ongoing obligations/service to you that arise from any contracts entered between you and us.
• To meet our compliance, regulatory and legal requirements as defined by the varying bodies that regulate us.

STORING YOUR PERSONAL DATA

We take appropriate measures to ensure that any personal data are kept secure, including security measures to prevent personal data from being accidentally lost, or used or accessed in an unauthorised way. We limit access to your personal data to those who have a genuine business need to know it. Those processing your information will do so only in an authorised manner and are subject to a duty of confidentiality.
We also have procedures in place to deal with any suspected data security breach. We will notify you and any applicable regulator of a suspected data security breach where we are legally required to do so.
Unfortunately, the transmission of information via the internet is not completely secure. Although we will do our best to protect your personal data, we cannot guarantee the security of your data transmitted to the Website; any transmission is at your own risk. Once we have received your information, we will use strict procedures and security features to try to prevent unauthorised access.
Keeping your personal data up to date
If your personal details change you may update them by accessing this data through the wealth platform portal, or by contacting us using the contact details below. If you have any questions about how we use data collected which relates to you, please contact us via phone or email.
We will endeavour to update your personal data within seven working days of any new or updated personal data being provided to us, in order to ensure that the personal data We hold about you is as accurate and up to date as possible.
How long we keep your personal data
• We will hold personal data (e.g. name, address, date of birth and contact details) in line with our regulatory and legal obligations as set out by our regulator – currently a minimum of 5 years for investment business and indefinitely for occupational pension transfer or opt-out business.
Where we store your personal data
All of the information that we hold about you is stored on secure servers that comply with the GDPR requirements. They also comply with the most widely accepted standards and regulations like ISO27001, 27017, 27018 and SOC 1, 2 and 3.
If you would like further information please contact us or the Compliance Director at Best Practice IFA Group Limited, of which we are an Appointed Representative (see ‘Contact’ below).

WHERE WE STORE YOUR PERSONAL DATA

All of the information that We hold about you is stored on our secure servers within the EEA.

The data that We collect from you may be transferred to, and stored at, a destination outside the European Economic Area (“EEA”). By submitting your personal data, you agree to this transfer, storing or processing. We will take all steps reasonably necessary to ensure that your data is held securely and in accordance with this Policy. Countries outside the EEA do not have the same data protection laws as the United Kingdom and EEA and We have therefore ensured that any of our suppliers who may transfer your personal data outside the EEA has put in place appropriate measures to protect your data, either by being a member of the US-EU Privacy Shield, or by entering into a European Commission approved contract (as permitted under Article 46(5) of the General Data Protection Regulation).

If you would like further information, please contact Us or the Compliance Director at Best Practice (see ‘Contact’ below). We will not otherwise transfer your personal data outside of the United Kingdom or EEA or to any organisation (or subordinate bodies) governed by public international law or which is set up under any agreement between two or more countries.

YOUR RIGHTS

Under the General Data Protection Regulation you have a number of important rights free of charge. In summary, those include rights to:
• Access to your personal data and to certain other supplementary information that this policy is already designed to address
• Require us to correct any mistakes in your information which we hold
• Require the erasure of personal data concerning you in certain situations
• Receive the personal data concerning you which you have provided to us, in a structured, commonly used and machine-readable format and have the right to transmit those data to a third party in certain situations
• Object at any time to processing of personal data concerning you for direct marketing
• Object to decisions being taken by automated means which produce legal effects concerning you or similarly significantly affect you
• Object in certain other situations to our continued processing of your personal data
• Otherwise restrict our processing of your personal data in certain circumstances
• Claim compensation for damages caused by our breach of any data protection laws.
For further information on each of those rights, including the circumstances in which they apply, see the Guidance from the UK Information Commissioner’s Office (ICO) on individuals rights under the General Data Protection Regulation

HOW TO COMPLAIN

We have that we or our Compliance Director can resolve any query or concern you raise about our use of your information. The General Data Protection Regulation also gives you right to lodge a complaint with a supervisory authority, in particular the European Union (or European Economic Area) state where you work, normally live or where any alleged infringement of data protection laws occurred. The supervisory authority in the UK is the Information Commissioner who may be contacted at https://ico.org.uk/concerns/ or telephone 0303 1231113.

COOKIE POLICY

Cookies are on almost every website. They are small text files that are placed on your computer (or any other device used to connect to the internet) by websites that you visit. They are saved on your computer to help the website perform differing functions and are used for several reasons. This is purely statistical data about our users’ browsing actions and patterns and does not identify any individual. We may, however, use such information in conjuction with the data we have about you in order to track your use of our services.

TYPES OF COOKIES USED

The website uses cookies for a variety of reasons but with the main purpose of ensuring the website runs as efficiently as possible.

We use all or some of the following categories of cookies on our website:

  • Analytical” cookies. They allow Us to recognise and count the number of visitors and to see how visitors move around the Website when they are using it. This helps Us to improve the way our Website works, for example, by ensuring that users are finding what they are looking for easily.
  • Strictly necessary” cookies. These are cookies that are required for the operation of our Website. They include, for example, cookies that enable you to log into secure areas of our Website, use a shopping cart or make use of e-billing services.
  • Functionality” cookies. These are used to recognise you when you return to our Website. This enables Us to personalise our content for you, greet you by name and remember your preferences (for example, your choice of language or region).
  • Targeting” cookies. These cookies record your visit to our Website, the pages you have visited and the links you have followed to our affiliates websites. We will use this information to make our Website, offers e-mailed to you and the advertising displayed on it more relevant to your interests. We may also share this information with third parties for this purpose.
    At any time, you can prevent cookies from being received by your browser. By deleting cookies, this may affect the experience via our website. Please refer to your browser Help guide for details on how to block or delete any cookies.

CONTACT

All questions, comments and requests regarding this Privacy and Cookies Policy should be addressed to Robert Bowers rob.bowers@bluewealth.co.uk or write to us at 3 Westbury Mews, Westbury-on-Trym, Bristol, BS9 3QA. Alternatively, please contact our Compliance Director at Best Practice IFA Group Ltd, Broadlands Business Campus, Langhurstwood Road, Horsham, West Sussex, RH12 4QP. Tel 01403 334455 or via email at info@bestpractice.co.uk