29th September 2023
Saving for the next generation
TAKING PROACTIVE STEPS IN SECURING YOUR CHILD’S OR GRANDCHILD’S FINANCIAL FUTURE
Many parents and grandparents set aside money for the next generation to help with their financial needs. The rising cost of education, housing, and life in general, has created concerns about financial stability for future generations.
Increasingly, parents and grandparents want to ensure their children and grandchildren have the financial resources to navigate these challenges successfully. Additionally, a greater awareness of the importance of financial planning and wealth accumulation has prompted many individuals to take proactive steps in securing their children’s financial futures.
Starting early and investing strategically will enable you to provide a solid foundation for your child’s or grandchild’s economic wellbeing. The desire to give the next generation a head start in life and empower them to overcome any financial hurdles is a driving force behind why many parents and grandparents focus on setting aside money for children and grandchildren.
When considering the tax implications and how to arrange your affairs best, tax-efficient structures like Junior ISAs (JISAs) or bare trusts can be worth exploring.
PASSING ASSETS TO YOUNG PEOPLE
A bare trust is commonly used to pass assets to young people. In bare trust, the assets are held in the name of the trustee (typically a parent or grandparent) until the beneficiary reaches a specific age, in this case 18.
On the other hand, a JISA has a current allowance of £9,000 (tax year 2023/24) and anyone can contribute to it. there is no limit on the amount that can be settled in a bare trust, while there are restrictions on JISAs, and a change of beneficiary is not allowed.
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The value of your investment can go down as well as up, and you may get back less than you invested.
The tax treatment is dependent on individual circumstances and maybe subject to change in future.