One of the best ways you can ensure your family’s financial needs will always be met is to prepare for their future now. No matter why you choose to help build wealth for the future generations of your family — for education, a car, a home, or even to jumpstart their retirement — it’s a great way to provide security for your family. Find out how you can get started investing for your family’s future.
This does not constitute advice and advice should be sought in all instances before acting on it.
The sooner you get started with your plan, the better. You’ll be able to take advantage of the compounding effect which will help you grow your money over time without doing anything. That means that even a small contribution now could provide big returns in the long run. For the best way to get started, we recommend working with a professional adviser, as they’ll know all of the tax implications and legal rules that you’ll need to adhere to. But here are a few things to know about building wealth for your children, grandchildren, and beyond.
Take advantage of the seven-year rule
Investing for your grandchildren isn’t just a great way to provide them with financial support, it’s a way to effectively reduce Inheritance Tax liability. Did you know that there is no tax due on gifts you give if you live for seven years after giving them?
To do this, you’ll need to gift any income generated above and beyond what you need for everyday living expenses. Unless your gift is part of a trust, no tax will be due on it as long as you stay alive for seven years after giving the gift, which is also known as the seven-year rule. If you die before time is up then Inheritance Tax will be due on it, and the amount that is owed is dependent on how many years have passed before your death.
The keyword here is that it is a gift and cannot be used as an investment. HMRC has specific guidelines as to what qualifies as a gift, so again we urge working with a financial adviser to avoid any future issues.
Put those Junior accounts to work
Another way to build long-term wealth is to open a Junior Self-invested Personal Pension for your grandchildren as soon as they’re born. These pensions are protected from income tax and are usually exempt from IHT as well. As of this tax year, you can contribute a maximum of £3,600 a year and the government will top it up by 20%, or up to £720 each year.
You can also look into Junior Individual Savings Accounts. For the current 2023/24 tax year the maximum you can pay in is £9,000. An account can be opened for anyone under the age of 18. It’s a great, tax-efficient way to save or invest and it’s safe from Income Tax, tax on dividends, and Capital Gains Tax on the proceeds. A savings account ensures their money is safe and secure in the hands of professionals.
Building a secure financial future now and for years to come
Finding ways to build wealth for your family will help secure their financial future. With professional guidance from the experts at Dental & Medical Financial Services, you’ll not only be able to save the maximum amount of money you can for your children and grandchildren, but you’ll be able to do it tax-efficiently too. To get started building generational wealth, contact us today.