Many parents are seemingly retaining savings when they would like to help their children because they are worried they will lose out should their children divorce. They are instead only giving away small sums of money to assist their children with outgoings from time to time or otherwise bypassing them completely direct to the grandchildren. Obviously retaining significant savings may have implications for inheritance tax in the future (or indeed any future wealth tax).

There are various mechanisms by which parents can protect their money which are dealt with below:-

Gifts to grandchildren rather than the child. However, they should be aware that grandchildren may be under the influence of their parents when they get access to that money at aged 18.

If suffering ill health and there is a potential for the child to divorce then they could alter their Will to place monies into a Discretionary Trust in order that their child is a potential beneficiary. (This can then be changed at a later date).

Have drawn up a simple Loan Agreement in favour of their child and spouse. If the money is being used to purchase a house their interest can be registered at the Land Registry but of course any prospective lender will need to be made aware.

• Not providing any capital sum until their child and spouse enters into a Cohabitation Agreement recognising their interest, be it a percentage or for the return of the capital with/without interest.
• Creating a Family Discretionary Trust which can assist with conferring the potential but not guarantee future benefits.
• Asking the child before they marry to enter into a Pre-Nuptial Agreement to recognise that with their assistance that child is perhaps putting in a greater share than the other prospective spouse. Of course the Court would retain discretion but in the proper circumstances subject to fairness and manifestly meeting needs of the parties the Court do look to uphold Pre-Nuptial Agreements.
• If the child and their partner are not intending to marry/are not married then ensuring a Cohabitation Agreement is in place between them to again recognise the capital contribution is repayable debt or is otherwise to be retained by their child as a specific gift.
• Any property purchased can be held jointly with the child and partner as tenants in common so recognising the capital as a share in the property.

It is important to recognise that all of these apart from properly executed and registered Loan Agreement and joint property carry risk as the Court retains an overall discretion. However, the problem with the Loan Agreement is of course it fails to ‘pass on’ the wealth so the benefit of that debt would form part of the grandparents’ estate and so be potentially subject to inheritance taxes.