Education and helping your children with a head start in life can be expensive. Discover how we can help identify the right options to help reduce these costs.
Funding a child through education or simply giving them a head start in life can be expensive. When this is funded from income that has been subject to income tax and national insurance, the gross income needed to meet these costs can be significant. There are numerous opportunities to reduce these costs by paying the income directly to the child. To use their tax free personal allowance and the low rates of income tax bands. There is also an added opportunity for grandparents to fund children under the age of 18 that are not available to parents. Furthermore, if the gifts are structured correctly they can benefit the grandparent or parent with their inheritance tax planning.
There can of course be a concern that a child is not ready for the responsibility of owning an income producing assets such as shares. This is where trusts can be used.
If a trust is drafted correctly it can provide asset protection, the parent or grandparent can retain control through their role as trustees and the income generated can be the income of the child.
It is however important, especially when using trusts, that the planning is done correctly to ensure that tax efficient income is paid to the child and there is no additional tax on the parent or grandparent.
At RSM we understand that no two families are alike. We are able to offer solutions that are both tax efficient and practical and can help provide much needed financial assistance to a child.