Information for Grandparents

Grandparent Trusts

If you have the ability to offer a lump sum gift towards your grandchildren’s school fees, then setting up a trust for paying school fees might be a consideration as there are substantial tax benefits.

A trust allows you to 'gift' money to your chosen beneficiaries, e.g. grandchildren for their education, but still retain some control. Importantly you will not be subject to an immediate tax bill, and as long as you are still alive in seven years' time, the money will not be included in your estate for inheritance tax.

That’s why more and more grandparents are choosing to contribute towards school fees. An investment of this kind means grandparents aren’t giving away lifetime earnings in inheritance tax but instead are investing in their grandchildren’s future.

Grandparents can:

  • Give up to £3,000 per year free of inheritance tax
  • Also make regular school fee payments from their income and these will immediately be removed from their inheritance tax liability, provided the gift comes from surplus income and does not reduce their standard of living
  • Also make school fee payments as gifts from their capital. In this situation the gifts would be regarded as a potentially exempt transfer (PET) and would be free from inheritance tax after seven years.

Please contact an independent financial advisor for additional information on tax planning and how you can help give your grandchildren the gift of education.