Too generous by half?

Younger family members are increasingly supported by generous grandparents, but intergenerational gifting needs to take potential benefits, and pitfalls, into account.

A third of millennial homeowners have received financial help from their grandparents of an average £7,400, according to a survey from mortgage brokers Trussle. Meanwhile, research by equity release provider Key found that 15% of grandparents had contributed towards their grandchildren’s higher education, with another 20% planning to do so over the next decade.

For the younger generation, steep education and housing costs mean these gifts can help them reduce debt and qualify for a mortgage. But there may also be tax advantages for grandparents from these generous intergenerational arrangements.

If you have more substantial assets, you may wish to mitigate your future inheritance tax (IHT) bills. Estates worth more than £325,000 are taxed at 40%, although married couples (and civil partners)can pass on £325,000 each, tax free, with possible additional allowances for the family home.

After the rapid increase in property values in recent decades, many families may be looking to reduce any IHT liability. Giving away assets to family members while you are still living can be an effective way to do this.