Using the tax man to pay for your children's (or grandchildren's) education
Death is not a subject on which the British like to dwell - the weather is far more important. So, no matter how many campaigns are run and offers made, it seems that the proportion of people with a Will in the UK remains firmly below the 40% mark. The figure for those who take the time to keep Wills up to date or, importantly, consider the impact of inheritance tax will be much lower.
So whilst not necessarily topics of polite conversation, schools may well be missing a trick if they are not raising these issues in their prospectuses and marketing materials.
Convincing families to take a broader and coordinated view of their assets and the potential impact of inheritance tax on them could lead to much more pleasant discussions over school fees.
It’s simple. At one end of the family spectrum are grandparents with a home, no mortgage and an inheritance tax liability. At the other end are grandchildren about to move to private school or onwards to university. In the middle are parents who need to fund the school/college fees. In the current environment they are likely to be feeling income-light (for these purposes we can ignore the official inflation figures which we are spun on a weekly basis – I would rather trust my Visa statement than a politician) and so this may well be a very real and present issue.
By utilising some of their assets, grandparents can lessen their inheritance tax burden and parents have the comfort of knowing that education fees are met. How might the grandparents do this? Some will be in the fortunate position that they may have readily available assets (cash, investments) which can be used, while others might need to consider releasing equity from their main capital asset - the home - and using this to provide the funding.
People shouldn’t be put off by the words ‘equity’ and ‘release’ coming in close proximity to one another. There are now properly regulated equity release schemes with the benefit of the consumer rather than the financial advisor in mind. It’s a question of getting proper independent advice – and again, to re-emphasise, to do so in a thought through way for the whole family.
In terms of benefit, such capital funding can be further enhanced where school fees are concerned if the school is willing to accept all fees paid in advance and by doing so offer discounted terms to the family. In business speak this is probably referred to as a win-win-win scenario. In reality it is simply common sense.
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