It is often the way of things that those involved in inheritance tax planning overlook the simple and straightforward. Part of the reason undoubtedly lies in the discipline needed to make regular gifts over many years.
For those who have that discipline three of the best should always be at the top of the list.
The Junior ISA
The account must be opened by a parent or guardian, anyone can top up Junior ISA savings, even if they live overseas. The annual savings limit is £4,368 (2019/20), but the fund grows free of income tax and capital gains tax, meaning the child pays nothing when they have access to the cash when they turn 18 years old.
Over a full 18-year term, grand parents and other relatives can transfer £78,624 plus interest and pay no tax on the growth.
The Junior SIPP
Like a Junior ISA but with different tax-efficient contribution rules. Again, must be set up by a parent or guardian and anyone can contribute, including expat grandparents.
The annual savings limit is £2,880 net a year, which is topped by 20% tax relief to £3,600 gross.
A Junior SIPP fund is locked until the child reaches 57 years old from 2028, when the cash becomes subject to pension freedom rules.
The Junior Investment Account
Grandparents can open these accounts and pay in money or investments. The account is set up under a bare trust, which allows a parent or other trustee to hold assets for the child.
Helping grandchildren financially is just one aspect of gifting money – minimising inheritance tax is the other.
One might anticipate that grandparents concerned about inheritance tax and grandchildren would see the above vehicles as their first port of call … in practice it seems to be the exception so it is always a good area to constantly revisit.