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Tuition fees – grandparents’ support can be tax efficient

With the stress and hopefully, relief of “A” level results day behind them, parents up and down the country are now facing the reality of funding their child’s university education. With many universities having opted to charge the maximum annual tuition fee of £9,000, for some this will be a daunting proposition.

What better time then, for grandparents to review their Inheritance Tax (IHT) exposure and consider how their position might be improved by some lifetime giving?

For those in a position to make sizeable gifts, they could consider setting up a trust, perhaps for the benefit of all of their grandchildren, from which further education could be funded. Subject to the grandparents surviving for seven years thereafter, the value of this gift would be exempt from IHT. The grandparents could retain control by acting as trustees, perhaps alongside their children.

Even those of more modest means could consider utilising their annual exemptions of £3000 each, or if they have surplus income, making regular gifts from that income. Providing that making these regular gifts does not affect the grandparents’ standard of living or require them to dip into capital to maintain it, these gifts will also be exempt from IHT. In each case there is no survival period requirement.

With the right advice, this could be an excellent opportunity for grandparents to address their own tax position and invest in their grandchildrens’future.