Knowledge Hub | Articles

22 July 2015

How to prepare for a princely present

As Prince George turns two on 22 July, there must be some among his nearest and dearest who will be wondering what on earth to buy the future heir to the throne.

And although the toddler is unlikely to want for material gifts or financial security during his lifetime, his birthday does raise the question of what you can give a child who ostensibly has everything he (or she) needs.

Fortunately, there are a number of tax efficient measures which parents and grandparents can consider when wanting to give a gift which is a little above the model car or a book of nursery rhymes.

These include investing in future school fees, taking advantage of an annual gifting allowance, or setting up a trust; as Craig Williams, leader of the wills, trusts and probate group at leading Buckinghamshire law firm B P Collins LLP, explains.

“The law allows you to give away an annual allowance of £3,000 as a simple gift, although you do have to be aware of the rules around anti-avoidance provision for income tax purposes,” said Craig. “If money you give your children produces income in excess of £100, either directly or indirectly via a trust, that money can still be taxed as the parents’ income.

“Setting aside monies for the payment of school fees is also a form of estate planning as, if these are paid out of excess income without affecting usual day-to-day living standards, they will normally be exempt for inheritance tax purposes. School fees paid by parents would also be exempt as a gift for the maintenance of the family.”

Another alternative, says Craig, is the option of setting up a “bare” trust, something that is usually more popular with grandparents, especially those who want to help out with school fees.

Although while under 18, the child cannot have access to the money, it does mean that if income tax or capital gains tax is due, this can be set against the child’s own personal allowance. Once the child does reach 18 however, he or she will be able to use the money as they wish – something some grandparents might be keen to avoid.

Further examples of tax efficient investments include transfers into trust, which allow you to give money away while maintaining control; and also taking out life insurance policies, which will eventually produce a cash lump sum.

In addition, such time as children marry, then each parent is allowed to give the sum of £5,000 inheritance tax free as a wedding gift, while grandparents can each give £2,500.

By the time Prince George is ready to choose a bride, we can assume he won’t be overly worried about wealth planning.

For the rest of us however, securing a solid financial future for generations to come is important and it pays to seek independent legal and financial advice about the most effective way of doing so.

For expert advice, please contact the wills, trusts and probate team on 01753 889995 or email

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Phone: +44 (0) 1753 889995


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