When it comes to leaving your estate to your children, you have two main options: making a will or giving gifts. Both options have their advantages and disadvantages, and choosing the most cost-effective option will depend on your specific circumstances.
Making a Will
A will is a legal document that specifies how you want your assets to be distributed after your death. By making a will, you can ensure that your children receive your estate in the way that you intended. If you don’t make a will, the laws of intestacy will determine how your estate is distributed, which may not be in line with your wishes.
One of the benefits of making a will is that it allows you to appoint a guardian for your children if you die whilst they are under the age of 18. This is particularly important if you are a single parent or if both parents are deceased.
Another advantage of a will is that it can help to minimize the amount of inheritance tax that your children will have to pay. If you leave your estate to your children through a will, they may be able to take advantage of the nil-rate band, which is currently £325,000 in the UK.
However, one of the disadvantages of making a will is that your children may have to wait until after your death to receive their inheritance, as your estate will have to go through probate first.
Making lifetime gifts is another option for leaving your estate to your children. By making gifts while you are still alive you can see the benefit of your gift during your lifetime. You may be able to enjoy watching your children use the gift to achieve their goals or to support their families and potentially reduce the amount of inheritance tax that your estate will have to pay.
One of the benefits of making gifts is that your children can use the money or assets immediately. This can be particularly important if your children need financial support or if you want to help them to achieve their goals, such as buying a house or starting a business.
However, one of the disadvantages of giving gifts is that you will lose control over the assets once you have given them away. Additionally, if you give too much of your estate away while you are still alive, you may not have enough to cover your own expenses in later life.
In conclusion, both wills and gifts have their advantages and disadvantages, and the most cost-effective option will depend on your specific circumstances. If you want to ensure that your children receive your estate in the way that you intended, making a will is a good option. However, if you want to reduce the amount of inheritance tax that your children may have to pay, giving gifts is a better choice.
It’s important to seek professional advice when making decisions about your estate, as each case is unique and may have different tax implications. If you would like to speak to us about making a will or making gifts please call us on 01279 295047, or complete our contact form and we will be in touch.