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How Much Should You Really Give Your Kids? Inheritance, Incentives and Money Mindsets with Hamish Leng · Merryn Talks Money

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Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. Welcome to Marin Talks
0:20
Speaker 1: Your Money, the Personal finance edition of Marin Talks Money
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Speaker 1: and these bonus podcasts. We talk about the best strategy
0:25
Speaker 1: is making the most of your money. I'm Marin zum
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Speaker 1: zetweb Editor at Large for Bloomberg UK Wells. On today's show,
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Speaker 1: we are going to dive into a topic we briefly
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Speaker 1: touched it on during the latest episode with Suzanne Willie.
0:36
Speaker 1: If you haven't listened to that one, you really should.
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Speaker 1: We talked about inheritance and how important it is to
0:41
Speaker 1: find some kind of balance between passing enough money to
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Speaker 1: your airs to give them the best opportunities possible, but
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Speaker 1: not giving them so much it reduces their desire to
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Speaker 1: work hard for themselves. Incentives matter. Everybody knows one, well,
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Speaker 1: actually does everyone know one? Unhappy trust fun kid. I
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Speaker 1: don't know a lot of people do. And that's not
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Speaker 1: the legacy we want to pass on to our own
1:00
Speaker 1: own children and our grandchildren. So joining me in the
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Speaker 1: studio today with help with this naughty problem is Hamish
1:05
Speaker 1: Lang of Hamish Lang and Company, a small knights Bridge
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Speaker 1: based financial planning firm who specialize in helping families I'm
1:12
Speaker 1: quoting here, helping families and individuals achieve financial security and
1:16
Speaker 1: order and live their lives. They well, sounds great. Hamish
1:18
Speaker 1: started as a financial planner in nineteen eighteen, he spent
1:21
Speaker 1: four decades. Over four decades, even apologies for Hamish for
1:25
Speaker 1: revealing your age here for advising clients on gifting money
1:28
Speaker 1: to their heirs, his advice in corporate is the psychological
1:30
Speaker 1: aspect of giving. That's what we want to get into,
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Speaker 1: as well as the tax and practical aspects. So he's
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Speaker 1: perfectly placed to help us understand this tricky topic. Hamish,
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Speaker 1: welcome to the show.
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Speaker 2: Thank you very much.
1:42
Speaker 1: Right, this really is a naughty topic actually, So there's
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Speaker 1: two sides to this I want to get into today.
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Speaker 1: The first being the actual money yourself. How much do
1:49
Speaker 1: you give, how do you do that? How do you
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Speaker 1: dedicate around it? And the second being how do you
1:53
Speaker 1: make this tax efficient? So why don't we start with
1:56
Speaker 1: the first bit? I mean, it's the psychological aspect of
1:59
Speaker 1: it is so important. How do you talk to your
2:03
Speaker 1: kids about money? Assuming you have money? And then how
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Speaker 1: do you decide how much to give a child over
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Speaker 1: a lifetime? Do you give it young, do you give
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Speaker 1: it late? Do you tell them what they're going to get?
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Speaker 1: How on earth do you make this work?
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Speaker 2: I think you need to start off with a few
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Speaker 2: sort of guiding principles and understanding your children's weaknesses and
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Speaker 2: strengths in that area. Not that he was a child
2:26
Speaker 2: of mine. If you take the late Gerald Grovener, Duke
2:28
Speaker 2: of Westminster, he was the hardiest working person I've ever
2:31
Speaker 2: come across. Yet he could have been a playboy. He
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Speaker 2: worked incredibly hard. Other people I know have got lots,
2:38
Speaker 2: don't do anything at all, and so what are the factors?
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Speaker 2: I think that self confidence is very important. I think
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Speaker 2: if you're self confident in your own achievements and you
2:52
Speaker 2: are hungry, I think it doesn't matter when you give
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Speaker 2: money to people, give money to a to someone who's
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Speaker 2: twenty five or twenty, if they got that self confident
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Speaker 2: hunger to do things for themselves, it doesn't matter. I
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Speaker 2: think the age is not really that important if we
3:12
Speaker 2: got the other things right.
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Speaker 1: Okay, well, now you're moving into a whole area of
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Speaker 1: parenting that we all desperately want to hear about. How
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Speaker 1: do you make that self confident child?
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Speaker 2: Well, I think it starts a chat around the dinner
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Speaker 2: table at home. I think, and you need to talk
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Speaker 2: about money. You need to talk about if you've got
3:30
Speaker 2: a family business, you need to talk about the factors
3:32
Speaker 2: that go into it. I think you know, you can
3:36
Speaker 2: start off with giving someone pocket money and seeing what
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Speaker 2: they do with it. You need to know how they
3:42
Speaker 2: work with it. And I was interested in the Chancellor's
3:44
Speaker 2: sister said that the Chancellor always put twenty five percent
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Speaker 2: of her money aside and spent the rest. Be interesting
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Speaker 2: to see what she does with our economy, of course, and.
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Speaker 1: Then we already know what she's doing with our economy.
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Speaker 1: I'd like to see what she's doing with the twenty
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Speaker 1: five percent she's supposed to be setting aside exactly, So
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Speaker 1: I'm not just us the best example Hamish exactly.
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Speaker 2: And so things like a little family charity, I mean,
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Speaker 2: you don't have to give much to it, just involving
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Speaker 2: the kids getting that, giving them five pounds when they're
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Speaker 2: six years olds, just to see what they support, how
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Speaker 2: they do it. It helps them learn about money, It
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Speaker 2: learns that other people are less fortunate themselves. It's a
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Speaker 2: really good tool. I think another one is open up
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Speaker 2: as soon as you can and account the likes of
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Speaker 2: Hargrea's landsdown and put a little bit of money in
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Speaker 2: it and say look here you are, see what you
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Speaker 2: do with it? How do you invest it? And I
4:41
Speaker 2: know two children, for example, the girl didn't do anything
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Speaker 2: with it at all, apart from put money into cryptocurrency
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Speaker 2: just before it fell. And it turned out she had
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Speaker 2: given put in twenty pounds out of the five hundred
4:53
Speaker 2: pounds she got, So it was quite useful for the
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Speaker 2: parents to know how she dealt the money.
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Speaker 1: But that's also that's a pretty useful lesson early on,
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Speaker 1: isn't it.
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Speaker 2: Yeah, it is, And therefore probably that parent giving lots
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Speaker 2: more money will probably there's a danger because sitting in
5:07
Speaker 2: cash for thirty years, the boy bright technical invested half
5:13
Speaker 2: of it in business he knew would fly. Actually they
5:16
Speaker 2: all failed, and it was only the other half that
5:20
Speaker 2: after three years made back the loss. So the thousand
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Speaker 2: pounds a ye or five hundred pounds was exactly the
5:26
Speaker 2: same as it was after three years. Great lesson, Great
5:30
Speaker 2: lesson for the child, great lesson for the parent to
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Speaker 2: understand what might happen with it. But I keep on
5:35
Speaker 2: coming back to this self confidence in no one has
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Speaker 2: ever got self confidence by being given money. They get
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Speaker 2: self confidence by achieving something for themselves. It doesn't have
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Speaker 2: to be financial. They could be a great flower ranger,
5:49
Speaker 2: they could be a good cabinet maker, it doesn't really matter.
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Speaker 2: But it's just that belief in themselves, because I think
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Speaker 2: a lot of people often who don't have self confidence
6:00
Speaker 2: will try and buy friends. I know of a couple
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Speaker 2: who would spend so much money having extravagant parties and
6:08
Speaker 2: holidays for their friends because they felt that people would
6:12
Speaker 2: think ill of them. And even then I said, you're
6:14
Speaker 2: going to be a bust by the time you're fifty five,
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Speaker 2: they just couldn't stop.
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Speaker 1: Interesting. Now let's go back to the boy and the girl.
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Speaker 1: If you have children who you have found out through
6:25
Speaker 1: the various methods you've discussed, are always going to have
6:28
Speaker 1: different attitudes to money and different behaviors around money, Does
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Speaker 1: that mean that you should treat them differently when you
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Speaker 1: gift money.
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Speaker 2: To an extent, yes, So I think if someone is
6:38
Speaker 2: really people get self confidence in time. You get someone
6:42
Speaker 2: who's got great self confidence at sixteen, someone maybe gets
6:46
Speaker 2: it at twenty five or thirty, or maybe never gets it.
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Speaker 2: So I think you have to take that into consideration,
6:52
Speaker 2: but you also need to be fair because otherwise that
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Speaker 2: cause is resembled.
6:56
Speaker 1: But I was going to say, and one of the
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Speaker 1: things that constantly comes up that was a theme whenever
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Speaker 1: there is breakdown in child and parent relationships is the
7:03
Speaker 1: idea that there's been unfairnessed. So if you give money
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Speaker 1: to one child at twenty one because they look like
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Speaker 1: they're going to manage it very well and then full
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Speaker 1: of confidence and maybe they needed a posit for a house,
7:13
Speaker 1: et cetera, and then you look at your other child
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Speaker 1: and going, yeah, not ready for it yet, and leave
7:17
Speaker 1: it until they're thirty, there's there's space for a lot
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Speaker 1: of conflict in that.
7:22
Speaker 2: There is. But if you come back to my example
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Speaker 2: of the Harbury's Landsdowne account, you can set some parameters
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Speaker 2: on it and say, you know, when you show me
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Speaker 2: that you are responsible with it. It doesn't mean to
7:33
Speaker 2: say you need to make you mounts of money, but
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Speaker 2: you maybe set some rules. You said that you're so
7:38
Speaker 2: there's no surprises on that. But people's view on fairness
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Speaker 2: can be quite subjective. I had another two children and
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Speaker 2: one of them was doing very well in the city
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Speaker 2: after university, and twenty five the parents said, we're going
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Speaker 2: to stop making er contributions for you. The girl was
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Speaker 2: doing teach first, not only much money. And twenty five
8:00
Speaker 2: the parents decided to keep funding the contribution to the
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Speaker 2: ISO for the impoverished teacher. And the boy got enst
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Speaker 2: about it because he said, through my wit and skill
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Speaker 2: and my hard work, you're penalizing me. But the point
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Speaker 2: is it was very useful for the parents to understand
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Speaker 2: that for what was a relatively small amount of money,
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Speaker 2: what might come down the way.
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Speaker 1: Yeah, I mean, I'm with the boy. I'm with the boy.
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Speaker 1: What should you should be? She's you know, you make
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Speaker 1: your choices right, and parents should always be consistently, constantly fair.
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Speaker 1: And it always seems to me that, regardless of their
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Speaker 1: children's situations, say should the extent that they can equalize
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Speaker 1: what they give. I mean, I've never been present at
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Speaker 1: the reading of a will, but I reckon that's where
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Speaker 1: the real fights kick off, right.
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Speaker 2: Well, I think you need to tell people in the
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Speaker 2: in principle what's in the will to head that one off,
8:51
Speaker 2: because I think it's unfair to leave the children to
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Speaker 2: sort it out. But going back to this fairness, I
8:57
Speaker 2: think it is subjective. Let's say that Earl had needed
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Speaker 2: one hundred thousand pounds of cancer treatment. Would would you
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Speaker 2: still say, sorry, we've got to give a hundred thousand
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Speaker 2: to the boy. You know, these are things to think.
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Speaker 1: About, not really for us talking about this is it.
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Speaker 1: But I think that's different actually because that's an emergency
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Speaker 1: and it's not a wealth building measure. It's a survival measure,
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Speaker 1: you know. So if you're looking at giving people who
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Speaker 1: will have similar, similar, health, similar everything, and what they're
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Speaker 1: doing is building wealth, but they've chosen to do it
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Speaker 1: via different route. Because these are choices. Why should they
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Speaker 1: be penalized or awarded for by their parents for the
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Speaker 1: different choices. I don't know. People will fill very differently
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Speaker 1: on these things, but I'm a great one to treat
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Speaker 1: them all exactly the same to the extent that you can.
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Speaker 1: What about large inheritances, I mean, there's a lot of
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Speaker 1: incentive in the system for the very wealthy to dispose
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Speaker 1: of as much of their of their wealth as possible
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Speaker 1: early right in order to avoid the seven year ruling
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Speaker 1: caitencelves out of the inheritance tax bracket. But there's a
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Speaker 1: downside to people knowing that they will in large amounts
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Speaker 1: of money, isn't there? And we talked about self confidence earlier,
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Speaker 1: in self esteem and the way that people are driven
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Speaker 1: through life. But it's hard to be driven hard to
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Speaker 1: really get out there and work sixteen nowadays, if you're
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Speaker 1: expecting to inherit enough money to never have to work again,
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Speaker 1: maybe in your thirties or forties. You see this all
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Speaker 1: the time, don't you. People who know that their parents'
10:23
Speaker 1: house is worth a certain amount of one day that's
10:25
Speaker 1: coming to them. And also people who know that their
10:28
Speaker 1: parents have large amounts of money sitting around the place
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Speaker 1: that they will not want to pay inheritance tax on.
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Speaker 1: It's a disincentive to work. How do you manage it
10:37
Speaker 1: if you are very well off and you and your
10:40
Speaker 1: children both know there's a large amount of money coming
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Speaker 1: their way.
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Speaker 2: Well, I come back to this thing about personal cheap
10:47
Speaker 2: and self confidence. People want to achieve for themselves, to
10:51
Speaker 2: be the best flower ranger. It's it's not going to
10:54
Speaker 2: knock them off, course. I mean there will be a few,
10:56
Speaker 2: of course, but generally it won't. And I was really
11:00
Speaker 2: interested when I was at school. People seem to be
11:02
Speaker 2: very interested in who their parents were, children, go to school.
11:05
Speaker 2: Now they're not interested is what have you done? What
11:08
Speaker 2: are you doing? So that's a very good peer pressure
11:11
Speaker 2: to do well for yourself, not necessarily financially. And can
11:16
Speaker 2: I come back to Gerald Grovener, he knew he was
11:18
Speaker 2: going to get a huge amount of money, but he
11:21
Speaker 2: worked hard. There's not always the case that just because
11:23
Speaker 2: you are going to get lots of money. I would
11:25
Speaker 2: say most people I come live up to their responsibilities
11:30
Speaker 2: if they have started early, the chat run at the
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Speaker 2: supper table. I think it's an unusual thing that people
11:37
Speaker 2: actually do go off the rails and don't work hard.
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Speaker 2: I also think that the difference between giving money, well,
11:42
Speaker 2: you know, here's here's ten million pounds put in your
11:45
Speaker 2: bank account and money to help pay for education, to
11:50
Speaker 2: buy a house, that sort of thing. So sometimes you
11:53
Speaker 2: can sort of you give it with an explanation of
11:57
Speaker 2: why you're giving it now. But on the other end,
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Speaker 2: if someone's not ready for it and you're worried about
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Speaker 2: inheritance text, I wouldn't get too poged down by it.
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Speaker 2: By a cheap life assurance policy for the next twenty
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Speaker 2: years and just ignore inheritance tax and then come back
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Speaker 2: to it later. I think there are there are ways
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Speaker 2: to do.
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Speaker 1: To what extent do you think that you should be
12:32
Speaker 1: completely open with your children about their finances? Should they
12:35
Speaker 1: know exactly how much you have and how you have
12:39
Speaker 1: invested it and what there is there? Or is their
12:43
Speaker 1: value in keeping your finances relatively separate from them.
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Speaker 2: I think I don't think there's it's necessary to say
12:49
Speaker 2: how much you've got. I think probably that's not a
12:51
Speaker 2: great thing, particularly early on. But I think you can
12:55
Speaker 2: talk about what talk about the principles of how you
12:57
Speaker 2: manage it and the difficulties and the concer And I
13:01
Speaker 2: think it's important to someone if their parents can afford
13:05
Speaker 2: to buy a high top Ferrari but only buy a
13:09
Speaker 2: sort of a cheaper state car because it's more practical,
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Speaker 2: it's useful to say why we're doing that.
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Speaker 1: One thing I sort of want to make clear before
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Speaker 1: we go on, because I want to go on to
13:18
Speaker 1: the tax element of things now and how to do
13:20
Speaker 1: this efficiently. But one thing I want to make clear,
13:23
Speaker 1: and I bet you do as well, is that we
13:25
Speaker 1: always sayn John and he does the podcast with me often,
13:29
Speaker 1: that the greatest gift you can give your children to
13:32
Speaker 1: a large degree is your own financial security. There's absolutely
13:35
Speaker 1: nothing worse for someone struggling in their thirties or their
13:39
Speaker 1: forties with children, golfees, mortgages, accepter to suddenly find that
13:43
Speaker 1: their parents are broken need some of the money back.
13:46
Speaker 1: So one of the most important things in this entire
13:49
Speaker 1: conversation is, as they say, to put on your own
13:52
Speaker 1: your own oxygen mask. First, make sure that your own
13:54
Speaker 1: finance is a secure and your retirement is secure before
13:57
Speaker 1: you start shoveling money to your kids. Isn't that fair.
14:00
Speaker 2: It's a very good point, and you, every person and
14:04
Speaker 2: family should, in my view, have a financial plan, and
14:08
Speaker 2: the parents particularly. You need to know your number so
14:11
Speaker 2: that you end your perfection is dying with a check
14:15
Speaker 2: to the undertaker, bouncing in old age.
14:17
Speaker 1: No pockets in a shroud, as they always say, exactly,
14:20
Speaker 1: and so you need to isolate your number for yourself.
14:25
Speaker 2: You don't need to give away the rest, but you
14:27
Speaker 2: know that's straight away. But you know that's available, and
14:31
Speaker 2: you know that you're not be asking your children back
14:33
Speaker 2: for it.
14:34
Speaker 1: When you say your number, you mean the amount of
14:37
Speaker 1: money that you have calculated you will require to take
14:39
Speaker 1: you to the end. Of your retirement to death.
14:42
Speaker 2: Correct, and that could be a mix obvious admittu of
14:44
Speaker 2: penches and capital, but it needs to be amortized down
14:46
Speaker 2: to zero. In my view, you say, well, well I'll
14:49
Speaker 2: live to one hundred. These de assumptions are use and
14:52
Speaker 2: you add on maybe thirty percent more of your sixty
14:55
Speaker 2: because things could go wrong and you just come up
14:58
Speaker 2: with your number and then you were from you know
15:01
Speaker 2: what's that and you know probably you need to have
15:03
Speaker 2: your house. Let's it's mention out of it. So you're
15:08
Speaker 2: not just keep that out of it. But you can
15:10
Speaker 2: always use equity release in old age to give away
15:13
Speaker 2: some money using that. But the child should also have
15:16
Speaker 2: a financial plan. The other day, sad parents died and
15:21
Speaker 2: there was a child that twenty five got about five
15:24
Speaker 2: million pounds and they earned thirty thousand. It has made
15:28
Speaker 2: no difference to their way of thinking and their relationship
15:31
Speaker 2: with money because they started early having a plan. They knew,
15:36
Speaker 2: they budgeted, and they knew what it was for. Yeah.
15:40
Speaker 1: Right, So let's look at the tack side of this.
15:43
Speaker 1: I mean, regardless of your base level of wealth, because
15:46
Speaker 1: not everybody listening to this podcast is going to have
15:49
Speaker 1: five million pounds, no exactly, So looking at it from
15:52
Speaker 1: the very beginning, what are the most efficient ways to
15:55
Speaker 1: pass money to your children? And obviously the first first
15:59
Speaker 1: staging post is in your ISO, right, Well.
16:02
Speaker 2: There's a junior izer obviously, but actually giving them money
16:08
Speaker 2: without any ties, I think is actually you're not sort
16:12
Speaker 2: of managing stuff for them, and you give it to
16:16
Speaker 2: them freely so they know it's theirs. And I think
16:19
Speaker 2: that that's a good starting point. But we've discussed when's
16:23
Speaker 2: the right time to do that. If it's not the
16:25
Speaker 2: right time to do it, just defer it and buy
16:27
Speaker 2: a cheap life assurance policy. Trusts are since two thousand
16:32
Speaker 2: and six have become much more difficult. There's a limitation
16:36
Speaker 2: putting money into a trust, and actually a lot of
16:38
Speaker 2: trusts down the line end up by causing ras and resentments.
16:43
Speaker 1: And you have that ten year charge, right, so you're
16:44
Speaker 1: effectively paying inheritance takes anyway in the end you are,
16:47
Speaker 1: so remind me of that you pay six percent of
16:50
Speaker 1: the superiodic charge.
16:52
Speaker 2: You pay six percent basically extend the.
16:54
Speaker 1: Value of the assets inside the trust every ten years.
16:57
Speaker 1: The idea being that effectively, over a generation that comes
17:00
Speaker 1: out at much the same as forty percent inheritance tax.
17:03
Speaker 1: Is how the maths work, give or take, right, But.
17:05
Speaker 2: Well, I think that's the principle. But you can of
17:07
Speaker 2: course use it. I mean some you can use it
17:09
Speaker 2: as a tool if someone's young, and then you you
17:11
Speaker 2: don't have to keep it there forever. You can say, well,
17:14
Speaker 2: i'm not quite sure how things are going used to
17:16
Speaker 2: discretionary trust, and then dish it out. Let's get the
17:18
Speaker 2: trustees to dish it out. And you could be the
17:20
Speaker 2: trustee in ten or fifteen years time. And of course
17:24
Speaker 2: the great thing about discretionary trust is no one needs
17:27
Speaker 2: to know they're a beneficiary. That's quite useful. If you've
17:29
Speaker 2: got someone who's a bit you're unsure about them, they're
17:32
Speaker 2: a very useful tool there.
17:34
Speaker 1: Okay, so we've got that, although it's not necessarily something
17:37
Speaker 1: to do over a full lifetime. We've got the junior
17:40
Speaker 1: I said, which is relatively straightforward. And then of course
17:43
Speaker 1: a lot of people are paying too pensions for their children,
17:45
Speaker 1: don't they.
17:46
Speaker 2: They do, But there's a well, if they're not earning,
17:49
Speaker 2: there's a limit you can put in, which is three
17:51
Speaker 2: thy six.
17:52
Speaker 1: Hundred if you start that very early. That if you
17:54
Speaker 1: start a three thousand, six hundred a year sip for
17:58
Speaker 1: a child that can compound quite nicely into the beginning
18:01
Speaker 1: of their working career.
18:03
Speaker 2: Very nicely. I suppose that just the caveat is that
18:06
Speaker 2: if pensions are going to be a political football down
18:09
Speaker 2: the line and there's limitations on them, you could find
18:12
Speaker 2: that actually by funding even a smaller marunat at an
18:16
Speaker 2: early age, it limits their benefits. So if they're a
18:20
Speaker 2: doctor and they're on a final salary pension and in
18:23
Speaker 2: the not that long ago there was the value of
18:25
Speaker 2: it was a lifetime allowance and actually you could overfund them,
18:30
Speaker 2: but it's just a fact. It is quite useful. And
18:33
Speaker 2: also when people are working, often their parents will make
18:36
Speaker 2: them a contribution to help top up their sixty pounds
18:41
Speaker 2: allowance and they all say it's quite useful to know
18:43
Speaker 2: they're not they can't touch it until fifty five or
18:46
Speaker 2: fifty seven. That's quite useful.
18:47
Speaker 1: Yes, that's effectively a kind of trust, isn't it. And
18:51
Speaker 1: it is one thing that we don't want to do anymore.
18:54
Speaker 1: Is this idea that we had previously when your pension
18:58
Speaker 1: pot could be passed down for of inheritance tax, that
19:01
Speaker 1: became a marvelous way to think about passing money to
19:03
Speaker 1: your children. I know a lot of financial advisors started saying,
19:06
Speaker 1: spend everything outside your pension first, leave the pension until last,
19:10
Speaker 1: because it's such an efficient way tank capital to your children.
19:13
Speaker 1: But that ship, like many other ships, has now sailed,
19:15
Speaker 1: hasn't it.
19:16
Speaker 2: Well, it's the other way around. Now. You need to
19:18
Speaker 2: draw the pension out and exhaust it in your natural lifetime.
19:21
Speaker 1: Yeah, because pensions, because pensions are now subject to inheritance tax,
19:24
Speaker 1: and what you don't want is to end up paying
19:26
Speaker 1: inheritance tax and then income tax on the withdrawal from
19:29
Speaker 1: a pension.
19:30
Speaker 2: Well, that's the thing. That's the thing before Osborne changed it.
19:34
Speaker 2: One must remember that after seventy five it was fifty
19:37
Speaker 2: five percent so tax on it. So it's not as
19:40
Speaker 2: though that tax will It's come back, Yeah, it's come back.
19:43
Speaker 1: Yeah.
19:45
Speaker 2: Now.
19:45
Speaker 1: The other thing that I think is that the one
19:48
Speaker 1: thing that isn't discussed very much, and you probably do
19:50
Speaker 1: this all the time in the context of handing money
19:52
Speaker 1: to your children is gifts out of income and there
19:55
Speaker 1: is this neat little side step to the tax system.
19:58
Speaker 1: Isn't there way you can to your children are indeed
20:01
Speaker 1: to anybody money from your income as long as gifting
20:06
Speaker 1: that money does not affect your lifestyle.
20:09
Speaker 2: And generally should It needs to be an on a
20:11
Speaker 2: regular basis. Yes, so you can't do it as a
20:14
Speaker 2: one or but it's a for those lucky enough to
20:16
Speaker 2: have decent surplus income, it's a fantastic exemption. And I
20:21
Speaker 2: was slightly surprised to see still remained in the budget.
20:23
Speaker 2: But there we are.
20:24
Speaker 1: Well, yes, yes, because it you know, if you do
20:27
Speaker 1: have a very high income and a relatively frugal lifestyle,
20:31
Speaker 1: that is a way to pass on a lot of money.
20:34
Speaker 2: But I think it's so slightly caveat that a lot
20:36
Speaker 2: of people think. For example, let's say they're not drawing
20:39
Speaker 2: their pension, they suddenly draw the they say that all
20:42
Speaker 2: of that money is there for surplus, But if they've
20:45
Speaker 2: been living off capital as well, it's not that the
20:50
Speaker 2: income that they take on the pension will first of
20:52
Speaker 2: all replace the capital for the calculation. So it's not
20:56
Speaker 2: always outside. But on the other end, if they if
20:59
Speaker 2: they give it and they survive for seven years, anyway,
21:02
Speaker 2: it's outside. There are state even if it is not
21:05
Speaker 2: surplus income.
21:07
Speaker 1: Okay, quite a few things take into account that anything
21:10
Speaker 1: else on the tax front that we should talk about.
21:13
Speaker 2: There's family investment companies where you know, the parent can
21:16
Speaker 2: be the director, but the children of the.
21:19
Speaker 1: Show quite neat for the audience. Great faith in the
21:24
Speaker 1: wealth of our audience, but I'm not sure there are
21:26
Speaker 1: that many you are going to go up and set
21:27
Speaker 1: out a family investment company.
21:29
Speaker 2: It's true, but you asked a question, checked it out
21:32
Speaker 2: when I started. I'm so old when I started to
21:35
Speaker 2: work that there were no business property relief, and I
21:37
Speaker 2: grew up properly relief from most farmers and people in
21:40
Speaker 2: business set aside an annual sum to buy a life
21:45
Speaker 2: policy payable at death and trust. I think actually in
21:48
Speaker 2: a way people are going now back to that, and
21:51
Speaker 2: it is a very very useful tool. And it's not
21:53
Speaker 2: if you start young. It's in your fifties. It's not
21:56
Speaker 2: that expensive, and it does mean you don't have to
21:58
Speaker 2: give huge amounts of money at the wrong time. It's
22:01
Speaker 2: a very very useful thing.
22:02
Speaker 1: Yeah, okay, interesting, and you mentioned earlier equity release as
22:07
Speaker 1: a way to hand money onto your children.
22:09
Speaker 2: Yes, if you have a house or a flat with
22:12
Speaker 2: a long lease, you can take a percentage of the value,
22:16
Speaker 2: and you can either use it for you to spend
22:19
Speaker 2: to supplement your income or your resources, or if you
22:23
Speaker 2: don't need you can give it away last for seven years.
22:26
Speaker 2: So obviously the interest, well you can either pay it,
22:29
Speaker 2: but you probably want to clock it up. The interest
22:32
Speaker 2: and loan are deductive from your estate when you die,
22:35
Speaker 2: so you could argue that actually forty percent of that
22:39
Speaker 2: is paid by the is paid by the tax system.
22:43
Speaker 2: And actually you can move from the house when you
22:46
Speaker 2: if you need care. It's it's quite a good system,
22:48
Speaker 2: but not probably until you're in old age. Otherwise the
22:51
Speaker 2: interest will clock up and eat the hard.
22:54
Speaker 1: Tut I mean, there have been quite a few shockers
22:55
Speaker 1: in that, haven't there. It's not I don't think it's
22:57
Speaker 1: sell out anymore. But in the old days you had
22:59
Speaker 1: people to look at a release too early and they
23:02
Speaker 1: owed more than the house is worth.
23:04
Speaker 2: Yeah yeah, yeah, Well equity release schemes won't allow negative equity,
23:07
Speaker 2: so if you lived like that. There's the oldest woman
23:09
Speaker 2: in the world who's one hundred and sixteen, who were
23:11
Speaker 2: I'm very proud to see as a brit So if
23:13
Speaker 2: she'd taken a release him till seventy she was still
23:16
Speaker 2: living in her property, so.
23:17
Speaker 1: She'll been living rent free for quite a long time.
23:19
Speaker 1: But on the other hand, have left nothing for her hes,
23:22
Speaker 1: although of course they may have predeceased her at this point.
23:26
Speaker 2: Yes, but it did allow her, if she was in
23:28
Speaker 2: that situation, to use other money to give away in
23:31
Speaker 2: her lifetime. And she's obviously lived for seven years.
23:35
Speaker 1: Yeah, you know, well done, well done. This'll be quite
23:38
Speaker 1: interesting when we come to the mansion tax, right, assuming
23:40
Speaker 1: it ever appears, which I'm not one hundred percent convinced about.
23:44
Speaker 1: And of course it's not really a mansion tax, it's
23:45
Speaker 1: a recently big house tax. People are going to be
23:49
Speaker 1: able to roll up that liability and pay it on
23:52
Speaker 1: the sale of the house or indeed on death I
23:54
Speaker 1: fellows when the house is sold, right, So that'll be
23:57
Speaker 1: a similar feel.
23:58
Speaker 2: It seems to be. It seems there's a nice German
24:02
Speaker 2: quote which you might like to hear. Giving with warm
24:05
Speaker 2: hands while you're alive is better than giving cold hands
24:09
Speaker 2: when you're dead.
24:10
Speaker 1: Thanks all the fun, Okay, I think we'll end on that.
24:13
Speaker 1: We'll end on that. That's something for parents to think
24:17
Speaker 1: about over Christmas. Hamish, thank you so much for joining
24:22
Speaker 1: us today. Really useful. Thank you, Marion, Thank you, thanks
24:33
Speaker 1: for listening to this week's Meren Talk to Your Money.
24:35
Speaker 1: If you like our show, rate review and subscribe wherever
24:37
Speaker 1: you listen to podcasts. Also be short to follow me
24:40
Speaker 1: and John on excell Twitter. I am at marinas W
24:43
Speaker 1: and John is John Asco Stepec. This episode was produced
24:46
Speaker 1: by Summerside and Moses and special thanks of course to
24:49
Speaker 1: Hamish and of course, as usual, questions and comments on
24:52
Speaker 1: this show and all our shows are always welcome. Our
24:55
Speaker 1: show email is Merren Money at Bloomberg dot net.
25:00
Speaker 2: Wh