The Bank of Mum and Dad: A guide to gifting money to loved ones

With house prices remaining high and the cost of living continuing to put pressure on families, many parents and grandparents are choosing to help loved ones financially. Whether it is contributing towards a first home, paying university fees or helping an adult child through a difficult period, gifting can make a real difference.

However, before transferring money, it is worth taking a step back to consider the legal and financial implications. A carefully planned gift can benefit both you and your family, while a rushed decision could create complications in the future.

Can you afford to make the gift?

The first question should always be whether you can comfortably afford to give the money away. While it is natural to want to support family members, your own financial security should remain a priority.

Consider your retirement plans, future care needs and any unexpected expenses that may arise. Once a gift has been made, it may not be possible to recover those funds if your circumstances change.

Understand the inheritance tax rules

Lifetime gifting can form part of an effective inheritance tax planning strategy, but it is important to understand the rules.

Many gifts are known as Potentially Exempt Transfers, meaning they may fall outside your estate for inheritance tax purposes if you survive for seven years after making the gift. There are also a number of annual gifting exemptions that may apply, depending on your circumstances.

Keeping a clear record of when gifts were made and their value can make estate administration much easier for your executors in the future.

Think about fairness and keep clear records

Helping one child financially may be the right decision, but it can sometimes lead to misunderstandings if other family members feel they have been treated differently.

Before transferring any money, ask yourself one simple question: is this a gift or a loan? While the distinction may seem obvious now, memories can fade and expectations can differ over time. Keeping a written record of any significant gifts or loans, including the amount, date and your intentions, can help avoid future uncertainty and ensure your wishes are clearly understood.

Fair does not always mean equal, but it is sensible to think about how lifetime gifts fit into your wider estate planning. If you intend a gift to be taken into account when your estate is eventually distributed, your Will may need updating to reflect your wishes.

Open conversations with family members can also help manage expectations and reduce the risk of disputes later on.

Make gifting part of your estate plan

Gifting should not be viewed in isolation. It should form part of a wider estate planning strategy that considers your Will, inheritance tax position and long-term financial security.

Taking advice before making substantial gifts can help ensure your generosity benefits your loved ones in the way you intended, while protecting your own interests and reducing the likelihood of complications for your family in the future.

If you are considering making a significant gift or would like advice on inheritance tax and estate planning, our Wills, Trusts and Probate team can help you make informed decisions that reflect your personal circumstances and long-term wishes.

For further information or advice please contact Niamh Minihane, Partner in the Wills, Trusts and Probate team at Blaser Mills on 01628 962262 or email

niamh.minihane@blasermills.co.uk.

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