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Where Taxpayers and Advisers Meet

Grandson,grandmother- joint savings account

Joined:Wed Aug 06, 2008 3:07 pm

Postby Lennon » Wed May 25, 2005 10:39 pm

My mother is considering setting up a savings account in her name and her granson's name and funding it with a large lump sum. Her belief is, that when she dies, half the account will fall outside the value of her estate for IHT purposes but, should she need this fund in the future she will have access to it. This doesn't seem right to me...we would appreciate your advice in this matter, please,

Joined:Wed Aug 06, 2008 3:22 pm

Postby King_Maker » Wed May 25, 2005 11:22 pm

IMHO, it would not be effective for IHT, as she still has control over the funds.

It would be a Gift with Reservation. An account (for 50% of the money) would have to be in her grandson's sole name. This would be a PET (Potentially Exempt Transfer), and she needs to survive for 7 years for the gift to be free from IHT.

Joined:Wed Aug 06, 2008 3:14 pm

Postby bob.fraser@towrylaw. » Wed May 25, 2005 11:26 pm

Hi Lennon (an appropriate name after last night's victory!)
Effectively what your mother is doing is making a gift of 1/2 the amount to her grandson. The fact that she wishes to be able to draw on this at some stage in the future makes it a gift with reservation of benefit (GROB). Such gifts are specifically ignored by the Inland Revenue for IHT purposes.
Furthermore, 50% of the account would be considered to be a PET from your mother to the grandson.

Arnold Aaro
Joined:Wed Aug 06, 2008 3:11 pm

Postby Arnold Aaro » Thu May 26, 2005 4:06 am


your mother may be interested in the following concept to reduce the value of her estate immediately.

One way of gifting cash is through a Discounted Gift Trust.

This would allow your your mother to gift some of her cash away to the family (e.g. grandchildren). Let's call them beneficiaries. THis would be done through a Trust (normally in an Investment Bond). The beneficiaries would not be allowed to touch the gift until the inevitable happened to your mother. Your mother is then allowed to take an income FOR LIFE, which is tax free to her (given certain rules and circumstances) from the gift she has made to the Trust.

The result is that on starting the trust and making the gift, a considerable portion (e.g. 50% for a healthy 70yr old female) of the amount put into it would be immediately classed as outside the estate for Inheritance Tax purposes.

After 7 years the whole falls outside the estate, and your mother has then avoided Inheritance Tax on complete gift. But of course she still receives the income for life, thus having some access to the fund.

As you can see with a Discounted Gift Trust one can reduce the value of their estate immediately, thus reducing IHT, but still receive a tax effieient income to live off.

If you want more info on this, don't hesitate to get in touch via e mail or phone, under no obligation.

best regards,

Arnold Aaron
Investment and Inheritance Tax Planner
Zurich Advice Network
e mail:
Tel: 0208 201 6574 Mobile 07957 440 724

[I advise on Inheritance Tax Planning, and specialise in setting up Discounted Gift Trusts]

Joined:Wed Aug 06, 2008 3:07 pm

Postby Lennon » Thu May 26, 2005 6:05 am

Thanks King-maker,Bob and Arnold for very prompt replies...I'm sure mum will be in touch,

Good health, wealth and happiness to you all
(aka Lennon)

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