Video series: ‘Sofa talks’ – Experts answer questions about gifts and estates
This series sees experts at ABN AMRO answer questions from clients. On the sofa today: Tjarko Denekamp (Wealth Planning Expert, ABN AMRO) and Bobby Le Febre (adviser from the Preferred Banking team). In this episode, they zoom in on the topic of gifts and estates.
What’s a ‘gift on paper’?
A gift on paper is a ‘notional’ gift. While the gift itself is real, you in effect lend the money ‘back’ from the recipient (your child or someone else), meaning you incur a debt. You must pay statutory interest on this amount. A gift on paper means you transfer a portion of your assets, but this transfer only takes effect at a later date.
What are the benefits of a gift on paper?
If you own a mortgage-free home with considerable equity, and this home is part of your estate when you die, a gift on paper can be beneficial. Without the gift on paper, your estate may be taxed at the top rate of inheritance tax. A gift on paper saves money, since your gift is taxed at a lower rate than any inheritance tax you would have to pay.
I don’t have a partner or children. Who inherits my estate?
I you don’t have a partner or children, your estate will be passed on to your other family members: brothers, sisters, cousins, nieces, nephews and so on. You decide if that’s what you want. Older people tend to have similarly aged brothers and sisters, in which case it makes more sense to appoint younger family members as beneficiaries. People who don’t have a partner or children often consider donating their estate to a charity.
If you don’t put any arrangements in place, your estate is divided according to the law: starting with your family and ending with the State. You can also leave a bequest to a good friend, people who are close to you, or to a charity. However, if you don’t put anything in writing, the law will decide for you.
What’s a common mistake people make when giving gifts?
Putting off making arrangements, or making no arrangements at all. I once had a client who had a child from a past relationship that nobody knew about. He didn’t know how to deal with it and kept putting things off. When he died, it transpired that the child was his only heir, so everything went to the child. That wasn’t at all what the man wanted, but he’d left things too late.
If you have a question about gifts or estates, ask our adviser. Go to COACH and use one of our exclusive contact options for Preferred Banking clients.
