Can I Leave Money Directly to My Grandchildren?

Yes, absolutely. You can leave money directly to grandchildren in your will. But there are important considerations about age, trusts, and whether this is the best approach.

Whether you want to skip a generation for tax reasons, help grandchildren get on the property ladder, or simply want to include them specifically, here's how to do it right.

Why Leave Money Directly to Grandchildren?

Common Reasons

• Tax efficiency: Your children are already well-off and would pay IHT on what they inherit from you, then more IHT when they die
• Helping them earlier: University fees, house deposits, starting a business
• Children don't need it: Your children have their own wealth
• Fairness across generations: Wanting all grandchildren treated equally
• Protecting from children's partners: Ensuring money stays in the bloodline

How to Leave Money to Grandchildren

Option 1: Direct Gift in Your Will

Simply name them as beneficiaries:

• "I leave £10,000 to each of my grandchildren"
• "I leave 25% of my estate to my grandchildren equally"

Problem: If grandchildren are under 18, they can't receive directly. The money must be held by trustees until they're 18.

Option 2: Trust in Your Will

Set up a trust that controls when and how they receive the money:

• Specify age of inheritance (21, 25, 30)
• Allow staged payments (third at 21, third at 25, etc.)
• Let trustees release funds for education, housing, emergencies
• Protect from poor decisions or outside influence

Option 3: Junior ISA or Child Trust Fund

For smaller amounts during your lifetime:

• Tax-free growth
• Child can access at 18
• Maximum £9,000/year per child

What Age Should They Inherit?

Age 18 (Automatic)

Without a trust, they receive at 18 by law.

• Pros: Simple, no ongoing trust administration
• Cons: 18-year-old may not be ready for large sums

Age 21-25

Common choice for moderate inheritance.

• Finished education
• More mature decision-making
• Can use for house deposit

Age 25-30

Better for larger inheritances.

• Established career/life
• More financially mature
• Less vulnerable to bad influences

Staged Distribution

Example: 1/3 at 21, 1/3 at 25, 1/3 at 30

• Reduces impact of poor early decisions
• Allows learning from experience
• Provides resources at different life stages

Tax Implications

Inheritance Tax

• Gifts to grandchildren are subject to IHT like any other gift
• Can use annual gift exemptions (£3,000/year)
• Regular gifts from surplus income are exempt
• Lifetime gifts become exempt after 7 years

Generation Skipping

Unlike the US, the UK doesn't have a separate "generation-skipping tax." You can skip generations without additional penalty.

Benefit: If your children are wealthy, leaving directly to grandchildren avoids the assets being taxed twice (in your estate, then in your child's estate).

Trust Tax

If using a discretionary trust:

• Trust pays 45% on income (reduced by tax credits)
• Periodic charges every 10 years
• Exit charges when money leaves trust

For smaller amounts, simpler trust structures may avoid most of this.

What About Your Children?

Telling Them (or Not)

• Your children may expect to inherit everything
• Consider discussing your plans to avoid surprises
• Explain your reasoning — tax efficiency, helping grandchildren

Protecting From Children's Access

If you're concerned parents might pressure grandchildren:

• Use a trust with independent trustees
• Set clear rules about what money can be used for
• Delay inheritance until grandchildren are truly independent

What About Grandchildren Not Yet Born?

You can include future grandchildren:

• "To all my grandchildren living at my death, equally"
• "To all children and grandchildren of my son James"

Consider what happens if:

• A grandchild is born after you make the will but before you die — usually included
• A grandchild is born after you die — only included if your will specifically provides for this

Common Scenarios

Scenario 1: Equal Split Across Generations

Wish: Each child gets £100k, each grandchild gets £10k

Approach: Specific gifts to each person named in will. Simple and clear.

Scenario 2: Skip Children Entirely

Wish: Everything to grandchildren, nothing to children

Approach: Make this explicit. Consider discussing with children to avoid challenge risk. Document your reasons.

Scenario 3: Education Fund

Wish: Money for grandchildren's education, not general spending

Approach: Trust with education purposes specified. Trustees can release for school fees, university costs, etc.

Scenario 4: Protect From Divorce

Wish: Money stays with grandchild if their marriage breaks down

Approach: Discretionary trust where trustees can consider circumstances. Direct gifts become marital assets; trust assets may be better protected.

Choosing Trustees for Grandchildren's Trust

• Independent trustees: Less risk of pressure from parents
• Professional trustees: For large sums or long-term trusts
• Other family members: Aunts/uncles who can be objective
• Mixture: Professional plus family member

The Old Way vs Our Way

The Old Way	Our Way
Everything to children, hope they share	Direct provision for grandchildren in will
Lump sum at 18	Structured distribution when ready
No protection for young beneficiaries	Trusts protect from poor decisions
Ignore tax efficiency	Consider generation-skipping benefits