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Wednesday, February 21, 2024
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    ‘My daughter expects me to fund her wedding, after I loaned her £300,000. Should I?’

    Dear reader,

    Parents often wish to pass on wealth during their lifetime, as it could be much more rewarding to see our families profit from our money while we’re still around, than gaining one other nought on our net price. 

    Based on the findings of a Gallup survey, reported within the book Wellbeing by Tom Rath and Jim Harter, the trick to financial wellbeing is twofold: 

    1. Buy experiences reminiscent of holidays and days out – make memories with friends and family members
    2. Spend on others as a substitute of on material possessions. 

    Based on this, it sounds to me as if you have to be feeling really good, on condition that you will have been so generous along with your family and now have one other opportunity to contribute to great memory making. 

    Nevertheless, the demands on you’re causing quite the alternative effect. 

    Over many years of working with clients as a financial planner I even have met parents who’re so generous they risk poverty in their very own lives, and those that just accumulate wealth for no quantifiable reason. 

    The plain solution is ensuring we manage to pay for to keep up our own financial independence throughout our lifetime, after which having fun with the chance to assist our family members with whatever is “spare”. 

    As a mother (of sons slightly than a daughter, which suggests there was no expectation that I might fund their weddings), I consider certainly one of the best gifts I can provide my children is that I’ll have the option to cover my very own long-term care fees, if needed. 

    I don’t wish to be a frail resident of their homes after they are attempting to boost a family and dealing full-time with a purpose to finance their western lifestyle. While other cultures do it very otherwise, I’m sold on this path personally and have planned accordingly. 

    Intergenerational gift and loan arrangements don’t often occur by accident. There is normally a deed to stipulate the expectations around interest and repayment terms, and what happens if things don’t go as expected. 

    It could be that you will have a rather more casual arrangement in place, but I can’t imagine you will have given away money without having a take into consideration what you would like for your individual financial security, including some obvious “what if” scenarios in case of a change in economic or personal situations.

    I’m guessing there needed to be a loan element since you desired to be as generous as possible to assist your daughter and realised that, although you can let her use a few of your capital for her profit temporarily, you can not afford to part with that capital unconditionally.

    As well as, it could be tax-efficient to cut back the worth of estates because if we make the error of dying with an excessive amount of left over then we find yourself losing 40pc of it to tax. 

    While tax is the worth all of us pay for living in a civilised society we’ve got to ask ourselves if we wouldn’t slightly distribute our “spare’’ wealth amongst our nearest and dearest and see them flourish, slightly than have an enormous slice disappear off to HMRC.

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