A school fees trust is a type of family trust, used to set aside assets for grandchildren’s education, whilst reducing the impact of inheritance tax on your estate. Family trusts allow you to protect your loved ones, whilst retaining flexibility over who will receive funds and when, in a tax efficient manner.
School fees trusts are generally more tax efficient than grandparents paying fees directly as they arise, for the following reasons:-
- The funds are directed from the trust for the grandchild’s benefit and grandchildren can often (via their parents) reclaim an amount of income tax of up to 45% on some of the school fees paid. That reclaim can then be used for further fees, for other school expenses or to put aside for their benefit in the future.
- Invoices can be sent to the dedicated trust manager who will pay the school directly, simplifying the process for both parents and grandparents.
- After 7 years, the funds set aside by the grandparent will generally pass outside of the estate for inheritance tax, saving up to 40% of the amount put into trust, maximising the amount available for school fee payments. For example, on a gift of £325,000 into trust, the saving could be £130,000 after 7 years.
Our expert advisors work with clients on the best way to structure the amount that they wish to give and how to put the payments into effect either immediately or in due course.
And if the whole amount set aside is not needed for school fees for any reason, it can instead be used for university fees, property purchases or whatever other benefit you might wish to provide.
If you would like to speak to one of our expert advisors about how we might be able to help you with planning for your grandchildren’s school fees, please call us on 020 4534 2750 or email [email protected].