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The easy guide to gifting money to family

11th August 2021

Whether it’s helping your loved ones to get on the property ladder, paying for a wedding or buying a car, giving money to family members is increasingly common practice. And yet for many families it continues to be a minefield of misunderstandings, when that doesn’t need to be the case! 

Keep reading to find out what makes the conversation difficult to navigate and how to make it easier for the whole family.

What makes gifting money to family difficult? 

Whether you're being approached by a loved one with a request, or giving a gift, the money conversation doesn’t come easy to many of us. Here are a few things that usually makes it a topic families avoid: 

Money is still considered a taboo subject 

There are many reasons why money is such a touchy subject. A lot of them stem from our deeply rooted social habits, circumstances and upbringing. Be mindful of how sensitive the topic is to your family, especially if you don’t have a habit of discussing money together. 

Fairness between family members 

Gifting money to grandchildren or children sometimes brings up the difficult topic of fair share and whether you should offer equal help or prioritise those members in the family who need help the most. Whatever your decision, make sure you take the time to explain it fully to avoid misunderstandings and resentments, and be prepared to answer questions they may have. 

How money is used 

Even if you agree on how much you can gift your children or other family members, the way they intend to spend those financial resources might not be aligned with your opinions about what’s better or more efficient. Try to keep an open mind when it comes to their wishes and their perspective. 

Worries about your own financial security 

Even if you are in the lucky position to be able to help your family, it can be difficult to find the right balance between your family’s financial needs and your own. We really recommend talking to a financial adviser before making any decisions, to ensure you have all the information you need upfront. 

Why is it important to talk before giving money to family members? 

Despite its reputation for being a thorny subject, it’s the very act of discussing money thoroughly with family that stops it from becoming the root of arguments later on. Having an open conversation is a great opportunity for forward thinking and establishing ground rules. Problems arise when a lack of communication creates misunderstandings. 

No one wants to think about how an upcoming house purchase would be affected by a separation or divorce. But it’s easier to have an honest conversation upfront about what should happen in these specific circumstances, rather than scrambling for a solution later on. 

How to talk about gifting money to family 

Here are a few tips to help you navigate the money conversation a bit easier: 

Be clear

Make sure your family members know whether the financial assistance you’re offering is meant as a gift or as a loan. It may seem obvious to you, but the potential for misunderstandings is especially high when it comes to unstated intentions. If there are repayments or conditions to be met, make those clear. Keeping a record of the agreement is also useful, especially for substantial gifts or if the money is intended as a loan. We recommend using a financial adviser to help you draw up official paperwork that clarifies where everyone stands. 

Be honest

It’s natural to feel uneasy or embarrassed if the conversation moves around specific conditions for the money gift, or how siblings will share your financial support. It’s normal to have fears about giving money to family members and what this might mean for your own standard of living or wellbeing later on in life. Remember, the same worries are likely to exist on the other end of the conversation, and your family will likely prefer to discuss this openly to make sure everyone is taken care of. 

Don’t rush into making a decision

If you’re being approached by a family member asking for financial support, make sure you take your time before making any decisions. Even though you intend to offer the money as a gift, you need time to decide how much can you gift your children or other relatives that may need the help. Remember to also find out when giving money to someone is taxable to avoid hefty tax bills – a financial adviser is the best person to help with this. 

Put yourself in their shoes

Thinking of the hopes and concerns your family members may have will help keep the conversation constructive. Try to see it from their perspective as well, and take a break if the conversation gets off course or becomes emotional. 

Top questions to ask before giving money to family members:

  • How much money do they need? 
  • How much can you afford to gift right now? 
  • Will they need further financial assistance in the future? 
  • If there are conditions you want to put forward, do they understand them and agree to uphold their part of the deal? 
  • What happens if the family relationship breaks down? 
  • What happens if you encounter financial difficulties later on? 

Keep in mind that inheritance tax rules may apply when giving money to your family. Find out how much you can gift per year and what the potential tax liabilities are with our handy guide, next. 

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