December 17, 2025 • 25 mins
In this episode of Merryn Talks Your Money, Merryn Somerset Webb sits down with veteran financial planner Hamish Leng to unravel one of the trickiest issues in personal finance: how to pass wealth to your children without undermining their drive, confidence, or future independence. From the psychology of raising financially capable kids to the smartest, tax-efficient ways to gift money, Hamish shares four decades of insight into what actually works for families.
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Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, radio News. Welcome to Marin Talks
Your Money, the Personal finance edition of Marin Talks Money
(00:23):
and these bonus podcasts. We talk about the best strategy
is making the most of your money. I'm Marin zum
zetweb Editor at Large for Bloomberg UK Wells. On today's show,
we are going to dive into a topic we briefly
touched it on during the latest episode with Suzanne Willie.
If you haven't listened to that one, you really should.
We talked about inheritance and how important it is to
find some kind of balance between passing enough money to
(00:43):
your airs to give them the best opportunities possible, but
not giving them so much it reduces their desire to
work hard for themselves. Incentives matter. Everybody knows one, well,
actually does everyone know one? Unhappy trust fun kid. I
don't know a lot of people do. And that's not
the legacy we want to pass on to our own
own children and our grandchildren. So joining me in the
studio today with help with this naughty problem is Hamish
(01:05):
Lang of Hamish Lang and Company, a small knights Bridge
based financial planning firm who specialize in helping families I'm
quoting here, helping families and individuals achieve financial security and
order and live their lives. They well, sounds great. Hamish
started as a financial planner in nineteen eighteen, he spent
four decades. Over four decades, even apologies for Hamish for
revealing your age here for advising clients on gifting money
(01:28):
to their heirs, his advice in corporate is the psychological
aspect of giving. That's what we want to get into,
as well as the tax and practical aspects. So he's
perfectly placed to help us understand this tricky topic. Hamish,
welcome to the show.
Speaker 2 (01:40):
Thank you very much.
Speaker 1 (01:42):
Right, this really is a naughty topic actually, So there's
two sides to this I want to get into today.
The first being the actual money yourself. How much do
you give, how do you do that? How do you
dedicate around it? And the second being how do you
make this tax efficient? So why don't we start with
the first bit? I mean, it's the psychological aspect of
it is so important. How do you talk to your
(02:03):
kids about money? Assuming you have money? And then how
do you decide how much to give a child over
a lifetime? Do you give it young, do you give
it late? Do you tell them what they're going to get?
How on earth do you make this work?
Speaker 2 (02:14):
I think you need to start off with a few
sort of guiding principles and understanding your children's weaknesses and
strengths in that area. Not that he was a child
of mine. If you take the late Gerald Grovener, Duke
of Westminster, he was the hardiest working person I've ever
come across. Yet he could have been a playboy. He
worked incredibly hard. Other people I know have got lots,
(02:38):
don't do anything at all, and so what are the factors?
I think that self confidence is very important. I think
if you're self confident in your own achievements and you
are hungry, I think it doesn't matter when you give
money to people, give money to a to someone who's
(03:02):
twenty five or twenty, if they got that self confident
hunger to do things for themselves, it doesn't matter. I
think the age is not really that important if we
got the other things right.
Speaker 1 (03:13):
Okay, well, now you're moving into a whole area of
parenting that we all desperately want to hear about. How
do you make that self confident child?
Speaker 2 (03:22):
Well, I think it starts a chat around the dinner
table at home. I think, and you need to talk
about money. You need to talk about if you've got
a family business, you need to talk about the factors
that go into it. I think you know, you can
start off with giving someone pocket money and seeing what
they do with it. You need to know how they
(03:42):
work with it. And I was interested in the Chancellor's
sister said that the Chancellor always put twenty five percent
of her money aside and spent the rest. Be interesting
to see what she does with our economy, of course, and.
Speaker 1 (03:53):
Then we already know what she's doing with our economy.
I'd like to see what she's doing with the twenty
five percent she's supposed to be setting aside exactly, So
I'm not just us the best example Hamish exactly.
Speaker 2 (04:04):
And so things like a little family charity, I mean,
you don't have to give much to it, just involving
the kids getting that, giving them five pounds when they're
six years olds, just to see what they support, how
they do it. It helps them learn about money, It
learns that other people are less fortunate themselves. It's a
(04:24):
really good tool. I think another one is open up
as soon as you can and account the likes of
Hargrea's landsdown and put a little bit of money in
it and say look here you are, see what you
do with it? How do you invest it? And I
know two children, for example, the girl didn't do anything
(04:44):
with it at all, apart from put money into cryptocurrency
just before it fell. And it turned out she had
given put in twenty pounds out of the five hundred
pounds she got, So it was quite useful for the
parents to know how she dealt the money.
Speaker 1 (04:58):
But that's also that's a pretty useful lesson early on,
isn't it.
Speaker 2 (05:01):
Yeah, it is, And therefore probably that parent giving lots
more money will probably there's a danger because sitting in
cash for thirty years, the boy bright technical invested half
of it in business he knew would fly. Actually they
all failed, and it was only the other half that
after three years made back the loss. So the thousand
(05:24):
pounds a ye or five hundred pounds was exactly the
same as it was after three years. Great lesson, Great
lesson for the child, great lesson for the parent to
understand what might happen with it. But I keep on
coming back to this self confidence in no one has
ever got self confidence by being given money. They get
self confidence by achieving something for themselves. It doesn't have
(05:46):
to be financial. They could be a great flower ranger,
they could be a good cabinet maker, it doesn't really matter.
But it's just that belief in themselves, because I think
a lot of people often who don't have self confidence
will try and buy friends. I know of a couple
who would spend so much money having extravagant parties and
(06:08):
holidays for their friends because they felt that people would
think ill of them. And even then I said, you're
going to be a bust by the time you're fifty five,
they just couldn't stop.
Speaker 1 (06:19):
Interesting. Now let's go back to the boy and the girl.
If you have children who you have found out through
the various methods you've discussed, are always going to have
different attitudes to money and different behaviors around money, Does
that mean that you should treat them differently when you
gift money.
Speaker 2 (06:36):
To an extent, yes, So I think if someone is
really people get self confidence in time. You get someone
who's got great self confidence at sixteen, someone maybe gets
it at twenty five or thirty, or maybe never gets it.
So I think you have to take that into consideration,
but you also need to be fair because otherwise that
cause is resembled.
Speaker 1 (06:56):
But I was going to say, and one of the
things that constantly comes up that was a theme whenever
there is breakdown in child and parent relationships is the
idea that there's been unfairnessed. So if you give money
to one child at twenty one because they look like
they're going to manage it very well and then full
of confidence and maybe they needed a posit for a house,
et cetera, and then you look at your other child
and going, yeah, not ready for it yet, and leave
(07:17):
it until they're thirty, there's there's space for a lot
of conflict in that.
Speaker 2 (07:22):
There is. But if you come back to my example
of the Harbury's Landsdowne account, you can set some parameters
on it and say, you know, when you show me
that you are responsible with it. It doesn't mean to
say you need to make you mounts of money, but
you maybe set some rules. You said that you're so
there's no surprises on that. But people's view on fairness
can be quite subjective. I had another two children and
(07:47):
one of them was doing very well in the city
after university, and twenty five the parents said, we're going
to stop making er contributions for you. The girl was
doing teach first, not only much money. And twenty five
the parents decided to keep funding the contribution to the
ISO for the impoverished teacher. And the boy got enst
(08:08):
about it because he said, through my wit and skill
and my hard work, you're penalizing me. But the point
is it was very useful for the parents to understand
that for what was a relatively small amount of money,
what might come down the way.
Speaker 1 (08:22):
Yeah, I mean, I'm with the boy. I'm with the boy.
What should you should be? She's you know, you make
your choices right, and parents should always be consistently, constantly fair.
And it always seems to me that, regardless of their
children's situations, say should the extent that they can equalize
what they give. I mean, I've never been present at
the reading of a will, but I reckon that's where
(08:44):
the real fights kick off, right.
Speaker 2 (08:46):
Well, I think you need to tell people in the
in principle what's in the will to head that one off,
because I think it's unfair to leave the children to
sort it out. But going back to this fairness, I
think it is subjective. Let's say that Earl had needed
one hundred thousand pounds of cancer treatment. Would would you
still say, sorry, we've got to give a hundred thousand
(09:06):
to the boy. You know, these are things to think.
Speaker 1 (09:08):
About, not really for us talking about this is it.
But I think that's different actually because that's an emergency
and it's not a wealth building measure. It's a survival measure,
you know. So if you're looking at giving people who
will have similar, similar, health, similar everything, and what they're
doing is building wealth, but they've chosen to do it
via different route. Because these are choices. Why should they
(09:29):
be penalized or awarded for by their parents for the
different choices. I don't know. People will fill very differently
on these things, but I'm a great one to treat
them all exactly the same to the extent that you can.
What about large inheritances, I mean, there's a lot of
incentive in the system for the very wealthy to dispose
of as much of their of their wealth as possible
(09:51):
early right in order to avoid the seven year ruling
caitencelves out of the inheritance tax bracket. But there's a
downside to people knowing that they will in large amounts
of money, isn't there? And we talked about self confidence earlier,
in self esteem and the way that people are driven
through life. But it's hard to be driven hard to
really get out there and work sixteen nowadays, if you're
(10:13):
expecting to inherit enough money to never have to work again,
maybe in your thirties or forties. You see this all
the time, don't you. People who know that their parents'
house is worth a certain amount of one day that's
coming to them. And also people who know that their
parents have large amounts of money sitting around the place
that they will not want to pay inheritance tax on.
It's a disincentive to work. How do you manage it
(10:37):
if you are very well off and you and your
children both know there's a large amount of money coming
their way.
Speaker 2 (10:43):
Well, I come back to this thing about personal cheap
and self confidence. People want to achieve for themselves, to
be the best flower ranger. It's it's not going to
knock them off, course. I mean there will be a few,
of course, but generally it won't. And I was really
interested when I was at school. People seem to be
very interested in who their parents were, children, go to school.
(11:05):
Now they're not interested is what have you done? What
are you doing? So that's a very good peer pressure
to do well for yourself, not necessarily financially. And can
I come back to Gerald Grovener, he knew he was
going to get a huge amount of money, but he
worked hard. There's not always the case that just because
you are going to get lots of money. I would
say most people I come live up to their responsibilities
(11:30):
if they have started early, the chat run at the
supper table. I think it's an unusual thing that people
actually do go off the rails and don't work hard.
I also think that the difference between giving money, well,
you know, here's here's ten million pounds put in your
bank account and money to help pay for education, to
buy a house, that sort of thing. So sometimes you
(11:53):
can sort of you give it with an explanation of
why you're giving it now. But on the other end,
if someone's not ready for it and you're worried about
inheritance text, I wouldn't get too poged down by it.
By a cheap life assurance policy for the next twenty
years and just ignore inheritance tax and then come back
to it later. I think there are there are ways
to do.
Speaker 1 (12:30):
To what extent do you think that you should be
completely open with your children about their finances? Should they
know exactly how much you have and how you have
invested it and what there is there? Or is their
value in keeping your finances relatively separate from them.
Speaker 2 (12:46):
I think I don't think there's it's necessary to say
how much you've got. I think probably that's not a
great thing, particularly early on. But I think you can
talk about what talk about the principles of how you
manage it and the difficulties and the concer And I
think it's important to someone if their parents can afford
to buy a high top Ferrari but only buy a
(13:09):
sort of a cheaper state car because it's more practical,
it's useful to say why we're doing that.
Speaker 1 (13:15):
One thing I sort of want to make clear before
we go on, because I want to go on to
the tax element of things now and how to do
this efficiently. But one thing I want to make clear,
and I bet you do as well, is that we
always sayn John and he does the podcast with me often,
that the greatest gift you can give your children to
a large degree is your own financial security. There's absolutely
nothing worse for someone struggling in their thirties or their
(13:39):
forties with children, golfees, mortgages, accepter to suddenly find that
their parents are broken need some of the money back.
So one of the most important things in this entire
conversation is, as they say, to put on your own
your own oxygen mask. First, make sure that your own
finance is a secure and your retirement is secure before
you start shoveling money to your kids. Isn't that fair.
Speaker 2 (14:00):
It's a very good point, and you, every person and
family should, in my view, have a financial plan, and
the parents particularly. You need to know your number so
that you end your perfection is dying with a check
to the undertaker, bouncing in old age.
Speaker 1 (14:17):
No pockets in a shroud, as they always say, exactly,
and so you need to isolate your number for yourself.
Speaker 2 (14:25):
You don't need to give away the rest, but you
know that's straight away. But you know that's available, and
you know that you're not be asking your children back
for it.
Speaker 1 (14:34):
When you say your number, you mean the amount of
money that you have calculated you will require to take
you to the end. Of your retirement to death.
Speaker 2 (14:42):
Correct, and that could be a mix obvious admittu of
penches and capital, but it needs to be amortized down
to zero. In my view, you say, well, well I'll
live to one hundred. These de assumptions are use and
you add on maybe thirty percent more of your sixty
because things could go wrong and you just come up
with your number and then you were from you know
what's that and you know probably you need to have
(15:03):
your house. Let's it's mention out of it. So you're
not just keep that out of it. But you can
always use equity release in old age to give away
some money using that. But the child should also have
a financial plan. The other day, sad parents died and
there was a child that twenty five got about five
(15:24):
million pounds and they earned thirty thousand. It has made
no difference to their way of thinking and their relationship
with money because they started early having a plan. They knew,
they budgeted, and they knew what it was for. Yeah.
Speaker 1 (15:40):
Right, So let's look at the tack side of this.
I mean, regardless of your base level of wealth, because
not everybody listening to this podcast is going to have
five million pounds, no exactly, So looking at it from
the very beginning, what are the most efficient ways to
pass money to your children? And obviously the first first
staging post is in your ISO, right, Well.
Speaker 2 (16:02):
There's a junior izer obviously, but actually giving them money
without any ties, I think is actually you're not sort
of managing stuff for them, and you give it to
them freely so they know it's theirs. And I think
that that's a good starting point. But we've discussed when's
(16:23):
the right time to do that. If it's not the
right time to do it, just defer it and buy
a cheap life assurance policy. Trusts are since two thousand
and six have become much more difficult. There's a limitation
putting money into a trust, and actually a lot of
trusts down the line end up by causing ras and resentments.
Speaker 1 (16:43):
And you have that ten year charge, right, so you're
effectively paying inheritance takes anyway in the end you are,
so remind me of that you pay six percent of
the superiodic charge.
Speaker 2 (16:52):
You pay six percent basically extend the.
Speaker 1 (16:54):
Value of the assets inside the trust every ten years.
The idea being that effectively, over a generation that comes
out at much the same as forty percent inheritance tax.
Is how the maths work, give or take, right, But.
Speaker 2 (17:05):
Well, I think that's the principle. But you can of
course use it. I mean some you can use it
as a tool if someone's young, and then you you
don't have to keep it there forever. You can say, well,
i'm not quite sure how things are going used to
discretionary trust, and then dish it out. Let's get the
trustees to dish it out. And you could be the
trustee in ten or fifteen years time. And of course
the great thing about discretionary trust is no one needs
(17:27):
to know they're a beneficiary. That's quite useful. If you've
got someone who's a bit you're unsure about them, they're
a very useful tool there.
Speaker 1 (17:34):
Okay, so we've got that, although it's not necessarily something
to do over a full lifetime. We've got the junior
I said, which is relatively straightforward. And then of course
a lot of people are paying too pensions for their children,
don't they.
Speaker 2 (17:46):
They do, But there's a well, if they're not earning,
there's a limit you can put in, which is three
thy six.
Speaker 1 (17:52):
Hundred if you start that very early. That if you
start a three thousand, six hundred a year sip for
a child that can compound quite nicely into the beginning
of their working career.
Speaker 2 (18:03):
Very nicely. I suppose that just the caveat is that
if pensions are going to be a political football down
the line and there's limitations on them, you could find
that actually by funding even a smaller marunat at an
early age, it limits their benefits. So if they're a
doctor and they're on a final salary pension and in
the not that long ago there was the value of
(18:25):
it was a lifetime allowance and actually you could overfund them,
but it's just a fact. It is quite useful. And
also when people are working, often their parents will make
them a contribution to help top up their sixty pounds
allowance and they all say it's quite useful to know
they're not they can't touch it until fifty five or
(18:46):
fifty seven. That's quite useful.
Speaker 1 (18:47):
Yes, that's effectively a kind of trust, isn't it. And
it is one thing that we don't want to do anymore.
Is this idea that we had previously when your pension
pot could be passed down for of inheritance tax, that
became a marvelous way to think about passing money to
your children. I know a lot of financial advisors started saying,
spend everything outside your pension first, leave the pension until last,
(19:10):
because it's such an efficient way tank capital to your children.
But that ship, like many other ships, has now sailed,
hasn't it.
Speaker 2 (19:16):
Well, it's the other way around. Now. You need to
draw the pension out and exhaust it in your natural lifetime.
Speaker 1 (19:21):
Yeah, because pensions, because pensions are now subject to inheritance tax,
and what you don't want is to end up paying
inheritance tax and then income tax on the withdrawal from
a pension.
Speaker 2 (19:30):
Well, that's the thing. That's the thing before Osborne changed it.
One must remember that after seventy five it was fifty
five percent so tax on it. So it's not as
though that tax will It's come back, Yeah, it's come back.
Speaker 1 (19:43):
Yeah.
Speaker 2 (19:45):
Now.
Speaker 1 (19:45):
The other thing that I think is that the one
thing that isn't discussed very much, and you probably do
this all the time in the context of handing money
to your children is gifts out of income and there
is this neat little side step to the tax system.
Isn't there way you can to your children are indeed
to anybody money from your income as long as gifting
(20:06):
that money does not affect your lifestyle.
Speaker 2 (20:09):
And generally should It needs to be an on a
regular basis. Yes, so you can't do it as a
one or but it's a for those lucky enough to
have decent surplus income, it's a fantastic exemption. And I
was slightly surprised to see still remained in the budget.
But there we are.
Speaker 1 (20:24):
Well, yes, yes, because it you know, if you do
have a very high income and a relatively frugal lifestyle,
that is a way to pass on a lot of money.
Speaker 2 (20:34):
But I think it's so slightly caveat that a lot
of people think. For example, let's say they're not drawing
their pension, they suddenly draw the they say that all
of that money is there for surplus, But if they've
been living off capital as well, it's not that the
income that they take on the pension will first of
all replace the capital for the calculation. So it's not
(20:56):
always outside. But on the other end, if they if
they give it and they survive for seven years, anyway,
it's outside. There are state even if it is not
surplus income.
Speaker 1 (21:07):
Okay, quite a few things take into account that anything
else on the tax front that we should talk about.
Speaker 2 (21:13):
There's family investment companies where you know, the parent can
be the director, but the children of the.
Speaker 1 (21:19):
Show quite neat for the audience. Great faith in the
wealth of our audience, but I'm not sure there are
that many you are going to go up and set
out a family investment company.
Speaker 2 (21:29):
It's true, but you asked a question, checked it out
when I started. I'm so old when I started to
work that there were no business property relief, and I
grew up properly relief from most farmers and people in
business set aside an annual sum to buy a life
policy payable at death and trust. I think actually in
a way people are going now back to that, and
(21:51):
it is a very very useful tool. And it's not
if you start young. It's in your fifties. It's not
that expensive, and it does mean you don't have to
give huge amounts of money at the wrong time. It's
a very very useful thing.
Speaker 1 (22:02):
Yeah, okay, interesting, and you mentioned earlier equity release as
a way to hand money onto your children.
Speaker 2 (22:09):
Yes, if you have a house or a flat with
a long lease, you can take a percentage of the value,
and you can either use it for you to spend
to supplement your income or your resources, or if you
don't need you can give it away last for seven years.
So obviously the interest, well you can either pay it,
but you probably want to clock it up. The interest
(22:32):
and loan are deductive from your estate when you die,
so you could argue that actually forty percent of that
is paid by the is paid by the tax system.
And actually you can move from the house when you
if you need care. It's it's quite a good system,
but not probably until you're in old age. Otherwise the
interest will clock up and eat the hard.
Speaker 1 (22:54):
Tut I mean, there have been quite a few shockers
in that, haven't there. It's not I don't think it's
sell out anymore. But in the old days you had
people to look at a release too early and they
owed more than the house is worth.
Speaker 2 (23:04):
Yeah yeah, yeah, Well equity release schemes won't allow negative equity,
so if you lived like that. There's the oldest woman
in the world who's one hundred and sixteen, who were
I'm very proud to see as a brit So if
she'd taken a release him till seventy she was still
living in her property, so.
Speaker 1 (23:17):
She'll been living rent free for quite a long time.
But on the other hand, have left nothing for her hes,
although of course they may have predeceased her at this point.
Speaker 2 (23:26):
Yes, but it did allow her, if she was in
that situation, to use other money to give away in
her lifetime. And she's obviously lived for seven years.
Speaker 1 (23:35):
Yeah, you know, well done, well done. This'll be quite
interesting when we come to the mansion tax, right, assuming
it ever appears, which I'm not one hundred percent convinced about.
And of course it's not really a mansion tax, it's
a recently big house tax. People are going to be
able to roll up that liability and pay it on
the sale of the house or indeed on death I
fellows when the house is sold, right, So that'll be
(23:57):
a similar feel.
Speaker 2 (23:58):
It seems to be. It seems there's a nice German
quote which you might like to hear. Giving with warm
hands while you're alive is better than giving cold hands
when you're dead.
Speaker 1 (24:10):
Thanks all the fun, Okay, I think we'll end on that.
We'll end on that. That's something for parents to think
about over Christmas. Hamish, thank you so much for joining
us today. Really useful. Thank you, Marion, Thank you, thanks
(24:33):
for listening to this week's Meren Talk to Your Money.
If you like our show, rate review and subscribe wherever
you listen to podcasts. Also be short to follow me
and John on excell Twitter. I am at marinas W
and John is John Asco Stepec. This episode was produced
by Summerside and Moses and special thanks of course to
Hamish and of course, as usual, questions and comments on
this show and all our shows are always welcome. Our
(24:55):
show email is Merren Money at Bloomberg dot net.
Speaker 2 (25:00):
Wh
Bloomberg Audio Studios, Podcasts, radio News. Welcome to Marin Talks
Your Money, the Personal finance edition of Marin Talks Money
(00:23):
and these bonus podcasts. We talk about the best strategy
is making the most of your money. I'm Marin zum
zetweb Editor at Large for Bloomberg UK Wells. On today's show,
we are going to dive into a topic we briefly
touched it on during the latest episode with Suzanne Willie.
If you haven't listened to that one, you really should.
We talked about inheritance and how important it is to
find some kind of balance between passing enough money to
(00:43):
your airs to give them the best opportunities possible, but
not giving them so much it reduces their desire to
work hard for themselves. Incentives matter. Everybody knows one, well,
actually does everyone know one? Unhappy trust fun kid. I
don't know a lot of people do. And that's not
the legacy we want to pass on to our own
own children and our grandchildren. So joining me in the
studio today with help with this naughty problem is Hamish
(01:05):
Lang of Hamish Lang and Company, a small knights Bridge
based financial planning firm who specialize in helping families I'm
quoting here, helping families and individuals achieve financial security and
order and live their lives. They well, sounds great. Hamish
started as a financial planner in nineteen eighteen, he spent
four decades. Over four decades, even apologies for Hamish for
revealing your age here for advising clients on gifting money
(01:28):
to their heirs, his advice in corporate is the psychological
aspect of giving. That's what we want to get into,
as well as the tax and practical aspects. So he's
perfectly placed to help us understand this tricky topic. Hamish,
welcome to the show.
Speaker 2 (01:40):
Thank you very much.
Speaker 1 (01:42):
Right, this really is a naughty topic actually, So there's
two sides to this I want to get into today.
The first being the actual money yourself. How much do
you give, how do you do that? How do you
dedicate around it? And the second being how do you
make this tax efficient? So why don't we start with
the first bit? I mean, it's the psychological aspect of
it is so important. How do you talk to your
(02:03):
kids about money? Assuming you have money? And then how
do you decide how much to give a child over
a lifetime? Do you give it young, do you give
it late? Do you tell them what they're going to get?
How on earth do you make this work?
Speaker 2 (02:14):
I think you need to start off with a few
sort of guiding principles and understanding your children's weaknesses and
strengths in that area. Not that he was a child
of mine. If you take the late Gerald Grovener, Duke
of Westminster, he was the hardiest working person I've ever
come across. Yet he could have been a playboy. He
worked incredibly hard. Other people I know have got lots,
(02:38):
don't do anything at all, and so what are the factors?
I think that self confidence is very important. I think
if you're self confident in your own achievements and you
are hungry, I think it doesn't matter when you give
money to people, give money to a to someone who's
(03:02):
twenty five or twenty, if they got that self confident
hunger to do things for themselves, it doesn't matter. I
think the age is not really that important if we
got the other things right.
Speaker 1 (03:13):
Okay, well, now you're moving into a whole area of
parenting that we all desperately want to hear about. How
do you make that self confident child?
Speaker 2 (03:22):
Well, I think it starts a chat around the dinner
table at home. I think, and you need to talk
about money. You need to talk about if you've got
a family business, you need to talk about the factors
that go into it. I think you know, you can
start off with giving someone pocket money and seeing what
they do with it. You need to know how they
(03:42):
work with it. And I was interested in the Chancellor's
sister said that the Chancellor always put twenty five percent
of her money aside and spent the rest. Be interesting
to see what she does with our economy, of course, and.
Speaker 1 (03:53):
Then we already know what she's doing with our economy.
I'd like to see what she's doing with the twenty
five percent she's supposed to be setting aside exactly, So
I'm not just us the best example Hamish exactly.
Speaker 2 (04:04):
And so things like a little family charity, I mean,
you don't have to give much to it, just involving
the kids getting that, giving them five pounds when they're
six years olds, just to see what they support, how
they do it. It helps them learn about money, It
learns that other people are less fortunate themselves. It's a
(04:24):
really good tool. I think another one is open up
as soon as you can and account the likes of
Hargrea's landsdown and put a little bit of money in
it and say look here you are, see what you
do with it? How do you invest it? And I
know two children, for example, the girl didn't do anything
(04:44):
with it at all, apart from put money into cryptocurrency
just before it fell. And it turned out she had
given put in twenty pounds out of the five hundred
pounds she got, So it was quite useful for the
parents to know how she dealt the money.
Speaker 1 (04:58):
But that's also that's a pretty useful lesson early on,
isn't it.
Speaker 2 (05:01):
Yeah, it is, And therefore probably that parent giving lots
more money will probably there's a danger because sitting in
cash for thirty years, the boy bright technical invested half
of it in business he knew would fly. Actually they
all failed, and it was only the other half that
after three years made back the loss. So the thousand
(05:24):
pounds a ye or five hundred pounds was exactly the
same as it was after three years. Great lesson, Great
lesson for the child, great lesson for the parent to
understand what might happen with it. But I keep on
coming back to this self confidence in no one has
ever got self confidence by being given money. They get
self confidence by achieving something for themselves. It doesn't have
(05:46):
to be financial. They could be a great flower ranger,
they could be a good cabinet maker, it doesn't really matter.
But it's just that belief in themselves, because I think
a lot of people often who don't have self confidence
will try and buy friends. I know of a couple
who would spend so much money having extravagant parties and
(06:08):
holidays for their friends because they felt that people would
think ill of them. And even then I said, you're
going to be a bust by the time you're fifty five,
they just couldn't stop.
Speaker 1 (06:19):
Interesting. Now let's go back to the boy and the girl.
If you have children who you have found out through
the various methods you've discussed, are always going to have
different attitudes to money and different behaviors around money, Does
that mean that you should treat them differently when you
gift money.
Speaker 2 (06:36):
To an extent, yes, So I think if someone is
really people get self confidence in time. You get someone
who's got great self confidence at sixteen, someone maybe gets
it at twenty five or thirty, or maybe never gets it.
So I think you have to take that into consideration,
but you also need to be fair because otherwise that
cause is resembled.
Speaker 1 (06:56):
But I was going to say, and one of the
things that constantly comes up that was a theme whenever
there is breakdown in child and parent relationships is the
idea that there's been unfairnessed. So if you give money
to one child at twenty one because they look like
they're going to manage it very well and then full
of confidence and maybe they needed a posit for a house,
et cetera, and then you look at your other child
and going, yeah, not ready for it yet, and leave
(07:17):
it until they're thirty, there's there's space for a lot
of conflict in that.
Speaker 2 (07:22):
There is. But if you come back to my example
of the Harbury's Landsdowne account, you can set some parameters
on it and say, you know, when you show me
that you are responsible with it. It doesn't mean to
say you need to make you mounts of money, but
you maybe set some rules. You said that you're so
there's no surprises on that. But people's view on fairness
can be quite subjective. I had another two children and
(07:47):
one of them was doing very well in the city
after university, and twenty five the parents said, we're going
to stop making er contributions for you. The girl was
doing teach first, not only much money. And twenty five
the parents decided to keep funding the contribution to the
ISO for the impoverished teacher. And the boy got enst
(08:08):
about it because he said, through my wit and skill
and my hard work, you're penalizing me. But the point
is it was very useful for the parents to understand
that for what was a relatively small amount of money,
what might come down the way.
Speaker 1 (08:22):
Yeah, I mean, I'm with the boy. I'm with the boy.
What should you should be? She's you know, you make
your choices right, and parents should always be consistently, constantly fair.
And it always seems to me that, regardless of their
children's situations, say should the extent that they can equalize
what they give. I mean, I've never been present at
the reading of a will, but I reckon that's where
(08:44):
the real fights kick off, right.
Speaker 2 (08:46):
Well, I think you need to tell people in the
in principle what's in the will to head that one off,
because I think it's unfair to leave the children to
sort it out. But going back to this fairness, I
think it is subjective. Let's say that Earl had needed
one hundred thousand pounds of cancer treatment. Would would you
still say, sorry, we've got to give a hundred thousand
(09:06):
to the boy. You know, these are things to think.
Speaker 1 (09:08):
About, not really for us talking about this is it.
But I think that's different actually because that's an emergency
and it's not a wealth building measure. It's a survival measure,
you know. So if you're looking at giving people who
will have similar, similar, health, similar everything, and what they're
doing is building wealth, but they've chosen to do it
via different route. Because these are choices. Why should they
(09:29):
be penalized or awarded for by their parents for the
different choices. I don't know. People will fill very differently
on these things, but I'm a great one to treat
them all exactly the same to the extent that you can.
What about large inheritances, I mean, there's a lot of
incentive in the system for the very wealthy to dispose
of as much of their of their wealth as possible
(09:51):
early right in order to avoid the seven year ruling
caitencelves out of the inheritance tax bracket. But there's a
downside to people knowing that they will in large amounts
of money, isn't there? And we talked about self confidence earlier,
in self esteem and the way that people are driven
through life. But it's hard to be driven hard to
really get out there and work sixteen nowadays, if you're
(10:13):
expecting to inherit enough money to never have to work again,
maybe in your thirties or forties. You see this all
the time, don't you. People who know that their parents'
house is worth a certain amount of one day that's
coming to them. And also people who know that their
parents have large amounts of money sitting around the place
that they will not want to pay inheritance tax on.
It's a disincentive to work. How do you manage it
(10:37):
if you are very well off and you and your
children both know there's a large amount of money coming
their way.
Speaker 2 (10:43):
Well, I come back to this thing about personal cheap
and self confidence. People want to achieve for themselves, to
be the best flower ranger. It's it's not going to
knock them off, course. I mean there will be a few,
of course, but generally it won't. And I was really
interested when I was at school. People seem to be
very interested in who their parents were, children, go to school.
(11:05):
Now they're not interested is what have you done? What
are you doing? So that's a very good peer pressure
to do well for yourself, not necessarily financially. And can
I come back to Gerald Grovener, he knew he was
going to get a huge amount of money, but he
worked hard. There's not always the case that just because
you are going to get lots of money. I would
say most people I come live up to their responsibilities
(11:30):
if they have started early, the chat run at the
supper table. I think it's an unusual thing that people
actually do go off the rails and don't work hard.
I also think that the difference between giving money, well,
you know, here's here's ten million pounds put in your
bank account and money to help pay for education, to
buy a house, that sort of thing. So sometimes you
(11:53):
can sort of you give it with an explanation of
why you're giving it now. But on the other end,
if someone's not ready for it and you're worried about
inheritance text, I wouldn't get too poged down by it.
By a cheap life assurance policy for the next twenty
years and just ignore inheritance tax and then come back
to it later. I think there are there are ways
to do.
Speaker 1 (12:30):
To what extent do you think that you should be
completely open with your children about their finances? Should they
know exactly how much you have and how you have
invested it and what there is there? Or is their
value in keeping your finances relatively separate from them.
Speaker 2 (12:46):
I think I don't think there's it's necessary to say
how much you've got. I think probably that's not a
great thing, particularly early on. But I think you can
talk about what talk about the principles of how you
manage it and the difficulties and the concer And I
think it's important to someone if their parents can afford
to buy a high top Ferrari but only buy a
(13:09):
sort of a cheaper state car because it's more practical,
it's useful to say why we're doing that.
Speaker 1 (13:15):
One thing I sort of want to make clear before
we go on, because I want to go on to
the tax element of things now and how to do
this efficiently. But one thing I want to make clear,
and I bet you do as well, is that we
always sayn John and he does the podcast with me often,
that the greatest gift you can give your children to
a large degree is your own financial security. There's absolutely
nothing worse for someone struggling in their thirties or their
(13:39):
forties with children, golfees, mortgages, accepter to suddenly find that
their parents are broken need some of the money back.
So one of the most important things in this entire
conversation is, as they say, to put on your own
your own oxygen mask. First, make sure that your own
finance is a secure and your retirement is secure before
you start shoveling money to your kids. Isn't that fair.
Speaker 2 (14:00):
It's a very good point, and you, every person and
family should, in my view, have a financial plan, and
the parents particularly. You need to know your number so
that you end your perfection is dying with a check
to the undertaker, bouncing in old age.
Speaker 1 (14:17):
No pockets in a shroud, as they always say, exactly,
and so you need to isolate your number for yourself.
Speaker 2 (14:25):
You don't need to give away the rest, but you
know that's straight away. But you know that's available, and
you know that you're not be asking your children back
for it.
Speaker 1 (14:34):
When you say your number, you mean the amount of
money that you have calculated you will require to take
you to the end. Of your retirement to death.
Speaker 2 (14:42):
Correct, and that could be a mix obvious admittu of
penches and capital, but it needs to be amortized down
to zero. In my view, you say, well, well I'll
live to one hundred. These de assumptions are use and
you add on maybe thirty percent more of your sixty
because things could go wrong and you just come up
with your number and then you were from you know
what's that and you know probably you need to have
(15:03):
your house. Let's it's mention out of it. So you're
not just keep that out of it. But you can
always use equity release in old age to give away
some money using that. But the child should also have
a financial plan. The other day, sad parents died and
there was a child that twenty five got about five
(15:24):
million pounds and they earned thirty thousand. It has made
no difference to their way of thinking and their relationship
with money because they started early having a plan. They knew,
they budgeted, and they knew what it was for. Yeah.
Speaker 1 (15:40):
Right, So let's look at the tack side of this.
I mean, regardless of your base level of wealth, because
not everybody listening to this podcast is going to have
five million pounds, no exactly, So looking at it from
the very beginning, what are the most efficient ways to
pass money to your children? And obviously the first first
staging post is in your ISO, right, Well.
Speaker 2 (16:02):
There's a junior izer obviously, but actually giving them money
without any ties, I think is actually you're not sort
of managing stuff for them, and you give it to
them freely so they know it's theirs. And I think
that that's a good starting point. But we've discussed when's
(16:23):
the right time to do that. If it's not the
right time to do it, just defer it and buy
a cheap life assurance policy. Trusts are since two thousand
and six have become much more difficult. There's a limitation
putting money into a trust, and actually a lot of
trusts down the line end up by causing ras and resentments.
Speaker 1 (16:43):
And you have that ten year charge, right, so you're
effectively paying inheritance takes anyway in the end you are,
so remind me of that you pay six percent of
the superiodic charge.
Speaker 2 (16:52):
You pay six percent basically extend the.
Speaker 1 (16:54):
Value of the assets inside the trust every ten years.
The idea being that effectively, over a generation that comes
out at much the same as forty percent inheritance tax.
Is how the maths work, give or take, right, But.
Speaker 2 (17:05):
Well, I think that's the principle. But you can of
course use it. I mean some you can use it
as a tool if someone's young, and then you you
don't have to keep it there forever. You can say, well,
i'm not quite sure how things are going used to
discretionary trust, and then dish it out. Let's get the
trustees to dish it out. And you could be the
trustee in ten or fifteen years time. And of course
the great thing about discretionary trust is no one needs
(17:27):
to know they're a beneficiary. That's quite useful. If you've
got someone who's a bit you're unsure about them, they're
a very useful tool there.
Speaker 1 (17:34):
Okay, so we've got that, although it's not necessarily something
to do over a full lifetime. We've got the junior
I said, which is relatively straightforward. And then of course
a lot of people are paying too pensions for their children,
don't they.
Speaker 2 (17:46):
They do, But there's a well, if they're not earning,
there's a limit you can put in, which is three
thy six.
Speaker 1 (17:52):
Hundred if you start that very early. That if you
start a three thousand, six hundred a year sip for
a child that can compound quite nicely into the beginning
of their working career.
Speaker 2 (18:03):
Very nicely. I suppose that just the caveat is that
if pensions are going to be a political football down
the line and there's limitations on them, you could find
that actually by funding even a smaller marunat at an
early age, it limits their benefits. So if they're a
doctor and they're on a final salary pension and in
the not that long ago there was the value of
(18:25):
it was a lifetime allowance and actually you could overfund them,
but it's just a fact. It is quite useful. And
also when people are working, often their parents will make
them a contribution to help top up their sixty pounds
allowance and they all say it's quite useful to know
they're not they can't touch it until fifty five or
(18:46):
fifty seven. That's quite useful.
Speaker 1 (18:47):
Yes, that's effectively a kind of trust, isn't it. And
it is one thing that we don't want to do anymore.
Is this idea that we had previously when your pension
pot could be passed down for of inheritance tax, that
became a marvelous way to think about passing money to
your children. I know a lot of financial advisors started saying,
spend everything outside your pension first, leave the pension until last,
(19:10):
because it's such an efficient way tank capital to your children.
But that ship, like many other ships, has now sailed,
hasn't it.
Speaker 2 (19:16):
Well, it's the other way around. Now. You need to
draw the pension out and exhaust it in your natural lifetime.
Speaker 1 (19:21):
Yeah, because pensions, because pensions are now subject to inheritance tax,
and what you don't want is to end up paying
inheritance tax and then income tax on the withdrawal from
a pension.
Speaker 2 (19:30):
Well, that's the thing. That's the thing before Osborne changed it.
One must remember that after seventy five it was fifty
five percent so tax on it. So it's not as
though that tax will It's come back, Yeah, it's come back.
Speaker 1 (19:43):
Yeah.
Speaker 2 (19:45):
Now.
Speaker 1 (19:45):
The other thing that I think is that the one
thing that isn't discussed very much, and you probably do
this all the time in the context of handing money
to your children is gifts out of income and there
is this neat little side step to the tax system.
Isn't there way you can to your children are indeed
to anybody money from your income as long as gifting
(20:06):
that money does not affect your lifestyle.
Speaker 2 (20:09):
And generally should It needs to be an on a
regular basis. Yes, so you can't do it as a
one or but it's a for those lucky enough to
have decent surplus income, it's a fantastic exemption. And I
was slightly surprised to see still remained in the budget.
But there we are.
Speaker 1 (20:24):
Well, yes, yes, because it you know, if you do
have a very high income and a relatively frugal lifestyle,
that is a way to pass on a lot of money.
Speaker 2 (20:34):
But I think it's so slightly caveat that a lot
of people think. For example, let's say they're not drawing
their pension, they suddenly draw the they say that all
of that money is there for surplus, But if they've
been living off capital as well, it's not that the
income that they take on the pension will first of
all replace the capital for the calculation. So it's not
(20:56):
always outside. But on the other end, if they if
they give it and they survive for seven years, anyway,
it's outside. There are state even if it is not
surplus income.
Speaker 1 (21:07):
Okay, quite a few things take into account that anything
else on the tax front that we should talk about.
Speaker 2 (21:13):
There's family investment companies where you know, the parent can
be the director, but the children of the.
Speaker 1 (21:19):
Show quite neat for the audience. Great faith in the
wealth of our audience, but I'm not sure there are
that many you are going to go up and set
out a family investment company.
Speaker 2 (21:29):
It's true, but you asked a question, checked it out
when I started. I'm so old when I started to
work that there were no business property relief, and I
grew up properly relief from most farmers and people in
business set aside an annual sum to buy a life
policy payable at death and trust. I think actually in
a way people are going now back to that, and
(21:51):
it is a very very useful tool. And it's not
if you start young. It's in your fifties. It's not
that expensive, and it does mean you don't have to
give huge amounts of money at the wrong time. It's
a very very useful thing.
Speaker 1 (22:02):
Yeah, okay, interesting, and you mentioned earlier equity release as
a way to hand money onto your children.
Speaker 2 (22:09):
Yes, if you have a house or a flat with
a long lease, you can take a percentage of the value,
and you can either use it for you to spend
to supplement your income or your resources, or if you
don't need you can give it away last for seven years.
So obviously the interest, well you can either pay it,
but you probably want to clock it up. The interest
(22:32):
and loan are deductive from your estate when you die,
so you could argue that actually forty percent of that
is paid by the is paid by the tax system.
And actually you can move from the house when you
if you need care. It's it's quite a good system,
but not probably until you're in old age. Otherwise the
interest will clock up and eat the hard.
Speaker 1 (22:54):
Tut I mean, there have been quite a few shockers
in that, haven't there. It's not I don't think it's
sell out anymore. But in the old days you had
people to look at a release too early and they
owed more than the house is worth.
Speaker 2 (23:04):
Yeah yeah, yeah, Well equity release schemes won't allow negative equity,
so if you lived like that. There's the oldest woman
in the world who's one hundred and sixteen, who were
I'm very proud to see as a brit So if
she'd taken a release him till seventy she was still
living in her property, so.
Speaker 1 (23:17):
She'll been living rent free for quite a long time.
But on the other hand, have left nothing for her hes,
although of course they may have predeceased her at this point.
Speaker 2 (23:26):
Yes, but it did allow her, if she was in
that situation, to use other money to give away in
her lifetime. And she's obviously lived for seven years.
Speaker 1 (23:35):
Yeah, you know, well done, well done. This'll be quite
interesting when we come to the mansion tax, right, assuming
it ever appears, which I'm not one hundred percent convinced about.
And of course it's not really a mansion tax, it's
a recently big house tax. People are going to be
able to roll up that liability and pay it on
the sale of the house or indeed on death I
fellows when the house is sold, right, So that'll be
(23:57):
a similar feel.
Speaker 2 (23:58):
It seems to be. It seems there's a nice German
quote which you might like to hear. Giving with warm
hands while you're alive is better than giving cold hands
when you're dead.
Speaker 1 (24:10):
Thanks all the fun, Okay, I think we'll end on that.
We'll end on that. That's something for parents to think
about over Christmas. Hamish, thank you so much for joining
us today. Really useful. Thank you, Marion, Thank you, thanks
(24:33):
for listening to this week's Meren Talk to Your Money.
If you like our show, rate review and subscribe wherever
you listen to podcasts. Also be short to follow me
and John on excell Twitter. I am at marinas W
and John is John Asco Stepec. This episode was produced
by Summerside and Moses and special thanks of course to
Hamish and of course, as usual, questions and comments on
this show and all our shows are always welcome. Our
(24:55):
show email is Merren Money at Bloomberg dot net.
Speaker 2 (25:00):
Wh
Host
Merryn Somerset Webb
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The Burden
The Burden is a documentary series that takes listeners into the hidden places where justice is done (and undone). It dives deep into the lives of heroes and villains. And it focuses a spotlight on those who triumph even when the odds are against them. Season 5 - The Burden: Death & Deceit in Alliance On April Fools Day 1999, 26-year-old Yvonne Layne was found murdered in her Alliance, Ohio home. David Thorne, her ex-boyfriend and father of one of her children, was instantly a suspect. Another young man admitted to the murder, and David breathed a sigh of relief, until the confessed murderer fingered David; “He paid me to do it.” David was sentenced to life without parole. Two decades later, Pulitzer winner and podcast host, Maggie Freleng (Bone Valley Season 3: Graves County, Wrongful Conviction, Suave) launched a “live” investigation into David's conviction alongside Jason Baldwin (himself wrongfully convicted as a member of the West Memphis Three). Maggie had come to believe that the entire investigation of David was botched by the tiny local police department, or worse, covered up the real killer. Was Maggie correct? Was David’s claim of innocence credible? In Death and Deceit in Alliance, Maggie recounts the case that launched her career, and ultimately, “broke” her.” The results will shock the listener and reduce Maggie to tears and self-doubt. This is not your typical wrongful conviction story. In fact, it turns the genre on its head. It asks the question: What if our champions are foolish? Season 4 - The Burden: Get the Money and Run “Trying to murder my father, this was the thing that put me on the path.” That’s Joe Loya and that path was bank robbery. Bank, bank, bank, bank, bank. In season 4 of The Burden: Get the Money and Run, we hear from Joe who was once the most prolific bank robber in Southern California, and beyond. He used disguises, body doubles, proxies. He leaped over counters, grabbed the money and ran. Even as the FBI was closing in. It was a showdown between a daring bank robber, and a patient FBI agent. Joe was no ordinary bank robber. He was bright, articulate, charismatic, and driven by a dark rage that he summoned up at will. In seven episodes, Joe tells all: the what, the how… and the why. Including why he tried to murder his father. Season 3 - The Burden: Avenger Miriam Lewin is one of Argentina’s leading journalists today. At 19 years old, she was kidnapped off the streets of Buenos Aires for her political activism and thrown into a concentration camp. Thousands of her fellow inmates were executed, tossed alive from a cargo plane into the ocean. Miriam, along with a handful of others, will survive the camp. Then as a journalist, she will wage a decades long campaign to bring her tormentors to justice. Avenger is about one woman’s triumphant battle against unbelievable odds to survive torture, claim justice for the crimes done against her and others like her, and change the future of her country. Season 2 - The Burden: Empire on Blood Empire on Blood is set in the Bronx, NY, in the early 90s, when two young drug dealers ruled an intersection known as “The Corner on Blood.” The boss, Calvin Buari, lived large. He and a protege swore they would build an empire on blood. Then the relationship frayed and the protege accused Calvin of a double homicide which he claimed he didn’t do. But did he? Award-winning journalist Steve Fishman spent seven years to answer that question. This is the story of one man’s last chance to overturn his life sentence. He may prevail, but someone’s gotta pay. The Burden: Empire on Blood is the director’s cut of the true crime classic which reached #1 on the charts when it was first released half a dozen years ago. Season 1 - The Burden In the 1990s, Detective Louis N. Scarcella was legendary. In a city overrun by violent crime, he cracked the toughest cases and put away the worst criminals. “The Hulk” was his nickname. Then the story changed. Scarcella ran into a group of convicted murderers who all say they are innocent. They turned themselves into jailhouse-lawyers and in prison founded a lway firm. When they realized Scarcella helped put many of them away, they set their sights on taking him down. And with the help of a NY Times reporter they have a chance. For years, Scarcella insisted he did nothing wrong. But that’s all he’d say. Until we tracked Scarcella to a sauna in a Russian bathhouse, where he started to talk..and talk and talk. “The guilty have gone free,” he whispered. And then agreed to take us into the belly of the beast. Welcome to The Burden.