William Marriott and Sophie Clark write for EG Magazine on structuring the bank of mum and dad and family trusts

According to our research, more than two-thirds of adults aged 27 or under believe 
they will receive financial support from their parents towards significant life expenses such as buying a home.

This is part of a wider change in parent/child dynamics for this Gen Z cohort, with 64% of Gen Z adults turning to their parents for financial advice, in contrast with older generations who prefer to consult professionals or online resources

With financial assistance from parents on the rise, in an article for EG, William Marriott, Partner and Head Private Property, and Sophie Clark, Associate, explain how family trusts work, and the inheritance tax advantages they offer.

To facilitate financial planning and inheritance tax mitigation, families are increasingly using discretionary trusts. These trusts allow parents to control the distribution of funds while enabling children to plan for major expenses. Parents can use their inheritance tax nil rate band to fund these trusts without immediate tax charges, and if they survive the gift by seven years, the value falls outside their taxable estate.

Trusts offer flexibility in property purchases, allowing for outright distributions, loans, co-purchases, or holding property as a trust asset. This flexibility helps parents balance financial support with control over how funds are used. Additionally, trusts can be advantageous for commercial property purchases due to potential changes in inheritance tax treatment of pensions.

For Gen Z, who often use financial support for property purchases, trusts provide a bargaining chip for parents to ensure protections like cohabitation agreements are in place. 

Read the full piece in EG Magazine here (page 46).