How Do I Leave Money to My Grandchildren? A Guide to Providing for the Next Generation

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How Do I Leave Money to My Grandchildren? A Guide to Providing for the Next Generation

For many grandparents, the desire to leave something behind for their grandchildren is one of the main reasons they decide to make a Will. Whether it is a lump sum to help with university fees, a deposit for a first home, or simply a financial safety net for the future, providing for grandchildren is a natural and generous instinct.

However, leaving money to grandchildren is not always as straightforward as it might seem. There are important legal, tax, and practical considerations to think about — particularly when your grandchildren are young. Getting it right means your gift will have the impact you intend. Getting it wrong could mean delays, unnecessary tax, or money reaching your grandchildren at the wrong time or in the wrong way.

In this article, we explain the different ways you can leave money to your grandchildren and help you understand which option might work best for your family.

The Simplest Option: A Direct Gift in Your Will

The most straightforward way to leave money to a grandchild is to include a specific legacy in your Will. This is a named gift of a fixed sum of money to a named individual. For example, you might include a clause stating that you leave £10,000 to each of your grandchildren.

This approach is simple, clear, and easy to administer. However, there are some important things to consider.

If your grandchild is under 18 at the time of your death, they cannot legally receive the money directly. Instead, the funds will need to be held by your executors or trustees until your grandchild reaches the age of 18 — or a later age if you specify one in your Will.

You should also think about what happens if your family grows. If you name specific grandchildren in your Will and more grandchildren are born after you write it, those later grandchildren will be left out unless you update your Will. A barrister or solicitor can help you draft flexible wording that covers all current and future grandchildren, avoiding the need for constant updates.

Leaving a Share of Your Estate

Rather than leaving a fixed sum, you may prefer to leave a percentage of your estate to your grandchildren. For example, you could leave 70 per cent of your estate to your children and divide the remaining 30 per cent equally among your grandchildren.

This approach has the advantage of adjusting automatically to the size of your estate at the time of your death. If your estate grows or shrinks over time, the share your grandchildren receive will reflect its actual value rather than a figure that may become outdated.

It also means you do not need to worry about inflation eroding the value of a fixed gift over the years.

Using a Trust to Leave Money to Grandchildren

For many grandparents, setting up a trust is the most effective and flexible way to leave money to grandchildren. A trust allows you to set aside money or assets for your grandchildren while maintaining a degree of control over how and when the money is used.

There are several types of trust you can use, and the right choice will depend on your family circumstances and what you want to achieve.

A bare trust is the simplest form of trust. Assets are held by a trustee on behalf of the grandchild, and the grandchild becomes entitled to the funds automatically at the age of 18. Bare trusts are straightforward to set up and administer, but they offer limited flexibility because you cannot delay access beyond the age of 18.

A discretionary trust gives your trustees the power to decide how and when to distribute funds to your grandchildren. This is particularly useful if you want to ensure the money is used wisely — for example, to fund education or a first property purchase rather than being spent all at once. Discretionary trusts offer the greatest flexibility but are more complex to administer and may have different tax implications.

An interest in possession trust gives your grandchild the right to receive income from the trust assets, while the capital itself may be preserved for distribution at a later date or passed to another beneficiary. This type of trust can be useful in more complex family arrangements.

A section 71D trust (sometimes referred to as a bereaved minor's trust or an 18-to-25 trust) is specifically designed for children who inherit from a deceased parent or grandparent. These trusts benefit from favourable tax treatment and can be a highly effective way of providing for young grandchildren.

Choosing the right type of trust is an important decision, and we strongly recommend taking professional legal and financial advice before proceeding.

Appointing the Right Trustees

If you decide to use a trust, choosing the right trustees is essential. Trustees are the people responsible for managing the trust, looking after the money, and making decisions about distributions. They have a legal duty to act in the best interests of the beneficiaries.

You can appoint family members, trusted friends, or professional trustees such as solicitors or financial advisers. Many grandparents choose a combination of family members and professionals to balance personal knowledge of the family with financial and legal expertise.

It is worth thinking carefully about who you appoint. Trustees may need to manage the trust for many years, so reliability, good judgement, and financial competence are all important qualities.

Tax Considerations When Leaving Money to Grandchildren

Inheritance tax is an important factor to consider when leaving money to grandchildren. In the UK, inheritance tax is charged at 40 per cent on the value of your estate above the nil-rate band, which is currently £325,000. If you leave your main residence to a direct descendant, you may also benefit from the residence nil-rate band, which is currently £175,000.

Gifts to grandchildren in your Will form part of your estate and are therefore subject to inheritance tax if your estate exceeds these thresholds. However, there are several strategies you can use to reduce the tax impact.

Gifting during your lifetime is one of the most effective ways to reduce the size of your estate for inheritance tax purposes. Each tax year, you can give away up to £3,000 without it being subject to inheritance tax. This is known as the annual exemption. You can also make small gifts of up to £250 per person per year to as many individuals as you wish, provided they have not already benefited from your annual exemption.

Additionally, if you make larger gifts during your lifetime, these are known as potentially exempt transfers. Provided you survive for seven years after making the gift, it falls outside your estate entirely and is free from inheritance tax.

Setting up a trust during your lifetime can also help with tax planning, though the tax treatment of trusts is complex and depends on the type of trust, the value of assets placed into it, and other factors. Professional advice is essential here.

Another option to consider is a junior ISA or a child's savings account, which allows you to save or invest on behalf of a grandchild in a tax-efficient wrapper during your lifetime. While this is not directly related to your Will, it can complement your estate planning by transferring wealth gradually rather than in a single lump sum.

What if Your Grandchildren Are Not Yet Born?

One common concern for grandparents is how to provide for grandchildren who have not yet been born at the time they write their Will. The good news is that a well-drafted Will can absolutely accommodate this.

A barrister or solicitor can include wording that covers all grandchildren living at the time of your death, including those born after the Will is written. This is sometimes referred to as a class gift — a gift to a defined group of people rather than to named individuals. This ensures no grandchild is accidentally excluded simply because they were born after you made your Will.

Skipping a Generation: Is It the Right Choice?

Some grandparents consider leaving their estate directly to their grandchildren, bypassing their own children entirely. There can be good reasons for this — for example, if your children are already financially secure and your grandchildren could benefit more from the inheritance.

However, this approach requires careful thought. Skipping a generation can sometimes cause resentment or family tension, particularly if your children feel overlooked. It can also have inheritance tax implications, as the assets will be taxed when they leave your estate and may be taxed again in your grandchildren's estates in the future.

If you are considering this approach, it is important to discuss it openly with your family where possible and to take professional advice to understand the full implications.

Keeping Your Will Up to Date

Family circumstances change. Grandchildren are born, relationships evolve, and financial situations shift. One of the most important things you can do is review your Will regularly to ensure it still reflects your wishes and your family's needs.

We generally recommend reviewing your Will every three to five years, or sooner if there has been a significant change in your circumstances such as the birth of a new grandchild, a change in your financial situation, or a change in the law.

The Bottom Line

Leaving money to your grandchildren is a wonderful way to provide for their future, but it requires careful planning to get it right. Whether you choose a simple gift in your Will, a share of your estate, or a trust, the key is to ensure your wishes are clearly expressed and legally sound.

A professionally drafted Will, tailored to your family's circumstances, is the best way to ensure your generosity reaches your grandchildren in the way you intend — at the right time, in the right amount, and with the least possible tax burden.

If you would like to discuss how to leave money to your grandchildren, our experienced team is here to help. Contact us today to arrange a consultation and we will guide you through your options.

Disclaimer: This article is provided for general informational purposes only and does not constitute legal or financial advice. Tax rules and thresholds referenced are based on the law in England and Wales as of 2026 and may be subject to change. Always consult a qualified legal and financial professional for advice tailored to your individual circumstances.