Initiative to help pay private school fees

THE credit crunch has created a chasm between the generations, which is causing headaches for parents who want to send their children to independent schools.

A partnership has been created to support families with pupils at a Yorkshire independent school, while enabling their grandparents to reduce their inheritance tax liability.

Elderly people who made their money during the boom times of the 1990s, are, in many cases, better off than their children.

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Law firm Lupton Fawcett, and The Grammar School at Leeds (GSAL), where fees are £10,000 a year, have created a partnership which could be copied across Britain. The partnership will help grandparents of pupils to use equity from their homes to pay their grandchildren’s fees at the 2,200-pupil school and cut the inheritance tax payable by their own children when they die.

The initiative, devised by wills and trusts specialists at Lupton Fawcett, is one of the first of its kind in Yorkshire and aims to help families who may need extra support with school fees while the economic recovery remains slow and unemployment is rising.

Leeds-based Duncan Milwain, the director and head of Lupton Fawcett’s wills, trusts and estates department, said: “The timing of the economic crash after 15 years’ growth means some retired people are comparatively well off while their adult children are struggling with rising inflation, pay cuts and, in some cases, short-time working. The threat of redundancy is also a very real one for many people. This can put significant pressure on parents who are planning to send their children to an independent fee-paying school.

“A chasm is developing between that generation and the better-off retired who have equity in their homes and may also have sizeable pension pots. For these people inheritance tax can be a headache – an individual’s threshold is £325,000 – over this figure tax is payable at 40 per cent.

“There are large parts of Yorkshire where simply owning a property can put people over this threshold and into the tax regime.

“Some grandparents are already stepping in to narrow this chasm by helping their family meet costs such as holidays and providing or supplementing deposits for home-buying. This tax-efficient initiative reflects a further way in which grandparents can offer practical financial support to their families now and to significantly reduce the inheritance tax payable when they die. Many will no doubt feel that it is an extremely worthwhile investment.

“It is however important that any planning carried out by a family is not dealt with in a vacuum – it should take place in the context of all the family circumstances.”

Research suggests that many parents would still like to send their children to independent schools, despite the tough economic climate.

Fifty four per cent of parents polled in a study commissioned by the Independent Schools Council (ISC), said they wanted to send their child to an independent school, while 26 per cent said they would not.

A spokesman for the ISC said: “This gap of 28 percentage points has never been greater; in 1997 the gap was 10 points.”

Populus interviewed 2,051 British adults online between September 16 and 18.

The data was weighted by Populus to make it representative of the UK population.