Should Grandma’s cheque come with strings attached?

YOU want to make a gift to your adult children. There are bills to pay and grandchildren to educate, and they could certainly do with some help.

Besides which, if you give away money in good time, there are financial benefits to your estate down the line.

But what if you’re not sure they’re going to use your money properly? What if you don’t fully trust your daughter-in-law not to fritter away all your hard-earned money on fripperies, or your son-in-law not to gamble the lot? And what will happen to your helpful little nest egg if your son or daughter ends up getting divorced?

Surely what’s yours should, well, still be yours? Enter the gran-nup, an increasingly popular way of passing money on to family — with serious strings attached.

Like the pre-nup before it, it’s a way of laying out in advance how your money will be spent, and who gets what if, for example, a marriage doesn’t last the distance.

And, like the pre-nup, it’s seen a surge in popularity, because these days you don’t need to own a yacht or an extensive share portfolio to have money to hand on to your children. All you need, in some parts of the country, is a house.

According to Simon Bashorun, a financial planner with wealth management firm Investec, there are several reasons why the older generation increasingly have money to give away.

‘People can draw a lump sum from their pensions, or they may be downsizing their property and have some spare cash,’ he says. ‘Sometimes people draw up trusts after a divorce, or because they’ve had an inheritance from their own parents which they don’t need, so they want to pass it straight on.’ SO, If one of these applies to you (or you’ve simply worked hard and saved all your life), it can make sense to give away some money at least seven years before death, because then it’s not counted when it comes to paying inheritance tax. It makes emotional sense, too.

As the old saying goes, it’s better to give with a warm hand than a cold one. Seeing your children and grandchildren make use of your money is going to make you happy.

But what if you want to decide what constitutes good use? The answer is the gran-nup, more properly known as a discretionary trust — which, Simon Bashorun explains, allows to you ‘to choose who gets the money and when’.

You can outline your intentions in a Letter of Wishes, which your trustees will then honour.

‘We’re seeing more and more of them,’ Simon Bashorun says. ‘They allow the older generation to retain an element of control.’

one common reason for these gran-nups is to steer the money away from a spendthrift spouse. ‘ You also get people who are concerned their son or daughter is with someone who already has children, and they want to make sure the money stays in their own bloodline,’ Simon Bashorun says.

‘ With second marriages so common, grandparents — but also parents — often want to see their assets pass down to their blood relatives, no matter how good the relationships are.

‘I have a client in this situation. There are excellent relationships with the step-grandchildren, but they want their assets to pass down to the three children to whom they are related.’

At first sight, these bespoke bequests can seem like a reasonable idea.

But what does it feel like to be on the receiving end if you are excluded from the gift? This happened to a friend of mine, whose in-laws set up a discretionary trust so that if her marriage ended, the money would remain the property of her husband. ‘It is hard not to feel resentful,’ she says, ‘especially considering that there isn’t anything wrong with our marriage.’

Simon Bashorun warns that the terms and conditions aren’t entirely lawyer- proof if the marriage does end in divorce.

‘It’s not a cast-iron guarantee — the judgment partly depends on whether any of the money has already been distributed — but it can offer protection,’ he says.

In my friend’s case, though, there’s been no divorce, and the decision has left her feeling her in-laws don’t think she’s good enough for their son. ‘Basically, it’s like they don’t trust me,’ she says.

of course, no one wants to turn down thousands of pounds. But accepting subsidies with strings attached can feel like being subjected to emotional blackmail. And some experts caution that you should be extremely careful before imposing this sort of arrangement on your family.

‘If you’re not careful, you can drive a wedge between you and your child, and between your child and their partner,’ says Helen Grant, a family therapist.

‘It can suggest to them that you think they don’t know how to manage their finances. That’s likely to make your child and their partner feel that they’re under scrutiny — and they’re failing.’

Psychotherapist Simon Greenwood agrees. ‘This kind of armslength control can feel overbearing. It’s not likely to end well.’

But what if you’re set on your hard-earned cash going towards something that you think is really important, like school fees for your grandchildren? Surely a gran-nup is fair enough in that case?

Yes . . . and no, says Relate’s Denise Knowles. ‘It would be fine if everyone in the family agrees that it’s the right thing to do with the money. But if your child or their partner doesn’t want, say, private school, you have to ask why, as grandparents, you would try to override that.’

She adds: ‘When there’s conflict over finances, it’s helpful to unpick the causes. People often use money to fight over other tensions or unresolved issues.’ USING money to control the next generation can look as if you believe they’re incapable of running their own lives.

If you set up a discretionary trust without your adult children’s full support, the message you are sending, the experts agree, is that you’re still treating them like children. ‘ And that,’ says Helen Grant, ‘is going to make them feel they’ll never be good enough.’

It’s understandable, when you have worked for a lifetime, and planned carefully, to think ‘it’s my money — I should be allowed to say what happens to it’.

But child psychologist Margaret McAllister warns: ‘ You need to beware of having an exaggerated sense of your own importance.

‘If you are going to pass your money down to your children, you have to trust their good sense.’

It is, in other words, a bit late to be parenting them now.

So, a gran-nup or not? The answer seems to be that settlements with strings are fine if all the family are in agreement about the aims. If, on the other hand, you’re imposing restrictions your children don’t want, you probably need to think about your motives.

unfortunately, if you suggest to your family that your gifts are conditional, you may find that their love is, too.