Do you want to make sure that all your children are treated equally, whether you’re lending them money now or planning their inheritance later?
You're not alone, and thankfully there is a special way to do it: through the use of a “hotchpot clause”.
Imagine, you help one of your children with a house purchase or pay off a debt for them. Of course, you want to make sure that this doesn’t make things unfair for your other children later on. That's where the hotchpot clause comes in!
What is a Hotchpot Clause?
Simply put, it's a legal way to make sure that gifts or loans you provide to one child during your lifetime are considered part of their inheritance. This ensures that all children receive the same benefit overall, keeping everything fair and square.
Here's a real-world example:
Say Sarah's parents pay off her £10,000 debt. With a hotchpot clause, they can reduce Sarah's inheritance by that amount, ensuring all siblings are treated equally.
How Does It Work?
The hotchpot clause isn’t about asking for money back. It's about recognizing the gift or loan and adjusting the inheritance accordingly.
Here's a typical clause:
“My Trustees must bring into account and charge against the share of each of my children in my Estate the amount of any gift or loan I make to that child in my lifetime. If any child of mine dies before me the share of his or her children in my Estate must be similarly charged.”
Keeping Track
For this clause to work its magic, it’s essential to keep a record of gifts or loans outside of the Will. And if it's a loan, an agreement between both parties must be in place. Keep everything up to date and store the records with your Will so they can be easily found.
A Path to Peace of Mind
Planning for the future can be complicated, but the hotchpot clause offers a way to ensure fairness among your loved ones. If you'd like to learn more about this or any other aspects of financial planning, we're here to help. Feel free to reach out and let’s make sure your wishes are fulfilled!
Colin Barrett-Treen is a Director & Principal Estate Planner at Peritum Wills.
Ancojada wills Limited trading as Peritum Wills is not authorised or regulated to provide financial advice.
All financial advice is provided by other regulated businesses.
The Financial Conduct Authority does not regulate Taxation, Trust advice or Will writing.
Trusts are a highly complex area of financial planning.
Information provided and any opinions expressed are for general guidance only and not personal to your circumstances, nor are they intended to provide specific advice.
Tax laws are subject to change and taxation will vary depending on individual circumstances.
Kommentarer