Amyr Rocha-Lima (pictured above) and Lena Patel discuss the advice they offer to clients preparing for their children's big day.
Financial planner, Holland Hahn & Wills: Wealth Management
Weddings and civil ceremonies are costly affairs. It is no wonder the prospect of paying for a child’s special day has some parents hearing wedding blues instead of bells.
Make a milestone
I treat planning for the cost of a child’s wedding as a ‘milestone event’ in a client’s financial forecast. Essentially, it is no different to planning for childcare or university costs. Therefore it needs a close working relationship with the family to understand their requirements.
However, given that my clients are typically in their 50s and 60s, this event is often not that far in the future. This means a cash lump sum is required without much room for forward planning.
Listen and learn
Modelling weddings on my clients’ financial forecast is an opportunity to get them talking about what a joyous occasion it is for them. I use this opportunity to listen, because sometimes it brings forward other life plans they wish to explore further.
There are some great tax planning opportunities to be used here. Each tax year you can give away up to £5,000 per child in relation to wedding or civil ceremony gifts, on top of the £3,000 annual gift exemption. As you can carry any unused annual exemption forward to the next tax year, this could potentially mean a £22,000 gift from a couple to their child without it being added to the value of their estate for inheritance tax purposes.
Top tip: Use the child’s wedding to get clients talking about their own life goals.
Director, ISJ Wealth Management
Many parents are helping their children plan financially for their wedding. Meanwhile, the children are facing tough decisions on whether to put money towards a wedding or a house deposit.
One client decided to give a lump sum to her son and let him decide whether that would go towards the house deposit or a wedding. She told him: ‘This is what we can afford right now, so here it is.’
The client was considering accessing her tax-free lump sum from her pension to help fund this. But this defeats the object of retirement planning, because retirement is for yourself.
In the end we cashed in investments, rather than using her tax-free pension lump sum. If you have cash in the bank or investments, that is what you should be using.
Traditionally in Asian families, it was always the parents who paid for the wedding. Nowadays the children contribute more.
A client might say: ‘I need £20,000 for each of my three daughters.’ That is £60,000 that has to be planned in advance.
But sometimes parents will be planning for something that may never happen, as the child may not have even found a partner. Parents can try to plan ahead, but some things are just out of their control.
Top tip: Cash or investments are better for wedding funding than withdrawing from a pension.
What Twitter thinks
Co-director, Piercefield Oliver
With proper financial planning and cashflow forecasting, life events can be planned for and informed decisions made.
Managing director, Equanimity IFA
A pre-nup is a must. Followed by an update of the will to take into account the marriage.