Transferring Wealth to Children Abroad: Strategies for International Families

For internationally mobile families — where parents and children may live in different countries, hold assets in multiple jurisdictions, and have complex tax residency positions — transferring wealth between generations requires more planning than the standard domestic approach.

The good news is that the UK's gifting rules, and the mechanisms available to international families, offer genuine flexibility. The challenge is using them in a coordinated way.

UK gifting rules: what parents need to understand

The UK's inheritance tax framework treats lifetime gifts in a specific way. Most outright gifts to individuals fall under the potentially exempt transfer (PET) rules. A PET is not immediately subject to inheritance tax — but it becomes fully exempt only if the donor survives for seven years after making the gift.

If the donor dies within seven years, the gift is drawn back into the estate for IHT purposes. The rate of IHT on the gift tapers over those seven years (known as taper relief), but taper relief only reduces the tax charge — it does not reduce the value added back to the estate for the purpose of calculating whether the nil-rate band has been used.

Key annual exemptions:

• Annual exemption: £3,000 per year can be gifted free of IHT, regardless of the seven-year rule. Unused allowance can be carried forward one year.
• Normal expenditure out of income: Gifts that form a regular pattern and are made out of income (not capital), leaving the donor's standard of living unaffected, are fully exempt — with no limit. This is an underused exemption that can be significant for high earners.
• Wedding gifts: Up to £5,000 from a parent, £2,500 from a grandparent, £1,000 from anyone else.
• Small gifts: Up to £250 to any number of individuals per year.

Do UK gift rules affect the recipient?

No — the UK does not have a gift tax on recipients. If a parent gives their adult child £100,000, the child does not pay tax on that receipt in the UK. The IHT exposure is with the donor's estate if they die within seven years.

If the child lives abroad, the same logic applies from the UK perspective. The child's country of residence may have its own rules about receiving large gifts — this needs to be checked jurisdiction by jurisdiction. Most Western countries do not tax outright cash or asset gifts received by individuals.

Trusts for children: the core options

Trusts are the main structural tool for larger intergenerational wealth transfers in international families.

Bare trusts hold assets in a trustee's name but for the absolute benefit of a named beneficiary. The beneficiary owns the assets beneficially from the outset — they simply cannot access them until they reach 18 (in England and Wales). Income and gains are taxed as the beneficiary's. Simple, low-cost, but inflexible once established.

Discretionary trusts give trustees the power to decide who receives income and capital, and when. Beneficiaries have no automatic entitlement. This flexibility is valuable for international families where circumstances may change, or where the settlor wants to retain some indirect influence over distributions. UK discretionary trusts are subject to a 10-year anniversary charge of up to 6% of the trust's value above the nil-rate band, and an exit charge when assets leave the trust.

Offshore discretionary trusts established by non-domiciled individuals can hold foreign assets as excluded property — outside the scope of UK IHT. This is a well-established planning structure but requires careful handling, particularly in light of post-2025 reforms to the non-dom rules and their interaction with trust treatment.

Junior SIPP

A Junior SIPP (Self-Invested Personal Pension) allows parents and grandparents to contribute up to £2,880 per year (net) into a pension for a child under 18, with the government adding basic-rate tax relief to bring the gross contribution to £3,600. The child cannot access the pension until they reach retirement age (currently 57), but the funds grow tax-free.

For a child aged five, for example, even modest regular contributions could build a meaningful pension pot over 52 years of compounding. The Junior SIPP is not primarily an immediate wealth transfer tool — but it is one of the most tax-efficient ways to establish a long-term financial foundation for a child.

Junior ISA vs international equivalents

For UK-resident children, a Junior ISA allows up to £9,000 per year (as of 2026) to be invested on the child's behalf, growing free of UK income tax and capital gains tax. The child can access the funds at 18.

For children who are not UK resident, JISAs are generally not available. Offshore equivalents exist — typically offshore investment bonds written on a child's life or for their benefit — but these are less standardised and require careful structuring.

Offshore investment bonds for education funding

An offshore investment bond is one of the most flexible vehicles for international education funding. Key advantages:

• Growth rolls up inside the bond free of UK income tax (subject to the policyholder's own tax position on encashment).
• The bond can be assigned to a child (or to a trust for a child's benefit), potentially moving the income tax liability to a lower-rate taxpayer.
• Funds can be used for school fees, university tuition, or any other purpose — there is no restriction on use.
• Bonds are available in multiple currencies, which matters if the child will study internationally.

The tax treatment depends on the policyholder's residency at the time of withdrawal and the bond provider's location. This is an area where proper structuring advice pays dividends.

Practical considerations for international families

Multiple wills. If you hold assets in several countries and want to pass them to children abroad, you likely need a will in each relevant jurisdiction. A UK will does not automatically govern assets in Spain, Cyprus, or Thailand.

Forced heirship. Some jurisdictions — particularly in the Middle East and parts of Europe — have mandatory rules about how estates must be divided, regardless of what a will says. EU Succession Regulation 650/2012 (Brussels IV) allows EU-resident individuals to elect the succession law of their nationality to apply. This is valuable but needs to be done correctly.

Currency matching. If children live in a different currency zone, consider whether gifts or trust assets should be held in the recipient's currency to reduce exchange rate friction over time.

Communication. The most technically perfect wealth transfer plan can cause family conflict if children are not aware of it or do not understand the intentions behind it. For larger transfers, a family meeting facilitated by an adviser can be as important as the paperwork.

Business assets and family succession

For families with business interests, transferring wealth to the next generation involves an additional dimension: the business itself. UK Business Property Relief (BPR) provides relief from IHT on qualifying business assets after two years of ownership. From 6 April 2026, 100% relief applies on the first £2.5 million of combined qualifying BPR and APR assets per estate, with only 50% relief on the excess (a 20% effective IHT rate). The cap was originally announced as £1 million in the October 2024 Budget and raised to £2.5 million in December 2025; the £2.5 million allowance is transferable between spouses and civil partners. Shares in a qualifying trading company can therefore pass on death with substantial IHT mitigation — but the uncapped 100% relief that applied before April 2026 no longer exists. This relief can be used proactively through lifetime gifts of business shares, though the £2.5 million cap on full relief applies equally to lifetime transfers.

However, transferring business ownership to children abroad requires careful consideration:

• The child's country of residence may tax the receipt of business assets differently to the UK
• Shareholder agreements must be updated to reflect new ownership
• Control and governance arrangements need to evolve with the ownership structure
• Different jurisdictions have different rules on what constitutes a "gift" versus a "sale" of business interests for tax purposes

Early engagement with advisers in both jurisdictions avoids unpleasant surprises at either end of the transfer.

The role of life insurance in wealth transfer

Life insurance — specifically whole-of-life policies written in trust — is one of the most tax-efficient and certain methods of transferring wealth to children on death. The policy pays out a guaranteed lump sum on death; if written in trust, the proceeds do not form part of the estate (no IHT) and are available immediately to beneficiaries without waiting for probate.

For international families, the policy can be written in a suitable jurisdiction (Isle of Man, Ireland, or Guernsey providers are commonly used) to ensure portability across countries and avoidance of local succession complications.

The ongoing premium is a regular commitment but is generally paid from income, potentially qualifying as a "normal expenditure out of income" exempt from IHT — making the premium payments themselves a form of IHT-efficient wealth transfer.

Frequently asked questions

Does my child have to pay tax when I give them money? In the UK, the recipient of a gift from a parent does not pay income tax or capital gains tax on the receipt. The IHT risk sits with the donor's estate if they die within seven years. However, if you give income-producing assets rather than cash — shares, for example — the child's income from those assets is taxed as their own income from the date of transfer.

What is a "bare trust" for a minor child? A bare trust holds assets in a trustee's name (often the parent) but for the absolute benefit of the named child. The child owns the assets beneficially and can demand them at age 18 (England and Wales). Income and gains in the trust are treated as the child's for tax purposes — though if the parent has gifted income-producing assets into a bare trust, the "parental settlement" rules may attribute the income back to the parent.

Can I set up a JISA for my child who lives abroad? Junior ISAs are available to children who are UK resident. If your child is not UK resident, they generally cannot open or contribute to a JISA. Some children who were UK resident when a JISA was opened may retain it after moving abroad, though new contributions cannot be made during non-residence. Offshore investment bonds or local equivalents are usually the alternative.

Is it better to give money now or leave it in my will? From a pure IHT perspective, giving during your lifetime starts the seven-year clock on PETs and removes future growth from your estate. However, you must consider your own financial security first — do not give away assets you might need. For those with more than sufficient personal capital, early gifting — particularly using annual exemptions and normal expenditure — is generally more IHT-efficient than relying solely on the will.

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How Global Investments can help

Global Investments works with internationally mobile families across all aspects of intergenerational planning — from simple gifting strategies to trust structures and cross-border estate coordination. Contact us to discuss your family's specific situation.

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This article is for general information only and does not constitute legal, tax, or financial advice. Inheritance tax rules and cross-border succession law are complex and individual.