Can I leave money to my German grandson and should I set up a trust if he is under 18?

I was widowed and then lost my son, who has a child, and I also have one daughter who lives in Britain.

Before his death, my son lived in Switzerland with his German wife and my grandson (seven years old), who is a registered German citizen.

I have to write a will, my daughter will be executor. My only asset is my home (not valued, but I estimate £400,000).

Do I need to set up a trust for my grandson and can I do this if he is a German citizen, or can it be specified in a will that my daughter sets up a trust for him? How do I deal with this?

I am disabled and virtually housebound. Do I need a financial advisor to figure it out, or a lawyer to write a will? USA, via email

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Harvey Dorset from This is Money replies: I’m sorry to hear about the losses you’ve suffered.

As you told us, the amount you want to leave to your daughter and grandson falls below the level at which you have to pay inheritance tax.

Although the threshold is £325,000, you will also benefit from the residential nil rate band of £175,000, plus likely your late spouse’s unused tax-free allowance and RNRB. if the conditions are met.

But even if you say your house is your only asset, you must also take into account any savings you may have, and any pension that could be subject to inheritance tax from 2027, following changes in the recent Autumn Budget.

Whether a trust is needed to ensure that you can pass this money on to your grandson will largely depend on when you expect this money to be left to your grandson.

Of course, this depends on your own health and age.

Because your grandson is seven, he may turn 18 before you die.

However, if you don’t expect this to be the case, you may need to set up a ‘discretionary will trust’ to ensure that the money you leave him is managed for him before he can legally take control of his finances. .

This is Money spoke to two financial advisors to find out what you need to consider to ensure your daughter and grandson can benefit from your estate in the way you want.

Liviu Ratoi, independent financial advisor at Flying Colors, answers: In short, your question is about how you can leave your estate to your daughter and your grandson after the death of your son.

The easiest way to do this is to contact a reputable lawyer and draw up a will, which will replace any existing will.

In the will you can specify that the estate will be divided equally between the two (assuming that is what you wish), and you can also name your daughter as executor of the will.

In this case I would question the need for a trust as the assessed value of the property of £400,000 falls below the inheritance tax threshold of £500,000 (there is a nil rate of £325,000 and a nil rate for residential property of £175,000 as you pass on assets to a child/grandchild).

Assuming your deceased spouse did not make any substantial gifts at the time of death or seven years prior, you can transfer his unused allowance. This brings your total inheritance tax exemption to €1,000,000.

However, because you are disabled and virtually homebound, you may need to think about what would happen if you needed long-term care. If you did nothing, the local government could theoretically force the sale of your house to pay for it, leaving less money to leave to your daughter and grandson.

You can also ask the council to place a charge on your house, which means they will pay for your long-term care initially and recoup the costs once you have died and the house has been sold. This allows any increase in the value of your home to be passed on, minus your long-term care costs.

You may also want to consider a “Trust for Land” before you show any sign of needing long-term care. This may put the house out of reach of your municipality if you need long-term care at a later date.

It is important that you are aware that the local authority could challenge this if they believe this has been done to deliberately ‘rob’ your estate, forcing them to fund your care. Your lawyer should be able to give you more information about this and whether or not it is suitable for you.

As for your grandson’s German citizenship, there are no problems leaving money to him, but it would be a good idea to check the local tax laws about inheriting money and know in advance if there are any tax consequences from an inheritance or not.

I reiterate the need for sound legal advice on all of this.

David Little, financial planner at 7IM, answers: Staggeringly, more than 50 percent of adults in Britain currently do not have a valid will, despite a will being the only legal means of ensuring that your estate is distributed according to your wishes on death.

You said that your home is your only asset and therefore a lawyer could meet your requirements without the need for a financial advisor.

At the same time as your will, the notary must also draw up a ‘power of attorney’, so that a confidant – for example your daughter – can arrange your affairs in case you are no longer able to do so yourself.

I see that your main priority is to ensure that your grandson can benefit from your estate after you pass away. To ensure this happens, it is advisable to consider setting up a ‘discretionary will trust’ through your will, starting on your death, together with a ‘letter of wishes’ to the trustees, informing them provides your instructions for the inheritance.

With a discretionary will, your estate, in your case your house or perhaps a sum of money if the house is sold, can be left in trust for the benefit of your grandson upon your death.

You can appoint trustees to manage this trust on your behalf, who will be legally responsible for ensuring that the assets are managed for the benefit of the trust’s beneficiaries.

It is important to choose the trustees very carefully as they will legally own the assets within the trust upon your death. You should have at least two trustees managing your trust, and possibly a trusted attorney, in the event of a trustee’s untimely death.

Because the trust will be a ‘discretionary’ trust, there is no automatic legal right to the assets for any beneficiary, which can help safeguard your assets should something untoward happen in your grandson’s future life. The trustees have full control over the timing and amount to be passed to your grandson, which will help safeguard your assets.

Regarding your grandson being a German citizen, foreign trusts are generally not recognized in Germany, but Switzerland does recognize foreign trusts.

However, as you will be setting up a discretionary trust in Britain with no automatic beneficiaries, the fact that your grandson is a German citizen living in Switzerland will not adversely affect your intentions for him to benefit.