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Am I better to spread the money between ISAs?
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# 1
teapackets
Old 26-03-2012, 8:36 AM
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Default Am I better to spread the money between ISAs?

Hello, my 16yr old daughter has been left just over 15,000 and having done a bit of research think it would be better in ISAs? I was thinking of putting the max limit into 3 separte ISAs - in my name, my husband's and my daughter's, in theory maximising the amount of tax free interest she'll be earning

Am I correct in my thinking? (we don't have any savings of our own to put into an ISA)

\Many thanks
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# 2
westy22
Old 26-03-2012, 8:48 AM
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Putting the money into your and your husbands names would be a breech of the Trust terms - it is not your money, it is your daughters.

She can have a 2011/12 adult cash ISA and a 2011/12 Junior Cash ISA and, after, 6 April she can have a 2012/13 adult cash ISA and a 2012/13 Junior Cash ISA - effectively moving all 15,000 into the tax shelter. You will need to hurry to get the 2011/12 ISAs set up and funded before the 5 April.
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# 3
teapackets
Old 26-03-2012, 9:43 AM
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Thanks Westy, I don't think the money was left in Trust for her (?) the will was just split between three children & two grandchildren.

Sorry to sound so dumb, but f I set one up for 2011/12 now what is the benefit?
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# 4
lisyloo
Old 26-03-2012, 9:43 AM
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Quote:
Am I correct in my thinking?
No.
Unless she wants to gift you the money (which I doubt) then it's wrong on several counts. Firstly tax, but also could cause problems in the case of receiving benefits or inheritance. Some of that means you illegally benefitting, but it could also harm you e.g. stop you getting some benefits.

She can however put money away before midnight 5th April in the tax year 2001-2012 and from 6th April in the 2012-2013 tax year, but you need to hurry up for this tax year as it runs out in two weeks.
But it's a fortunate posistion as she can use two tax years allowances.
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# 5
Wammer
Old 26-03-2012, 9:48 AM
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She will lose the rights to the tax free wrapper if you leave it until after 5 April 2012. Then she will only be able to put in 2012/13's allowance.
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# 6
lisyloo
Old 26-03-2012, 11:30 AM
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Quote:
Sorry to sound so dumb, but f I set one up for 2011/12 now what is the benefit?
It's free from tax for the rest of her life.
This is a very valuable benefit especially if she becomes a higher rate tax payer later in life.
A single years ISA allowance does not sound like much, but once you accumulate then into 5 or 6 figures then the tax benefits can be significant.
You have to use it year by year though, so you don't really want to lose this years' allowance.
Right now she probably won't pay income tax anyway, but it's protected for her lifetime (if it's kept in).
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# 7
westy22
Old 26-03-2012, 12:17 PM
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Quote:
I don't think the money was left in Trust for her (?)
The money may not have been formally left 'in Trust' but you are acting as a Trustee in that you are making financial decisions on her behalf whilst she is still a minor; decisions that legally she will make herself once she is 18.
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# 8
VT82
Old 26-03-2012, 5:42 PM
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I wouldn't panic the OP too much. If she's only 16, she's likely to qualify for gross interest on savings outside of ISAs, and unlikely to be able to have saved enough on top of this windfall in the next few years to make maximising her annual ISAs the number one priority anyway.

But yeah, the sooner it's in ISAs the better, and it has to be in her name.
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# 9
innovate
Old 26-03-2012, 9:39 PM
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Quote:
Originally Posted by VT82 View Post
But yeah, the sooner it's in ISAs the better, and it has to be in her name.
Absolutely.

You cannot "buy" any tax excemption later. Come April 6, the tax excemption on 5,340 will be lost forever, unless it is in an ISA.

And yes, it has to be in the daughter's name if it is the daughter's money.
Give a man a fish and he can eat for a day. Teach a man to fish, and he can eat for life. Chinese proverb.

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