Children savings that can't be accessed automatically at 18

xyz123 wrote: »

i want to avoid that to make sure it's used for educational purposes.

What do you do if your 18-year-old child doesn't want to be educated beyond 18?

The easy answer is to save in your own accounts, and gift the money when you are sure it will be used as you wish.
The complicated and expensive answer is to use a discretionary trust.

Someone will be along shortly to provide links.

Here's a bit of generic information on discretionary trusts:
https://www.gov.uk/trusts-taxes

But that being said, it may just be easier if appropriate to save yourself and gift it after the child turns 18, though of course by that point if he/she doesn't want to go to Uni, you can't exactly make them...

There is potentially a way, sort of, but it's controversial.

When I set up a Bare Trust (very simple to do) with the investment trust Baille Gifford I was surprised to learn they allow you to keep it going past 18. They ask you what target age you want and told me I can change this at any point.

In theory the child is entitled to the money at 18 but they will not release the money unless the trustees tell them to. The child could attempt to use legal means to force access or replace yourselves as trustees but in practice I gather this is very difficult. A poster in the past was trying to replace the trustees of their trust but not having much luck.

So no guarantees but if you want a simple solution it may be worth a try.

PS This just delays payout until you feel they are responsible enough to receive it. The money will still eventually go to the child and if they decide not to spend it on education that's their decision, so it may not be the solution you are looking for.

There is potentially a way, sort of, but it's controversial.

When I set up a Bare Trust (very simple to do) with the investment trust Baille Gifford

https://www.bailliegifford.com/individual-investors/literature-library/individualintermediary-non-fund/investment-trust/childrens-savings-plan-application-pack/
A Bare Trust will be set up in your child’s name. The
Trustees you appoint will have administrative
control until the child reaches 18 or older, when
control should be passed to the child**

**While the Bare Trust application form allows a later date to be provided for the duration of the Bare Trust than the date of the child’s 18th birthday
(or 16th birthday if the child is in Scotland), please note that there is no certainty that the assets will remain in trust until that later date. This is
because, when a child reaches the age of 18 (or 16 if the child is in Scotland), that child has a legal right to hold the assets directly for his or her
own benefit and can demand payment of the funds from the Trustees. While it might be expected that the child would respect the wishes of the
person(s) setting up the trust, there is no obligation on the child to do so once he or she has reached maturity in the eyes of the law. Please
consult your tax adviser on this point.

Reaper wrote: »

When I set up a Bare Trust (very simple to do) with the investment trust Baille Gifford I was surprised to learn they allow you to keep it going past 18. They ask you what target age you want and told me I can change this at any point.

Nothing surprising about that. You can ask for the money at 18 but nothing says you have to.

In theory the child is entitled to the money at 18 but they will not release the money unless the trustees tell them to. The child could attempt to use legal means to force access or replace yourselves as trustees but in practice I gather this is very difficult.

Once you got into court it would be trivial, an open and shut case. But it depends on how likely you think your children are to sue you.

From the perspective of the investment company, bare trust accounts are often just an ordinary unwrapped account with a designation attached - usually a series of letters which the trustee knows is the child's initials but from the perspective of investment company is just an abstract set of letters.

So if the beneficiary goes to the company and says "I am Little Jimmy Bloggs and I want you to encash the account held by Joe Bloggs with designation LJB as it's my bare trust account" they can say no, as they were never told it's a bare trust account, and never told that LJB refers to Little Jimmy, so they have no reason to do anything with Joe Bloggs' account without his signature.

Little Jimmy probably could eventually gather evidence that it belongs to him - after all Joe needed to be able to show that the money belongs to Little Jimmy so he didn't get taxed on it - but it will as you say be difficult.

A more straightforward way to avoid potential legal complications would be to simply not tell Jimmy it exists until he's ready for it. Legally it may be dodgy to hide someone's money from them (and it's probably a very bad idea once they become old enough to have their own taxable income - you don't want them to underpay tax because they had an investment they didn't know about) but again it comes back to how likely your kids are to sue you for it.

A poster in the past was trying to replace the trustees of their trust but not having much luck.

That sounds more likely to be a discretionary trust rather than a bare trust.