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  • FIRST POST
    • xyz123
    • By xyz123 16th Jun 17, 8:15 AM
    • 1,492Posts
    • 368Thanks
    xyz123
    Children savings that can't be accessed automatically at 18
    • #1
    • 16th Jun 17, 8:15 AM
    Children savings that can't be accessed automatically at 18 16th Jun 17 at 8:15 AM
    Hi

    As per title I am looking to put some money regularly for my little one. However as I understand it, I'd I open a JISA, it will automatically be accessible to child at 18.i want to avoid that to make sure it's used for educational purposes. So what can I do. I have heard I need to set up a trust but to be honest I have no idea if that's true, how does that work, how to setup and how much it costs.

    Thanks for reading my post.
Page 1
    • Eco Miser
    • By Eco Miser 16th Jun 17, 8:28 AM
    • 2,984 Posts
    • 2,763 Thanks
    Eco Miser
    • #2
    • 16th Jun 17, 8:28 AM
    • #2
    • 16th Jun 17, 8:28 AM
    i want to avoid that to make sure it's used for educational purposes.
    Originally posted by xyz123
    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.
    Eco Miser
    Saving money for well over half a century
    • justme111
    • By justme111 16th Jun 17, 8:38 AM
    • 2,791 Posts
    • 2,671 Thanks
    justme111
    • #3
    • 16th Jun 17, 8:38 AM
    • #3
    • 16th Jun 17, 8:38 AM
    I do not think anybody will give links ; I been hanging around these boards for a while and never seen them and I been asking the same question before with no answers. When I spoken to a solicitor she has not given me info about discretionary trust either so I just given up on the idea.
    • Neil Jones
    • By Neil Jones 16th Jun 17, 8:47 AM
    • 732 Posts
    • 391 Thanks
    Neil Jones
    • #4
    • 16th Jun 17, 8:47 AM
    • #4
    • 16th Jun 17, 8:47 AM
    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...
    • Keep pedalling
    • By Keep pedalling 16th Jun 17, 9:00 AM
    • 3,575 Posts
    • 3,849 Thanks
    Keep pedalling
    • #5
    • 16th Jun 17, 9:00 AM
    • #5
    • 16th Jun 17, 9:00 AM
    The costs involved in a trust are simply not worth it unless you are talking large sums.

    Even if you hold back on larger gifts, I think setting up a S&S JISA for a little one is worthwhile. As they get older you can use it to teach your child the value of investing for the long term and get them involved in decisions about which funds to keep their investments in.
    • Reaper
    • By Reaper 16th Jun 17, 9:08 AM
    • 6,106 Posts
    • 4,171 Thanks
    Reaper
    • #6
    • 16th Jun 17, 9:08 AM
    • #6
    • 16th Jun 17, 9:08 AM
    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.
    Last edited by Reaper; 16-06-2017 at 9:13 AM.
    • AnotherJoe
    • By AnotherJoe 16th Jun 17, 9:13 AM
    • 7,240 Posts
    • 7,754 Thanks
    AnotherJoe
    • #7
    • 16th Jun 17, 9:13 AM
    • #7
    • 16th Jun 17, 9:13 AM
    Reaper has a solution but I think eco misers is better, save in your own name.
    • xylophone
    • By xylophone 16th Jun 17, 9:57 AM
    • 22,881 Posts
    • 13,241 Thanks
    xylophone
    • #8
    • 16th Jun 17, 9:57 AM
    • #8
    • 16th Jun 17, 9:57 AM
    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
    • By Reaper 16th Jun 17, 10:33 AM
    • 6,106 Posts
    • 4,171 Thanks
    Reaper
    • #9
    • 16th Jun 17, 10:33 AM
    • #9
    • 16th Jun 17, 10:33 AM
    Thanks for the link xylophone. That never used to be there, they must have added it after all the previous queries from MSE members!

    You will notice the child can demand the money "from the trustees" not from the company directly. My understanding is they will accept instructions only from the trustees so it would be up to the child to try to get them removed.
    Last edited by Reaper; 16-06-2017 at 10:35 AM.
    • Malthusian
    • By Malthusian 16th Jun 17, 11:15 AM
    • 2,884 Posts
    • 4,126 Thanks
    Malthusian
    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.
    Originally posted by Reaper
    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.
    • xylophone
    • By xylophone 16th Jun 17, 11:41 AM
    • 22,881 Posts
    • 13,241 Thanks
    xylophone
    Remember that if a parent has provided the capital to set up a bare trust for his minor unmarried child, any income is subject to the "£100 rule".

    http://www.greenwoods.co.uk/knowledge-base/private-client/bare-trusts/

    Tax treatment?
    The tax treatment for this type of trust is very straightforward. The beneficiary is liable for income tax and capital gains tax arising within the trust.

    This is a very useful advantage, especially if a minor child is a beneficiary as they can use their own personal allowances. A word of warning however, if the trust was established by the parent of a young child and the income exceeds £100 per tax year then the income is subject to the parent’s income tax position.




    https://www.jameshay.co.uk/OldCMS/DocumentView.aspx?DocumentID=2900
    • Reaper
    • By Reaper 16th Jun 17, 11:45 AM
    • 6,106 Posts
    • 4,171 Thanks
    Reaper
    I found a link:
    http://forums.moneysavingexpert.com/showthread.php?t=5012333

    My memory wasn't quite right (it was 3 years ago). The question was whether it was possible for the adult child to get the money without a court order and the answer appears to be no. It is not enough for the child to tell the company he is entitled to it.

    I believe the only options are to try to remove the trustee or "break the trust", both of which involve the courts (unless the terms of the trust allow an easier means to replace trustees) and therefore a practical barrier. If an 18 year old is motivated and competent enough to see the process through then I hope they are responsible enough to use the money wisely too!
    • xylophone
    • By xylophone 16th Jun 17, 12:32 PM
    • 22,881 Posts
    • 13,241 Thanks
    xylophone
    The child would have to be informed of the existence of the trust once he became responsible for his own tax affairs.

    http://www.lawdonut.co.uk/personal/inheritance-tax-and-family-trusts/trusts-for-children-and-other-family-members-faqs

    https://uk.practicallaw.thomsonreuters.com/0-107-6471?__lrTS=20170411025445184&transitionType=Defau lt&contextData=(sc.Default)&firstPage=true&bhcp=1
    • xylophone
    • By xylophone 16th Jun 17, 12:41 PM
    • 22,881 Posts
    • 13,241 Thanks
    xylophone
    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.
    This needs care - there is a difference between an account which is merely "designated" ("revocable basis") and one which is held in bare trust ('irrevocable basis").

    https://www.trustnet.com/Education/SaveChild.aspx?ms=5
    • AnotherJoe
    • By AnotherJoe 17th Jun 17, 8:00 AM
    • 7,240 Posts
    • 7,754 Thanks
    AnotherJoe
    The last dozen or posts confirm my thought that it's far easier to save in your own name earmarked for the child, and hand over when you think appropriate.
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