CHILDRENS BONDS (children not eligible for CTF)

KD

I'm just flabbergasted by the amount of info on saving for kids and have read through the forms and articles, however, now struggling to know which way to deal with £5K my mum wants to gift to each of my two children (aged 7 and 11), after my father's death. (I'm aware of the 7 year rule re Inheritance Tax- my mum's determined to live it out!)

My parents always put birthday / xmas money into children's bonds and over many years they have ended up reaching the £1K (original limit), now raised to £3K, (info gained from a post I read).

Are children's bonds worth pursuing? The interest over 5 years doesn't seem so great, in comparison to some of the kids bank accounts. I also read all the stuff on regular savings but I've got a one off lump sum, so that doesn't seem like an option.

I get a bit confused over the compounding interest part and how to compare relative options between banks and National savings etc

I am a single parent, a 40% taxpayer, so I think it would be best to get the money in the kids name, and it's my mum's wish that they don't get access until they are 18 or so and I'm confident I'd be able to 'steer' this.

Any views about the relative merits of children's bonds v's bank accounts, could a mixture be the answer?

I also read in the Child Trust Fund thread about and unwrapped CTF- can someone enlighten me -i don't know what it is could it be an option as my kids won't qualify for CTF.

I now have major brainache and just quickly invested the £5K in Tesco instant access savings (in trust) so the taxman can start his clock!

Unbelievable_2

KD

Did you complete the form R85 - if the Tesco accounts are in your children's names they will then not have tax deducted from any interest earned.

I have tended to put my kid's savings in the highest earning, easy access savings accounts (whether they are childrens accounts or not) and have moved the dosh several times, always registering the accounts for gross income of course.

KD

Unbelievable wrote:

KD

Did you complete the form R85 - if the Tesco accounts are in your children's names they will then not have tax deducted from any interest earned.

I have tended to put my kid's savings in the highest earning, easy access savings accounts (whether they are childrens accounts or not) and have moved the dosh several times, always registering the accounts for gross income of course.

- R85 in place- is there a definative way I could check they are getting gross interest?

- Originally set up Tesco instant savings a/c as a 'pocket money' account- so kids could get into the idea of depositing money and withdrawing money for spending (even although I have to sign for it/hold the card). Only ever has about £150 in it. Typically, they are taking out £5/£10 etc.

-Just not sure that with the more substantial £5K- this is the right account to stick with as I don't want them to 'fritter' it away, as it's a long term investment.

The accounts your kids have; are they in your name, their name or held in trust?

Thanks for your help

KD

Paul_Varjak wrote:

KD:

It is not clear from you post whether your father has just died and your mum wants to make this gift now or your mum wants to make this gift after your father dies.....etc

My dad died last August- it's taken several months to sort out his estate- there are no Inheritance Tax issues as the estate passed to my mum and we'd maximised the opportunity to gift assests/ use IR limits over the past few years. Based on stuff I'd learned on MSE!

My mum has gifted the children the money directly..hence her determination to live 7 years!

I don't think my mum's estate will reach IHT - unless property prices rocket in Scotland. I'm keeping an eye on it though as i'm quite shocked at how quickly her assets add up.

We looked at a variation of my dad's will- it was deemed as being of marginal use given cost/ benefit.

Problem is IHT for me - as money progresses down the family- I have read the IHT thread extensively, which is where I gained the above insights and realised the importance of seeking prof advice.

Just wanted to get a 'good home' for the kids £5K.

Have I missed an opportunity somewhere?

KD

Thanks Paul - it's clearly a lot more complicated that I'd appreciated.

It's very clear that the money came from my mum's account and 7 year rule is a hedged bet on my part (if nothing changes on IHT limits that there's a possibility my mum's estate may borderline).

The kids have separate accounts, however I'd not thought about the pre-deceasing point.

Food for further thought.

Unbelievable_2

KD wrote:

My parents always put birthday / xmas money into children's bonds and over many years they have ended up reaching the £1K (original limit), now raised to £3K, (info gained from a post I read).

KD

Did you know that the £3000 limit on childrens bonds is per issue of bond - the issue changes when the rates change - so a child can have quite a bit more than £3k in bonds if they want. However I tend to agree that they aren't that competitive!

I'm a bit confused as to the trust part of this thread - when you said the Tesco account was in trust - did you mean it's in your children's names but you control the account? I have two children, each has a Nationwide Smart account in their names with money that they've received from grandparents and other gifts. I am names as a 'trustee' ion the account ie. they don't have access to the money. Each month I transfer money from this account to a Scarborough Building Society Childrens Savings bond. It's a three year bond currently paying 5.75%, after that I'll look for somewhere else to put it! HTH

KD

Unbelievable wrote:

KD

Did you know that the £3000 limit on childrens bonds is per issue of bond - the issue changes when the rates change - so a child can have quite a bit more than £3k in bonds if they want. However I tend to agree that they aren't that competitive!

I'm a bit confused as to the trust part of this thread - when you said the Tesco account was in trust - did you mean it's in your children's names but you control the account? I have two children, each has a Nationwide Smart account in their names with money that they've received from grandparents and other gifts. I am names as a 'trustee' ion the account ie. they don't have access to the money. Each month I transfer money from this account to a Scarborough Building Society Childrens Savings bond. It's a three year bond currently paying 5.75%, after that I'll look for somewhere else to put it! HTH

I only recently discovered the 'per issue' limit for these bonds- however the interest rate put me off pursuing it.

Given the thoughts that you and Paul have raised i think I need to check out the Tesco account a bit more deeply. I 'control' the account via internet or card. The account says (my name)ITF(child's name).

The kids can't access the money except through me. They get control at 16.

Looking at the way you've done it, may mean capturing a better interest rate for what is now meant to be a long term investment for the kids.

Thanks for your help- it's great to bounce off others knowledge/experiences.