Opening accounts in trust for children

littld

Hello, the mother of my children has recently died leaving some cash. They are both under 18. I got some advice about what to as there was no will and we were divorced. I have obtained letters of administration and will soon have access to the money.

My question is, how do I invest this on behalf of the children? Do I set up simple accounts in their name? Any advice would be most welcome.

gadgetmind

littld wrote: »

My question is, how do I invest this on behalf of the children? Do I set up simple accounts in their name? Any advice would be most welcome.

Will you be investing in cash or shares?

littld

gadgetmind wrote: »

Will you be investing in cash or shares?

Cash I think as it's in trust I don't think I can take risks with it.

gadgetmind

I've held shares in trust for daughter (nominee account in my name but with her initials as a designation) but cash has always been in accounts in her name with my wife as guardian. One complexity is that any interest over £100pa earned by a child from money given by a parent is taxed as the parent's income, but I'm not sure if this holds if the money is an inheritance from a parent.

xylophone

See my answer to Sas40 on 15th November ( my child has over £8000) and to mister fish (saving for grandchild) yesterday.

Annisele

I think it depends on the age of the children and the amounts you're talking about.

If you have £1k for a 17 year old, you'll likely want to keep it in cash until they turn 18.

If you have £500k for a toddler, you'll likely want to be taking professional advice on how you should invest (and I do mean invest, rather than leave it all in cash).

You also have to remember that leaving the money in cash is taking a risk with it -over time, it's likely that the value of the money will be eroded by inflation.

littld

xylophone wrote: »

See my answer to Sas40 on 15th November ( my child has over £8000) and to mister fish (saving for grandchild) yesterday.

I've read these, thanks.

I am acting on behalf of my children, who's mother did not leave a will. They are 15 and 16. I sought legal advice who said I could not invest the money in something with risk which leaves cash or bonds. The money will be theirs on 18th birthday. I understand some of the money can be used before then as long as it is in their interest and is recorded (e.g. towards education etc).

What I am stuck on is how to set up the accounts. Are they in my name and subject to income tax in re: of the children and I then claim tax back through HMRC or are they set up in the names of the children but somehow blocked from withdrawals until 18?

xylophone

http://www.hmrc.gov.uk/tdsi/children.htm
All info here. As set out in my previous post (*3 ) to Sas.
You will open an account for each child. Each account will be a 're' account- see HMRC guidance above. You can sign an R85 so that the interest will be paid gross but once each child turns 16 this will be rescinded and tax will be taken off but you will reclaim as explained in the link. The money belongs to each child absolutely once he/she turns 18 and he/she will manage the account as an adult. Hope this helps.