Trustee Account for 18 year old?

DS_Queen

My son is going to be 18 next month and we were planning on giving him some money. However, at Christmas he spent all his money and has nothing to show for it so we wondered if there was some kind of account we could open for him which we had control over. We don't want to keep the money from him indefinitely but we don't want it to be frittered away either!
Many thanks.

atush

You have a few options such as opening an ISA and make it a 2+ yr fixed rate? Setting up a pension (wont get any of that til 55 lol) setting up a FR acct or an investment trust savings plan as a Bare Trust.

xylophone

i would not thought a bare trust would be suitable as the young man is about to attain his majority.http://www.hmrc.gov.uk/trusts/types/bare.htm and see side panel.

The term ISA might be preferable.

buffman

I am thinking of doing something similar for my daughters. Rather than paying their university fees upfront (as reading Martin Lewis' comments makes me think that it is not necessarily the correct decision), I thought that I would give them some money for the future. I came to the conclusion that the easiest way to do this (and stopping them spending it straight away!) was to put it in a 5 year bond. As they are not tax payers, there is no reason for it to be an ISA as they can register to have interest paid gross.

atush

but they might be when the bond is cashed/matures?

buffman

atush wrote: »

but they might be when the bond is cashed/matures?

Possibly the last year or two. I will have to compare ISA and non ISA rates and make a decision at the time.

xylophone

Are your daughters entitled to Junior ISAs?http://www.direct.gov.uk/en/MoneyTaxAndBenefits/ManagingMoney/SavingsAndInvestments/ISAsandJuniorISAs/DG_199672
Otherwise see tax rules on interest arising on parental gifts to minors.
http://www.direct.gov.uk/en/MoneyTaxAndBenefits/ManagingMoney/PlanningYourPersonalFinances/DG_100139
http://www.hmrc.gov.uk/tdsi/children.htm

buffman

Thanks Xylophone. My gift will clearly generate more than £100 interest per year. In that case I will have to look at National Saving Certificates (if they are on sale at the time) or a fixed rate ISA. (my daughters will be 17+ when I make the gift).

xylophone

Remember it is £100 per parent.
You could wait until your daughters are 18 - you might have to consider IHT then though. http://www.hmrc.gov.uk/inheritancetax/pass-money-property/exempt-gifts.htm

buffman

One of my daughters will be 18 before I make the gift. It looks like I can give her £6k (annual Inheritance Tax exemption x 2) and anything over and beyond that will fall under the 7 year rule.

My other daughters will be 17 when I make the gift; so I guess Inheritance Tax will not apply?

Probably a stock or cash ISA (or National Savings Certificates) are the best route as (depending on interest rates), the gift will probably generate more than £200 income per year.

dzug1

buffman wrote: »

My other daughters will be 17 when I make the gift; so I guess Inheritance Tax will not apply?

.

Not sure where you get that from - the exemption is for maintenance payments out of income - not carte blanche