How best to invest child's inheritance?

dottodot

Really hoping some of you lovely money savers may be able to help with some advice on this one... my Dad passed away a few months ago and has left my daughter (age 3) approx £30,000. Really lovely of him. At the moment its sat in an executors account earning 0% interest so I must do something soon!

I was thinking I'd put it into her existing children's savings account, at 3% interest - but am I missing a trick? She is so lucky to be getting this, and it could make such a difference for her - so I am really feeling the weight of the responsibility for making the best decisions.

Also, I am wondering about the wisdom of a 16 year old having access to this type of money and blowing it crazily! Does anyone know anything about putting money into trust???

Thank you in advance!

jimjames

I can't suggest the best way to invest it via trust or whatever but for that age and length of time it would seem to make sense to have at least part of it invested in stocks & shares to get better growth prospects than a bank account.

You could use a Junior ISA but the limits for that are low in comparison, perhaps put into your own ISA for 3 years if you aren't already using it and then transfer into the junior ISA over time.

xylophone

I am assuming that the will does not specify that the child may access the money straight away nor set up any "contingent" trust (with age as the contingency) or named trustees.

Under these circumstances, it seems likely that you/your spouse will be bare trustees for the child since she should be able to access the funds at 16/18 as appropriate.http://www.hmrc.gov.uk/trusts/types/bare.htm
http://www.hmrc.gov.uk/trusts/types/index.htm

See http://www.hmrc.gov.uk/tdsi/children.htm - look also at the 10% guidance on the link on the left - the allowances used in the examples are out of date so see http://www.hmrc.gov.uk/rates/it.htm which may be relevant over time.

In view of the fifteen year time span, you may wish to consider using stock market based investments as well as cash.

Example here http://www.sit.co.uk/products/investing_for_children/features/questions_and_answers/

See also http://www.wfw.co.uk/companyData/3623/resources/BN06.pdf
In these circumstances I would use bare trust format not the designation format even thought the cash comes from the grandparents.


If such investments pay interest rather than dividends then it is likely that a tax reclaim would have to be made on the child's behalf.

Before the child became 16/18, it might be possible for the bare trustee to move the proceeds into (say) a three/five year fixed rate bond which would defer the age at which the child could access the cash.

However, it appears that this bequest is the child's absolutely and unconditionally and access cannot be delayed for ever?

If you are unsure you should seek professional advice?

xylophone

You could use a Junior ISA

If the child is 3 then she is likely to have/ be eligible for a CTF and so would not be eligible for the JISA. https://www.gov.uk/child-trust-funds/overview

dunstonh

What did the Will say about the money?

Normally a Will Trust (or similar - such as Bare Trust) is used in a case like this and investments use suitable for the timescale.

dottodot

dunstonh wrote: »

What did the Will say about the money?

Normally a Will Trust (or similar - such as Bare Trust) is used in a case like this and investments use suitable for the timescale.

It was a home-made will with no professional input, so literally said that he wanted to leave this sum of money to her.

Thank you Xylophone and JimJames - I will look at those links and will check out stocks and shares type options:)

dunstonh

So, a Will trust or bare trust seems to be most suitable then.