Saving for Children

smokeybubbles

Hi all,

I have been researching ways to start saving for my 9 month old baby, however am having a little difficulty in selecting the right solution to meet my needs.

The Junior ISA looked promising but I am not happy about the child having access to the finds at age 18. I remember what I was like at that age and certainly would not have used the money wisely – it would have been fun though


In an ideal world I am looking to do is invest approximately £50 a month into a fund which can build, and when at a certain value, is invested in Stocks and Shares as I feel over the next 20 years the stock market will out perform cash savings.

A family friend did suggest simply setting up an account under my name that would be “ear-marked” for her, but my concern is that if it builds to a nice sum I will be unable to “gift” the money to her without going over the maximum gift threshold.

Has anyone else looked into this and come up with a solution?

[FONT=&quot]Any advice appreciated[/FONT]

Masomnia

What maximum gift theshold?

smokeybubbles

My understanding, and it is far from expert, is that if you gift someone over £3000 in one year and pass away in the following 7 years then that gift will be subject to tax?

As I am planning 20+ years into the future it is a consideration I need to think about.

GhIFA

In the event of your death within 7 years of making the gift, it will only be subject to IHT if the value of your estate is in excess of the Nil Rate Band.

smokeybubbles

And, hopefully, I plan for my estate to be above that threshold.

Is there no Stocks and Shares fund or product that I could set-up in her name but control until a set date?

Reaper

smokeybubbles wrote: »

Is there no Stocks and Shares fund or product that I could set-up in her name but control until a set date?

By far the easiest option is a JISA, or an ISA in your own name. However if you don't like the downsides of those you could look at a Bare Trust via Baille Gifford. I was surprised to see on the application form a box asking when I wanted it to end. I checked and they said I could let it run past their 18th birthday if I wanted. I am rather unsure of the legality of that and suspect the child could wrest control of it at age 18 (or 16 in Scotland) if they were aware of it and knew their rights, but hopefully my son won't go that far even if he does find out about it!

However you should be aware it is not tax free like an ISA, but as a Bare Trust it is largely safe from Inheritance Tax and on the whole it is taxed as the child's income not yours, which usually means no tax. The exception to be aware of is the £100 interest rule which applies to parents giving gifts to children.

cloud_dog

smokeybubbles wrote: »

Is there no Stocks and Shares fund or product that I could set-up in her name but control until a set date?

I'm sure someone will come along in a minute to mention this but......... Yes, if you don't tell them about it!

Obviously this is fraught with legal issues which any 'normal' person would avoid.

Your concern is the prime consideration when thinking about saving/investing for a child; at what point should the child take control of the money.

You either go down the 'designated' account (savings) or Bare Trust (investments) route or you keep it in your / your spouses name. There is the alternative of setting up a Discretionary trust (there are tax considerations for this).

As with everything in life there isn't a one size fits all solution, and it really depends on your / your partners financial situation.

xylophone

See http://www.hmrc.gov.uk/tdsi/children.htm
http://webarchive.nationalarchives.gov.uk/20081112112334/direct.gov.uk/en/MoneyTaxAndBenefits/ManagingMoney/PlanningYourPersonalFinances/DG_10013916

Remember that income over £100 will be taxed at the parent's highest marginal rate. Be careful therefore even if giving money to your child and investing in dividend paying funds if you are a higher rate tax payer.

Note the difference between designated and bare trust
http://www.sit.co.uk/products/investing_for_children/features/questions_and_answers/

You could regard your ISA as "earmarked" for your child and make gifts when you wish but see http://www.hmrc.gov.uk/inheritancetax/pass-money-property/exempt-gifts.htm Note maintenance payments section if you will be making gifts when child is at University.