Children left money in Mother's will

JulieElizabeth

Hello, hope some of you informed peeps can help.

My mother died in August this year and left her house to me but her money (about £18k) split between her two great-grandchildren (aged 9 and 7). They will get in when they turn 18. I am the executor of her will.

Now I need to set up a bank account for the children. Does anyone have any ideas which type of account, which is the best bank to go for etc?

Thanks muchly in advance

talexuser

A bank account will give very poor interest and actually lose money due to inflation. A safe option would be a building society, perhaps fixing the rate for some years. However rates are now at an all time low, and will not improve much for some years, and there is still significant risk of losing purchasing power due to inflation.

Since you have 10 years to play with I don't think you will fall from your duty of diligence as executor if considering the stock market. A low cost all share tracker could be a better bet. The risk here is a stock market fall just as you intend to cash in, you could choose a market high a year or so before their birthdays and transfer to a bond fund or cash for safety, similar to the sort of thing a pension fund would do.

Robin_TBW

A Junior ISA will take part of the value for each of them and it'd be good to try and get the full values into those accounts over the next few years. That depends how much you want to move money in the future to make the most of it though. Hopefully then they'll come out of their teens seeing the efforts you've made to save for them and try to continue the good work.

If you open up two Junior Cash ISAs now you'll be able to put £3,600 in each of them for each of the two children and come April 6th you can put in another £3,600 into each. At that point you'd have put in £7,200 in each (£14,400) and just have approximately £4,000 left to deal with. You could keep that in a year long bond and then drop that into the ISAs too in April 2014?

System

If the will says they get it at 18 wouldn't the money need to be put in some sort of trust fund(s)

holly_hobby

As they are under 18, an automatic trust is imposed on the executor/trustee, who will remain responsible for the inheritance until the child is of age.

Hope this helps

Holly

atush

I agree that if it is in your name or theirs, it should be invested in Equities instead of cash savings. If you wanted to save a small part of it as cash, then put it into long term fixed rate accts, rolling them over as they mature into the best available.

For the bulk, drip feed it into an Investment trust via a savings plan in your name as a bare trust or a JISA or CTF if they are of the age they have those instead.

holly_hobby

Obv how the portfolio is structed is dependant upon the requirements placed on it and its returns ....

i.e is it for funding Uni fees (e.g - we have a specific time frame and vesting period known at outset) or for more generally requirements such as its retention towards purchasing their first home, first car, paying for a marriage etc (or even their reinvestment).

To that end (and esp given the limited amount of capital) I wouldn't suggest immediately exposing the whole or even a great deal, of the childrens inheritance to any asset backed investments - as with any proficient portfolio, diversification is the key to stabilisation and the ability to weather the shifts and swings we see between cash and asset markets - and whilst one would wish to ensure the inheritance weathers inflation, we don't want to see it decimated by poor or ill informed investment choices either.

I would always firstly advise the utilisation of index linked NI certs, child funds, and low risk (inc easy access) vehicles, and whilst tax mitigation isn't as pressing due to their age, monetary situation and tax status - risk must be assessed against gain ... the higher the risk the higher the gain (or indeed loss), which will be applied once you are ready to start drip and spread buying of more adventerous/speculative investments on their behalf.

Your aims, determined investment stragergy, tax situ and effect, and the utilisation of various trusts as reqd, all need to be pesonally discussed with a suitable and qualified practiioner ie an IFA - as I am sure you will both wish to obtain and to strive to ensure, you handle matters in the most proficient and beneficial manner possible for your childrens' legacy.

Hope this helps in the meantime ...

Holly x

dunstonh

As it was specified in the Will, then a trust will be required. It should not be invested/deposited in the parents name as that would be unlawful. It would leave the executor open to legal action against them if that was done.

A Will Trust or a Bare Trust would be suitable for this objective.

xylophone

You will need to hold the money in bare trust for each child -
see here http://www.hmrc.gov.uk/tdsi/children.htm re trust accounts and the R85 if opening bank/building society accounts. - as you will continue to hold in trust after the age of 16, note what happens about the R85 and how to reclaim the tax for each child if appropriate. Note also the 10% guidance on right in case it should become relevant.

You are not confined to children's accounts - you can open any account ( fixed rate bond for example) that the provider will allow to be held in trust.

In view of the long time scale, you might wish to open a stockmarket type investment in bare trust for each child - you could use an investment trust or OEIC for example.

See example here and note importance of bare trust format which is explained.

If the investment you choose pays interest rather then dividends then tax can be reclaimed if appropriate. http://www.hmrc.gov.uk/individuals/savings-income.htm

http://www.hmrc.gov.uk/rates/it.htm