Real-life MMD: Should I use my 5-year-old's £100k Prem Bond win to pay debts?

emmaglet

Pay off the debts.

You'll be less stressed, you'll be able to do things like cut back a day at work a week, take more day trips or just *something* that will actually make the time you spend with your children more valuable.

Up until the youngest is 18, I'd split all their winnings equally. Then once they've all got a level playing field THEY can decide what to do with the money - whether to withdraw it, leave it there, whatever.

tain

FatherAbraham wrote: »

The premium bond belongs to the 5yo, so the prize money does too.

Your responsibility, both morally and in law, is to look after the child's interests. That cannot include giving money away to siblings, or making a soft loan to yourself.

Your debts are your own problem -- you may not abuse a position of trust to benefit yourself.

The point of morals, ethics and laws is that they exist to enforce right behaviour in difficult circumstances. It may be convenient for you to pay off your debts, but it is not right. If expediency trumped correctness, then there would be no point in having rules and morals.

You have to live with the consequences of having given a highly volatile investment to each child (where the outcome has been an extreme profit for one of them).

Warmest regards,
FA

Can I just say that this is completely factually inaccurate.

Don't say things are fact or law when they're actually just a moral opinion.

LeaLea89

I would split the money 5 ways. £20,000 each. Equal shares for everyone. What you do with your share is your business but i would put a set amount in each of the children s accounts each month. TBH £20000 for a start in life when they are (between) 18-25 would be fantastic, it is a good stepping stone towards a home for their future.

tain

That £100k will only be worth £75k or even less by the time the child is of age (factoring in inflation, and going by the past 10 years inflation). So it makes sense to pay off debts now, and then use the money you save to pay back in to the childs fund.

For instance - pay off £12k of debts now, and then pay back £100 for 120 months. The financial saving from paying off the debts will be far higher than any interest on the winnings, plus the child will be no worse off when they're old enough to collect the winnings. Plus, if you're saving even more than £100 a month by paying debts off early, you could pay back in to the fund more than inflation, further benefitting the child.

As long as you can be certain that you'll be disciplined enough to pay back the money every month, your child will actually be worse off if you didnt (ie. mum and dad will have less money each month, while £100k sits in the bank doing nothing). Only the most selfish of children wouldn't realise the benefits of this proposal.

pippinpuss

The money is not yours to use. It belongs to the child in whose name the bond was held.

If you use it to pay off your debts would you pay a fair interest into the account to make up for the loss of interest child would receive.

You also shouldn't split it between the other children either, for the same reason.

Should go into a risk free account until child is 25 when they should be in a position to use the money themselves.

I would feel very resentful if I found out in the future that I had won that amount & other people had helped themselves to it.

Hiccups_2

*Superfluous text to avoid getting a "your message was too short" error*

FatherAbraham wrote: »

It's somewhat irrelevant who am I, or what I do -- what matters is the strength of the arguments posted on here.

The legal position is clear. The law has been worked out with lots of debate and discussion, whether in the legislature (Parliament) or in the courts, so it's likely to have some validity.

This is simply untrue. The children each had Premium Bonds, and a chance to win. One won, which is entirely the point of Premium Bonds (the interest paid on the capital invested isn't shared out equally, but is used to pay "unfair" prizes).

The arguments for redistributing the winning child's fortune to others are all about making the parent feel better, not benefitting the child.

This is not the case. The most compelling arguments in favour of redistribution are not about making the parent feel better but about avoiding resentment and arguments over money in the future.

Unfortunately, the world isn't fair. It's perfectly legitimate for a parent to strive for equality of outcomes for his or her children using his or her own resources (so in this case, the parent might redirect any future regular savings for the winning child to the other two); it is not okay for a parent to steal the assets of one fortunate child to give to siblings.

Yes, the world isn't fair, but where you have the power to make it fair, it seems an obvious route to take. The worst thing a parent can do for their children's mental well-being is to treat them differently. Putting aside savings for only two of the three is just as bad "stealing the assets of one child".

The same argument would hold if a rich uncle died, and left £100,000 to his favourite neice, the 5-year-old, and nothing to the others. The parent may not override the child's rights and redistribute the windfall to siblings.

The same argument does not apply, because in your example it is the rich uncle's money and it is his wish to give all of that money to his favourite niece. The parents cannot override the rich uncle's will. In this case, the parents were responsible for buying premium bonds, the child is not Gillick competent and therefore the child's parents must make this decision. I can tell you that five year olds are probably much more family focussed and unselfish than they may be when they are older, so even if the child had a say, I'm pretty certain he/she would want what's best for the whole family.

A child's assets are not the parent's, to do with as the parent wishes. That is the fundamental legal and moral situation here.

The law is used to settle disputes and is always the last resort. Before that stage is reached, parties can resolve their dispute amicably and in any way that they deem to be fair.

The moral issue here is not about "stealing one child's assets", it's about potentially giving one child a head-start in life (literally because of the luck of a draw) and not treating all your children equally (which is bad parenting). Think of the psychological impact on the other two children when they are older, and the winning child would probably not fare much better if he/she was later ostracised by the other two.

If one person in a (married) couple wins a lottery, do they take ownership of all of the money or do they share it as a couple? These types of situations only cause arguments when selfishness comes into it and at what cost? The breakdown of a previously loving relationship?

Would you flip a coin to decide which of your children gets to go to university or have a car bought for them?

At this moment in time, we have the situation where the five year old is part of a family unit in which one member of the family has won a large amount of money. Since the child is not old enough, the head of the family unit can make a carefully thought out and rational decision to use the money in a way that benefits all members of the household and avoid problems later on. Unless the child earned that money in some way, the child will not be conscious of having anything taken away from him/her. It was the parents' investment in the first place and I agree with the poster who suggested that the "ownership" of each bond should be seen as an administration issue, until the child turns 18 at which point all future winnings would be his /hers to spend as they wish.

Warmest regards,
FA

gloriouslyhappy

MSE_Debs wrote: »

Money Moral Dilemma: Should I use my 5-year-old's £100k Prem Bond win to pay debts?

We bought each of our children Premium Bonds when they were born - they're now eight, five and two. The five-year-old just won £100,000. Should I put it in a trust for her until she's 18, split it three ways in separate trusts, or use it to pay our debts and treat them to a holiday?

FatherAbraham wrote: »

The same argument would hold if a rich uncle died, and left £100,000 to his favourite neice, the 5-year-old, and nothing to the others. The parent may not override the child's rights and redistribute the windfall to siblings.

A child's assets are not the parent's, to do with as the parent wishes. That is the fundamental legal and moral situation here.

Warmest regards,
FA

If the Premium Bonds were put into the name of each child when they were purchased, then the legal position is clear - that bond and its winnings belong to that particular child and will be paid to that child in accordance with the regulations applying to Premium Bonds, at age 18 has been quoted, and without checking, that sounds about right. No dilemma in that case, only some family issues to deal with around the disappointment of the other two siblings.

If however, the parents bought them in their own name intending each bond bought in the same year as the birth of each child to 'belong' to that child, then there is indeed a moral dilemma but not necessarily a legal dilemma. I think the legal position would be quite different, that it would be the parents' bond and the parents' winnings as their original intentions would not have any legal status.

If I'm correct about intentions having no legal status (I'm sure a canny Forumite will advise me), then the solution is easy - pay off the debts if they're at a reasonable, not-caused-by-extravagance level, spend a little on making the family feel good such as a modest holiday, then split the balance three ways and hold it for the children against future sensible purposes like uni fees, deposits on flats, first car etc.

seven-day-weekend

I think you should definitely pay off high-interest debts (but not things like the mortgage or student loans), then split it three ways and continue to pay in until you have put the money back. No holiday or other 'treats'.

Even at today's rates, £30k is only a house deposit, so it won't seem like too much once they are grown up.

thriftyrb

Easy one for me, 100,000 / 4! Familys should be all about sharing, at least that is how i was taught

Pee

As a childless lawyer, I am sure that legally the correct thing to do is keep the money in the name of the child who won it.

I don't see why this could not be borrowed from the child to repay the mortgage provided it was secured properly and repaid. You would also need to take into account that at 18 the child can demand the money back. I am not sure that you can assume you would be able to remortgage at that stage and I think you would really need to think about how it would be repaid.

Morally the correct thing to do would be to divide the money between the three children and hopefully, if you have brought them up properly, they will agree the fair split at 18 when they are legally able to make that decision.

I don't doubt that the sensible approach would be to pay the debts, or even that this would maximise the benefit to the child who won and their siblings.

This is why a) you should not buy premium bonds or lottery tickets for people if you don't want to give them the prize and b) you should avoid putting anything in your children's name that they will have absolute control over at 18.

If I had inherited £100,000 at 18, I think my life would have been very different and probably not in a positive way.