taking the children's savings.

letthemeatcake

My children have had money saved by the Grandparents on their behalf for many years. I have asked the Grandparents to put the money in CTF and Junior ISA accounts that I have already set up for each child as I think the money is in a low paying HSBC children's account . They mentioned it was earning 2% several years ago. Grandmother insists tax is deducted from the accounts at source.

Now the other day she mentioned that as they had debts to repay on a mortgage they may need the children's savings to pay this off. One Son is 16 this year and I'm upset that they seem to think they can just take the money but surely my children would need to sign something to agree to the money being withdrawn! Having looked at the HSBC children accounts the money is transferred into their sole name at 17 but as I don't have any details of which account it is in and all correspondence goes to the Grandparents address I'm not sure how I can keep an eye on the situation. Would I be able to ring HSBC?

eskbanker

No harm in trying I suppose but I can't believe that HSBC would discuss these accounts with someone who isn't a party to them. Frustrating I'm sure but I can't see how you can keep an eye on the situation without going via grandmother....

xylophone

Are these savings in merely "designated" accounts so that the money actually belongs to the grandparents, is taxed on them, and in the event of their deaths could only pass to your children by specific bequest?

If the above is the case, then the grandparents may do as they wish with the cash because it is their cash. The fact that the interest is paid net may indicate that this is the case but if the accounts are actually bare trust accounts, could indicate error or omission with regard to R85s.

Or is the money simply in accounts in the grandparents' own names and without designation which they have thought of as money set aside for their grandchildren? Once again, they may do as they wish with the cash.

http://www.candidmoney.com/askjustin/809/difference-between-designated-accounts-and-bare-trusts

http://www.candidmoney.com/kids/default.aspx

Or are these accounts in the children's own names with the grandparents acting as bare trustees? If this is the case, assuming that your children are non- taxpayers, you should have been asked to sign R85s on their behalf so that the interest could be paid free of tax.

The money in such accounts belongs to the children and they have the absolute legal right to access and control at the age of 18 (16 in Scotland).

In sum then, it boils down to beneficial ownership of the cash? You might need to establish whether HSBC children's accounts are regarded by HSBC as "designated" or "bare trust"?

letthemeatcake

Many thanks for both of your replies. I only know that they were saving £25 p.m. for each child from birth but were advised by their accountant to pay in a lump sum of the total amount at some point.

I'm afraid they aren't forthcoming about any information regarding the accounts so I think I will be left guessing.

They have mentioned HSBC and that cards or cheque books were issued a few years back but Grandmother didn't want these so I think she cancelled them.

Your comments about the tax make sense Xylophone as Grandmother insists that she pays tax on these accounts.