How to approach IT

ANGLICANPAT

Having looked about ,Ive finally decided to use Bailley Gifford Scottish Mortgage IT for the money Im investing (as an executor) , for my grandchild, in a bare trust. Seems to tick most of my boxes and a low charge .

What Im not sure about is quite how to go about it for the best. 5k isnt a big amount ,so IFA would probably decimate it too much.

Reading the info on the website , is sounds simple enough to get the bare trust forms , choose a second trustee, fill in, return with id,s .....then just pay to add about £1k to it once a year (if wished)........or am I being naively simplistic?

Can it as with UT's be cheaper NOT to go direct? How much roughly would an IFA charge to do the admin since Ive already decided which fund suits my purpose?

Oh another thought, Ive read advice not to tell child about their little nest egg until theyre 18 - but what if they have left school at 16/17 and are working , or if they need to claim benefits , surely they cant fill in forms properly without knowing their financial position - or can the money be ignored as an asset as they cant access it till 18?

Thanks for any thoughts on any or all questions .

Reaper

ANGLICANPAT wrote: »

Reading the info on the website , is sounds simple enough to get the bare trust forms , choose a second trustee, fill in, return with id,s .....then just pay to add about £1k to it once a year (if wished)........or am I being naively simplistic?

Nope, that's all there is to it. I have one with them too.

Can it as with UT's be cheaper NOT to go direct? How much roughly would an IFA charge to do the admin since Ive already decided which fund suits my purpose?

In this case I think you are best off going direct.

but what if they have left school at 16/17 and are working , or if they need to claim benefits , surely they cant fill in forms properly without knowing their financial position - or can the money be ignored as an asset as they cant access it till 18?

They would need to know if they are filling in a tax return or similar.

ANGLICANPAT

Thanks Reaper, thats really reassuring . Ill get onto it asap. Am I right to interpret that with charges, its better to add a bigger sum once a year rather than on a DD each month , or is it more important to get an averaging effect by buying more often

Once youve opened it , and added what you want , is there any other admin on it during the year concerning me,or on behalf of child?

bowlhead99

ANGLICANPAT wrote: »

Am I right to interpret that with charges, its better to add a bigger sum once a year rather than on a DD each month , or is it more important to get an averaging effect by buying more often

1. The charges are percentage-based. So for example if stamp duty is 0.5% on each purchase, then it doesn't matter if you pay 0.5% on £100 ten times or 0.5% on £1000 once. It still costs the same.

2. There are pros and cons to averaging. If you put the money in dribs and drabs over the next 12 months and on average the price is lower over that time period than it is today, you will buy more units. If the price never moves at all, you will buy the same amount of units. If the price is higher, you will buy fewer units. You are buying this presumably with cash that is all available today and you are buying it because you expect it to go up over time. That would point you towards buying it all today.

The only reason not to do that is if you are cautious and expect a crash at some point over the next year, in which case you might hold off and put more money in later. Nobody has a crystal ball and the risk of a crash is already built into the price anyway (i.e. it would be more expensive if there was no risk of a crash). So unless you have superhuman skills at timing markets, you might as well just invest now and be done.

3. If you are an executor and you have this money available to invest in the child's name right now, why are you even considering instead investing monthly or adding more in future years? Does the will say you are to invest x% now and save some back in cash in a bank account and only move £y out of cash and into investments once a year? It would be more normal for you to just put all the money into the child's investment now, discharging your duties as an executor ASAP.

After that initial lump sum investment you can of course make gifts to the child out of your own personal money every so often if you like, so maybe that's why you are asking about whether to do it monthly or annually? If your plan is to commit a certain amount of new money to them over time, then a monthly direct debit seems a painless way to do it, just investing the cash whenever you have it available out of your own income. Alternatively if you want to make more of a big deal out of it with a lump sum at birthdays or christmasses, you could do it that way. The fees from Baillie Gifford are the same.

The way to get the child more money at the end is to give them the cash invested earlier. So giving them £1200 now as a lump sum for the christmas 2013 we just had, is better than giving them £100 a month during 2014, which in turn is better than only starting to giving them £1200 on Christmas 2014 and subsequent years after that.

Once youve opened it , and added what you want , is there any other admin on it during the year concerning me,or on behalf of child?

Not unless you move house and need to give them new contact details or whatever.

If they don't offer an option to automatically re-invest dividends each year, you might have to actively choose when to do that.

You will get periodic statements or can maybe go online to look at balances.

And as mentioned by Reaper the child may need details of its income if somehow they are a high rate taxpayer and need to pay tax on the dividend income. Or the asset value, if they are applying for means tested benefits.

Reaper

I think bowlhead99 has answered your query pretty thoroughly. When you ask:

ANGLICANPAT wrote: »

Once youve opened it , and added what you want , is there any other admin on it during the year concerning me,or on behalf of child?

No, there is zero admin after that. In my case I set it up to hold gifts my son was given by relatives at birth. I have not had to do anything since. There are no dividends you need to re-invest, it happens internally in the fund.

I haven't added anything more but if he gets any more cash gifts or inheritance money in the future it will be added to the pot.

ANGLICANPAT

Thanks both. Yes I asked about monthly with reference to anything I added. The original 5k will go in in a lump sum.
Glad to hear there is no admin, its not my favourite pastime .

Am I ok having my daughter (child's parent) as my co trustee since that would make it easier to pass over any admin maybe if anything happened to me ? Im presuming both trustees have to agree before any decisions are made to release money etc?

Drp8713

I was thinking of doing the regular child plan for my son.

Does anybody know if you can take your passports into their London office to be certified instead of sending originals in the post?

ANGLICANPAT

Best just to ring and ask. I rang today and theyre pretty helpful.

May I ask again please - anyone know if I can ask one of childs parents to be co- trustee with me? Thanks.

xylophone

May I ask again please - anyone know if I can ask one of childs parents to be co- trustee with me? Thanks.

http://www.bailliegifford.com/documentgateway.aspx?_id=A112736077F24F60869AECB10A65E28D&_z=z&download=go
page 9

"Set up a Bare Trust (this includes the
appointment of between two and four
Trustees, which can include yourself, your
partner, a trusted friend or relation).*"

ANGLICANPAT

Thanks xylophone- I did see that, but at the back of my mind, theres something rattling round that because this £5k is coming from a will, and Im executor / trustee, and the recipient is a minor , Im supposed to make sure that the parent cant get their mitts on it . Just cant quite remember where Ive got it from to check exactly what it was. May well have got it completely up the creek, but thats the point, I dont want to get it wrong .

xylophone

, Im supposed to make sure that the parent cant get their mitts on it . Just cant quite remember where Ive got it from to check exactly what it was. May well have got it completely up the creek, but thats the point, I dont want to get it wrong .

http://www.sit.co.uk/products/investing_for_children/features/questions_and_answers/
"Bare trust
If the plan is set up as a bare trust, the investment cannot be sold until the child reaches the age of majority other than at the discretion of the trustees, for purposes listed in the terms of the bare trust. Sale instructions must be given by the trustees jointly and in writing."

If you feel uncomfortable about a parent trustee, appoint another family friend or relative? Or consider a parent trustee and another relative /friend as trustee as well as you?

Does the child in question have a CTF/JISA?