Children's saving accounts

Confused_38

Is there anyway to save for your child without them having instant access to their money on their 18th birthday?

I have looked at joint accounts (for us to save on behalf of our child) and have considered premium bonds but these cannot be bought in joint names.

We would ideally like the money in our child's name but cannot see a way around the 18th birthday access to money.

Reaper

There is no simple way except to keep it in your own name and gift it when you are ready. Best done with any unused ISA allowance (remember you have a stocks and shares as well as a cash ISA allowance).

Unless you do a child pension in which case they can't have it until they retire.

jimjames

You can setup investment trust savings plans which designate the child but are in your name. That can bring other issues depending on income etc as the money can count as yours.

jackyann

I have seen posts from MSEers about setting up a trust, which they say can be very simple, so I would search the forum for that.

xylophone

I have seen posts from MSEers about setting up a trust, which they say can be very simple,

Care is needed- if you do not understand what you are doing, and don't take expert advice where necessary, you might find that trusts are far from simple.

http://www.hmrc.gov.uk/trusts/types/

There can be particular considerations where a parent sets up a trust for a minor child.

The parent (s) can use a CTF or JISA as appropriate but the money belongs to the child absolutely, can be managed by the child from the age of 16 and the funds released to the child at the age of 18.

If a parent saves for a child in the child's own name outside tax privileged accounts like CTF/JISA, then the "£100 rule" needs to be considered.

In an ordinary child account, the child would normally have control at the age of 16 unless the account was held in bare trust (outside Scotland where bare trust can end at 16)- If held in bare trust, then any R85 on the account would need to be rescinded and the parent would have to reclaim any overpaid tax on behalf of the child. See here http://uk.virginmoney.com/virgin/savings/learn/childrens-accounts/

The parents can save in their own accounts and think of this money as earmarked for their child - they can then make a gift when they choose but might need to have thought for IHT considerations.

Parents might choose to save in a designated plan but the money remains that of the parents and would need to be specifically mentioned as a bequest in any will.

This might help to explain http://www.sit.co.uk/products/investing_for_children/features/how_to/

ANGLICANPAT

As said above, you need to get your head round the tax angle, but regarding the 'age 18' part , Ive just done a Baillie Gifford bare trust for my grandchildren and there is a box where you can fill in the date you want to hand over to the child. I rang up asking if it could be beyond 18 and the answer was yes, although the new 'adult' would know about the money, it still required the trustees ( me and OH in this case ) to agree to let them withdraw anything . I settled for 21

xylophone

bare trust

Are you sure that this is a bare trust or that BG have this right?

http://www.hmrc.gov.uk/trusts/types/bare.htm

What is a bare trust?
A bare trust is one where the beneficiary has an immediate and absolute right to both the capital and income held in the trust. Bare trusts are sometimes known as 'simple trusts.'

Bare trusts are commonly used to transfer assets to minors. Trustees hold the assets on trust until the beneficiary is 18 in England and Wales, or 16 in Scotland. At this point, beneficiaries can demand that the trustees transfer the trust fund to them.

And see BG's own guide http://www.bailliegifford.com/documentgateway.aspx?_id=3A39B056-DE6E-474E-870C-3DB1B9BB88F3&disclaimer=ok

on page 17

You can also set up a children’s investment plan as a
bare trust, making it more tax-efficient. In this case, the
plan is held by trustees on behalf of the child and the
investment is treated as the child’s own for income and
capital gains tax purposes.
This is particularly useful if you’re likely to be making full
use of your own capital gains tax allowance or if you’re a
higher-rate taxpayer.
Another benefit is that the investment is treated as a
potentially-exempt transfer for inheritance tax purposes.
This means that as long as you live for at least seven
years after you make the investment on behalf of
the child, it will not be liable to inheritance tax on
your death.
On the downside, you will not be able to access the
investment: trustees relinquish control when the child
turns 18 (16 in Scotland), and once a trust is set up it
can’t be revoked.

Reaper

ANGLICANPAT wrote: »

As said above, you need to get your head round the tax angle, but regarding the 'age 18' part , Ive just done a Baillie Gifford bare trust for my grandchildren and there is a box where you can fill in the date you want to hand over to the child. I rang up asking if it could be beyond 18 and the answer was yes, although the new 'adult' would know about the money, it still required the trustees ( me and OH in this case ) to agree to let them withdraw anything . I settled for 21

I did the same and got the same response but I do doubt the legality of it. I too selected 21 but I'm sure my son could demand access to the money at 18. I'm hoping BG will keep quiet about his legal right to demand the money as they seem to be ignorant of it themselves!

ANGLICANPAT

I think Reaper that you're right, I got the impression its a matter of the 'new adult'

a)knowing he has the legal right to even ask never mind insist. Ive kept a copy of the page that shows where you can choose the 'future' date -which may look convincing without them making further enquiries - and Im not above being very 'misleading' over it either if thats what it takes to protect their inheritance

b) Having the 'knowhow' or money, to challenge you if you stand firm.

c) If the new adult is 'stable' and you think they are sensible enough to manage the money you could just play for time to do paperwork and make arrangements for the release of the money, or perhaps negotiate with promises of a little extra if they leave it the full time etc -or a part withdrawal etc. That could spin out another 6mths or so maybe with a few little off white lie-lets:D

d) If the new adult was a nightmare and likely to gamble, do drugs, or whatever, Im sure a word in the right place would ensure that there is no way they could get legal aid to challenge you anyway , so I wonder what would happen then ?- probably nothing and it would just rumble on till the date that was set.

I may well be living under a huge misapprehension, but it was the nearest offer I found that goes anywhere near protecting money beyond 18 .

xylophone

You have seen page 17 of BG's own booklet above

and see also http://www.bgchildsavings.com/pages/how_to_invest.aspx - clearly they do know the law.

And so do you!

And apart from any other consideration, if the accounts are held in bare trust, any income arising belongs to the beneficiary and should be taxed as theirs - do you know the tax position of the beneficiaries?

As adults, they are deemed to have knowledge of (and control over) their tax affairs.

ANGLICANPAT

Tax position - Yes . And yes, I did wonder at the difference between what I was told and and what was written although that one sentence is going to give rise to confusion isnt it -it would seem to back up the part of the form where you can choose a finish year later than 18

"A Bare Trust will be set up in your child’s name. The trustees you appoint will have administrative control until the child reaches 18 or older, when control should be passed to the child**.

and here could be read ambiguously too if read in combo with the above
"Consider this option if you want your child to have access to the investment after they are 18 ** but not before

(** Please note: in Scotland this is age 16; please consult your tax adviser on this point.)

Just have to hope I can implement ideas in my last post --but there again who knows my grandchildren might be perfect upstanding citizens at 18 :cool: