Money from inheritance to transfer to/save for children

Lynholmer_Park

Good afternoon

Apologies if this is incorrectly posted but I am new to the forum and keen for some advice.

I was left an inheritance following the death of my grandparent (£12,000). As the cheque was in my name, the funds were credited to my own savings account. However, my plan was that the money would always be passed onto my own children. However, for tax purposes can this money be seen as an indirect inheritance from their great-grandparent or will it be assumed that the money has come from me as their parent given the cheque was in my name/has been in my account?

Any thoughts would be most welcome.

Many thanks.

colsten

You made the inheritance, and you were given the proceeds after the estate had paid any tax that might have been due. The money is now yours, and you can do what you want with it. There is no link to the inheritance if you give the money away.

How many children do you have, what are their ages, do they have / are they entitled to have JISAs? Are all of them getting the same amount of money?

Lynholmer_Park

Thank you for your reply colsten.

Yes funds were made available post probate and once inheritance tax was paid.

I have 2 children - 8 & 11 - both have CTFs so not entitled to JISA? (although I understand CTFS can be transfer to JISA's from 2015). I have not contributed to their CTFS which remain with the funds given by government only as did not feel this was a good investment at the time/had no spare money to invest for them.

The inheritance will be equally shared, therefore £6k each. My plan is for this to support them post-school (e.g. towards Uni, house deposit).

colsten

OK, so until the money can go into JISAs, you can put it into savings accounts in their name. Any interest they get over £100 p.a. will get taxed at your tax rate. If you don't pay tax, neither will they, though they'd probably still need an R85 form filled in.

If you do pay tax, you might be able to get better interest in accounts in your name (TSB Plus, Club Lloyds, Tesco, Santander etc) between now and when you can put £4K into their JISAs next April

In either scenario, it is probably best to put £4K into JISAs next April, and the remaining £2K each the year after. Once in the JISAs, there's no longer any tax to consider.

kidmugsy

There's a thing called a Deed of Variation, whereby you can choose to direct the money to the children as if the will had left it to them, but it seems unlikely that you'd want to go to that fuss and expense for a modest sum such as £12k.

xylophone

There's a thing called a Deed of Variation, whereby you can choose to direct the money to the children as if the will had left it to them, but it seems unlikely that you'd want to go to that fuss and expense for a modest sum such as £12k.

The money has already passed to the legatee and is in her account - any gift will now be from her to her children?

http://www.hmrc.gov.uk/manuals/tsemmanual/tsem1815.htm

She might choose to put £4000 into each child's CTF in this CTF year and perhaps open a couple of TSB Classic plus in her own name with the balance of the £12000- she could then set up a same day SO of £500 from each to other to meet the funding requirement.

If the interest rate on the CTFs is dire then she could consider a transfer now. http://www.moneysavingexpert.com/savings/child-trust-fund-vouchers

https://www.gov.uk/child-trust-funds/overview

Next tax year she can transfer the CTFs to JISAS and the money from the TSB accounts into the JISAS.

Lynholmer_Park

xylophone wrote: »

The money has already passed to the legatee and is in her account - any gift will now be from her to her children?

OK, this is what I wanted clarification on.

Thanks for your additional advice. It seems as though JIAS are the best option next year. I guess the tax free NSANDI children's bonds could also be an option for now - £3k max in each at 2.5% ? I'll check out the TSB accounts in the meantime - thank you.

Lynholmer_Park

Re transfering CTFS to JISA, does anyone know if you can do so with both forms of CTF - I set up stocks and shares linked ones for my two - or is it the case that its only the cash CTFs that may be transferred?

xylophone

You cannot yet transfer CTF to JISA
https://www.gov.uk/government/news/government-to-allow-child-trust-funds-to-transfer-to-junior-isas

https://www.gov.uk/child-trust-funds/managing-the-account
You can change the type of account within CTF and within the JISA
https://www.gov.uk/junior-individual-savings-accounts/managing-an-account.

A child can have both a stocks and shares JISA and a cash JISA

https://www.gov.uk/junior-individual-savings-accounts/overview

Archi_Bald

Lynholmer_Park wrote: »

Re transfering CTFS to JISA, does anyone know if you can do so with both forms of CTF - I set up stocks and shares linked ones for my two - or is it the case that its only the cash CTFs that may be transferred?

The transfer rules haven't yet been decided but I would expect that it will be like with adult ISAs, where you can transfer cash to cash, cash to S&S, and S&S to cash. Also, there are likely to be charges for transferring S&S because the transfer is more involved than cash to cash.

kidmugsy

xylophone wrote: »

The money has already passed to the legatee and is in her account - any gift will now be from her to her children?

That's a good point, but I don't know whether it's accurate. You get two years in which to do a DoV but perhaps, as you imply, the executors should hold on to the money rather than distribute it.