Designated Investment Account

Hitting

Already used up!

colsten

Ah I see, you can't use it rather than won't.

xylophone

The Hargreaves Lansdown Bare Trust option might suit if you want to choose a selection of unit trusts.

Completing the Bare Trust Form as instructed sets up the Bare Trust.

http://www.hl.co.uk/faqs/contact-us/can-i-invest-on-behalf-of-a-child


If you do not wish to use a bare trust, you can set up a discretionary trust but this is more complex and you would be well advised to consult a solicitor.

http://www.hmrc.gov.uk/trusts/types/discretionary-accum.htm

Hitting

I have looked at the HL option which if it satisfies all that HMRC require is what I am looking for but the Bare Trust form makes no mention of the related UT investmentDesignated). What is required to tie the two together to make it official/legal?

bowlhead99

When setting up account to be owned by a Bare Trust, it is not an individual asset (share, fund, unit trust, cash) that is designated specifically for a beneficiary. The whole account with the broker or platform is owned by the trust on behalf of the beneficiary. So if account number 123456 at Hargreaves Lansdowne or Baillie Gifford or F&C is held by a trust, it doesn't matter whether the account contains £3000 worth of units in Fund A or Fund B or a bit of both or seventeen different funds and a bit of cash. The entire contents of the account belong to the beneficiary of the trust and no further "designation" is needed.

It would be like saying the trust holds a bank account for the beneficiary. The bank account might have £1 in it now and then have a second pound added later by a donor. The individual pounds or pennies don't have to get "designated" or individually marked as belonging to the beneficiary. ALL of the assets and liabilities of the trust belong to the beneficiary including each of the pounds which sit inside the bank account which the trust owns.

On Designation vs trust...

DESIGNATION:
As described earlier up the thread,, the concept of "designation" is just relevant where you are NOT using a Bare Trust and you are keeping the assets as belonging to you WITHOUT formally gifting them at this stage, and you want to "earmark" them for someone by adding their initials to your account.

When I last set up a designated account (using a different broker, TD Direct), they wanted to get identity documentation for my nephew as they use the same account opening procedures for that as they do for joint accounts - and the child's initials were going on the account so they wanted to know who this person was, that I was putting cash away for with the intention of building up a substantial balance over the years.

But that is simply an internal compliance / controls procedural thing for them, and doesn't mean the assets now belong to the child or are even partially co-owned by the child. By designating them as being earmarked for a future potential gift, I am setting out my intentions about probably making a future gift by conveniently marking the account so it doesn't get mixed up with my other unmarked accounts. But putting money into that marked account doesn't create a £3k gift. All the money and income and gains from it belongs to me and is taxed on me, regardless of those initials being on the account.

TRUST:
If I wanted to create a gift now, I would have used a Bare Trust instead, and had the trust own an account with a broker or platform or investment company. All the contents of the account would belong to the trust and the child is the only beneficiary of the trust so he/she effectively owns everything in it. When I fund the trust account with £3k I would be GIVING the trust £3k and I would no longer own the £3k, I only get to control it in my capacity as trustee. So HMRC consider the gift to have been made on the funding date, in that situation. So, if you open an account in bare trust with HL or whomever else, that's what you'll be doing, which sounds like what want.

Does that cover it?

Disclaimer to all the above I'm not a tax specialist but it seems consistent with what everyone else is saying and various literature from fund groups /HMRC

Hitting

Thank you, that is very informative,however;
If I used the Bare Trust pro forma available from Hargeaves Lansdowne and I am the donor and trustee and invest the sum mentioned on the Bare Trust to purchase a unit trust(s) on behalf of the Trustees for benifit of Grandchild how is the investment identified as held within the Bare Trust rather than me making the investment on my own behalf?

Would there be any problems in making out a Bare Trust and at same time making the associated Unit Trust investment 'designated', ie 'belt and braces', or would this complicate matters?

xylophone

If you go with HL, they will provide an explanatory booklet and an election for bare trust form.

https://www.hl.co.uk/free-guides/investing-for-children

Remember that all the assets in the bare trust will belong to the child absolutely.

Remember too that should you choose UTs that pay interest and the child is eligible to receive interest without tax deducted, the overpaid tax should be reclaimed on behalf of the child.

http://webarchive.nationalarchives.gov.uk/+/http://www.hmrc.gov.uk/individuals/savings-income.htm

xylophone

http://www.hmrc.gov.uk/trusts/types/bare.htm will be worth a look.