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Savings/Trust for an 8 year old

Hi All,
My 8 year old niece has been left a sum of around £38,000. we would like to invest this long term to have a lump sum available to her when she is in her 20's.


Any advice as to where to place this amount to get a good long term return?

Comments

  • xylophone
    xylophone Posts: 45,703 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    Is your niece absolutely entitled to this sum now so that the only reason that she cannot take control of the money is that as a minor she cannot give good receipt?

    If so, the money will need to be held for her in bare trust.

    Presumably the parents will be the Trustees?

    See http://www.osborneclarke.com/connected-insights/publications/the-powers-and-duties-of-bare-trustees/

    You will note that there is some debate as to whether the bare trustees actually have powers of investment or whether their duty is simply to guard the trust property (hold it on deposit at the best rate available) until the child reaches the age of 18 (16 in Scotland).

    Nationwide offer a Limited Access smart account which might be of interest. http://www.nationwide.co.uk/products/savings/our-savings-accounts/all-savings-accounts

    This currently pays 3%.

    If the Trustees felt that they did have powers of investment, they might consider investing in an investment trust in bare trust
    (it would have to be a bare trust if this money belongs to the child as above) or they might open an investment account in bare trust to hold OEICS, ITs, shares etc

    http://www.bgchildsavings.com/pages/how_to_invest.aspx

    http://www.hl.co.uk/faqs/contact-us/can-i-invest-on-behalf-of-a-child See "Junior Investment Account".
  • The will states that it needs to be held in trust until she comes of age, the executor of the will is her Grandmother and I am the 2nd executor. It is therefore likely that we will be the trustees. We are wanting to keep the funds secure until she is old enough to take over them.
  • xylophone
    xylophone Posts: 45,703 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    So the terms of the will have made her an absolute gift but state that the gift will be held in trust until she becomes 16/18?

    It seems that this will still be a bare trust but you can check this with your solicitor.

    You will need to decide whether as Trustees you are required to save or may invest the cash. (Or a combination of the two.)

    In a bare trust, the income is taxable on the beneficiary, in this case this would be your niece.

    Assuming that her income does not take her over the personal allowance, an R85 can be completed for deposit accounts.

    Should you choose to invest in any other financial instrument that paid interest (for example a bond fund), then this would be reclaimable - an account held in bare trust would be required to receive the income.
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