Children becoming owners of savings set up for them

13Kent

My MIL has set up post office accounts for her grandchildren in the past. I think they were set up in the children's names with her as the trustee. She has hardly any contact with the grandchildren, they do not live locally and they are now over 16. She says she is going to send them their bank books on their birthdays for them to do what they will with the money.

My questions are Firstly, if she does this will the children be able to access the money without her officially signing the accounts over to them?

And secondly who has ownership of the money? If the children are unable to access the money even though they have the savings books can my MIL withdraw it herself instead and send them a cheque? - or even could she decide that she no longer wants them to have the money she has saved in the accounts and just withdraw it herself? (the children make no effort to maintain contact with her and don't even acknowledge any Christmas or birthday gifts she sends them let alone bother to thank her for them, so I believe she is ready to wash her hands of them).

HappyMJ

MIL has ownership of the money and can do whatever she wants with it.

It would be easier for MIL to withdraw the money and close the accounts herself and send the cash to them in the form of a cheque so her grandchildren can bank it themselves and do what they want with it.

She can decide not to hand the money over...morally not very nice as the money was originally intended for them...but she can keep it if she wants.

xylophone

MIL has ownership of the money and can do whatever she wants with it.

If she is holding the accounts in bare trust for the children, then the beneficial owners of the money are the children.

bowlhead99

13Kent wrote: »

My MIL has set up post office accounts for her grandchildren in the past. I think they were set up in the children's names with her as the trustee.

[etc. etc.]

or even could she decide that she no longer wants them to have the money she has saved in the accounts and just withdraw it herself? (the children make no effort to maintain contact with her and don't even acknowledge any Christmas or birthday gifts she sends them let alone bother to thank her for them, so I believe she is ready to wash her hands of them).

If the money in the account is in the child's name and the grandmother is the trustee, then no she cannot decide she no longer wants them to have their money and go spend it it herself on things for her. That is not what a trustee does.

Atrustee is supposed to look after and control the assets that belong to somebody else, and has a fiduciary duty to act in their interests. Taking the money out and giving it to them is fine. Transferring the money to their name is fine. Pillaging the account for the trustee's own purposes does not sounds like it would be in their best interests . And so, if they or their family were aware of the account, they could pursue in law (e.g. small claims court)

HappyMJ wrote: »

MIL has ownership of the money and can do whatever she wants with it.

According to the facts as they were explained to us, "I think they were set up in the children's names with her as the trustee.".

As such, MIL does NOT have ownership of the money. She has control of the money because the children were not old enough to control a bank account when it was first opened. That is not the same as her having ownership of the money. For example I could be the registered keeper of my wife's car. It does not make it my car to sell. It means I am the one that gets chased if it goes over the speed limit or is parked somewhere dodgy and the authorities don't know who was driving, but just because my name is on a register associated with the car, doesn't give me the right to go and sell it and spend the money on something else. Control is divorced from ownership.

HappyMJ wrote: »

She can decide not to hand the money over...morally not very nice as the money was originally intended for them...but she can keep it if she wants.

If she wants, she can of course keep it for herself, because she has control of it. Like if I'm in a supermarket, I can pick up a banana, and if I want, I can walk out of the store without bothering to pay. I control the banana because it's in my hand and powerless to stop me. I could eat it right there in the store if I was so inclined.

However, if you consume or run off with something that is not yours, which you control but don't have legal ownership of, like a banana or the contents of someone's bank account, that is not just a moral issue but a legal one, and you would be in the wrong on both counts.

Of course, there is a difference in how a financial account can be established depending on what was intended.

It is feasible that the account was set up in the name of Mrs Motherin Law with a designation 'for the benefit of for Grand Child One'. E.g.: account name - "Mrs Motherin Law fbo GCO" or "Mrs M Law re GCO" . I have an investment account set up like that for my nephew. I've put a designation on the account because although the assets are legally mine, it helps me differentiate this account which I intend to hand over to him at some point in the future, or on my death, from all my other various accounts which I'm running for my benefit not his.

But while I say I'm running the account for his benefit, it is legally all mine. If the account generates interest or dividends they are mine and they are taxed as mine in the year they happen. If I get sued or made bankrupt the collectors can come after the account, and it's my account for means-tested benefits. All I'm doing is saying I intend to gift it to him at some point in the future and the transfer of ownership will not happen until I do. The assets are still in my estate for the purposes of inheritance taxes if I die suddenly before getting around to making the gift. If I'm unsuccessful in life and can't afford to give away the assets, or end up hating the little brat, I can change my mind and never go through with the gift. Because it was my money.

However if the account was simply set up in the name of "Grand Child One", or "Grand Child One, Mrs M Law as Trustee"or as "Mrs M Law atf GCO" (Motherin Law as trustee for grandchild one), or "Mrs M Law as nominee for Grand Child One" then it would be quite clear that the contents of the account belong to Grand Chile One and not to Motherin Law, who is merely looking after the child's money.

If this is the case, the MIL does not own the contents of the account. It is not in her estate for inheritance tax purposes, because the money was gifted away years ago ; if the debt collectors come to take her stuff they can't take it because it's not her stuff ; and if the account earns interest it doesn't result in a tax bill for her.

Of course, either way, the bank won't care about absolute ownership- as long as they are dealing with someone who is a signatory on the account documentation they will let them take the money out. So the fact the MIL can get access to the cash doesn't say anything about whether she is lawfully (or morally) allowed to keep it to herself. But of course even if she is not lawfully allowed to keep it, if the child's family do not complain, she will practically be allowed to keep it, just like me with the supermarket's banana.

13Kent

Thank you for your replies, I am just trying to find out what is practical for my MIL to do, as I am concerned that if she sends the books to the grandchildren she may be wasting her time if they cannot access the accounts anyway. Also I suspect it will be very awkward to try and reunite the MIL with the books so that the money can be withdrawn from the accounts once she has sent them the books.

I also was under the misapprehension that once a child became 16 a trustee could no longer access a bank account in their name to withdraw any money without the child's authorisation, but that the child could not withdraw the money themselves unless the trustee had signed the account over. I am obviously confused!

bowlhead99

Is there any reason you or she does not just ask the bank concerned whether the children will be able to access the accounts if they are given the passbooks - and what ID or other documentation etc they would need to prove it was their account and not just coincidentally their name ?

If the answer is no they would not be able to access the accounts easily, what do the bank suggest is done?

Certainly the simplest thing given the lack of contact and it being 'awkward' to 'reunite' the parties, would be for the MIL to withdraw the cash and post them a cheque of the same amount for them to deposit into an account of their choice. If the bank will not allow the MIL to withdraw the cash for some reason, ask for their suggestion on how to get the cash into the hands of the children.