grand children

jen0dorf

Hi

apologies as I'm sure this topic has been discussed before but I'm not 100% sure what my questions is.

Simply we have a 3 year old grandson and over the next 20 years we want to put money into an account at irregular times ie birthday, xmas, other present money etc to build a nest egg for him to have for his future. ie college, marriage.

So my questions are.

Should it be in his name with us as signatories or or my wife and I's name?

As he is not working does he pay income tax on the interest?

Will he have to pay tax when he cashed it it?

Any any other info would be helpful

thanks

Ian

cloud_dog

jen0dorf wrote: »

Hi

apologies as I'm sure this topic has been discussed before but I'm not 100% sure what my questions is.

Simply we have a 3 year old grandson and over the next 20 years we want to put money into an account at irregular times ie birthday, xmas, other present money etc to build a nest egg for him to have for his future. ie college, marriage.

So my questions are.

Should it be in his name with us as signatories or or my wife and I's name?

In my considerations, this aspect is always the primary question.

If you put it in to an account in his name (Bare Trust) the money belongs to the chiild and the child will take ownership at age 18 (16 in Scotland). A JISA is a similar account (although tax-exempt) with the monies belonging to the child and available to them at age 18.

With both account the money belongs to the child and they can do what they like with it. So your noble ideals of college, marriage may not fit in with his 'let's get completely wrecked' ideas.

jen0dorf wrote: »

As he is not working does he pay income tax on the interest?

Everyone, even children, are entitled to receive income up to the their income tax limit tax-free. So, he would get the basic limit. Also, everyone from April 2016 now has a personal savings allowance to use before taxation (£1000 for basic rate payers).

jen0dorf wrote: »

Will he have to pay tax when he cashed it it?

There wouldn't be any capital gains taxes to worry about, assuming it is a savings account you are referring to. If it was an investment account then there may be CGT to be aware of. Again if the increase and the disposal in one tax year exceeds the CGT allowance.

jen0dorf

Hi

many thanks for the speedy response

Food for thought

cheers

Ian

cloud_dog

The one thing to bear in mind is... it doesn't have to be all or nothing.

Assuming the child has a JISA, or another account (in his name) you could contribute to that and also use savings in your/wife's name to have some control over the monies and gift them to him as and when it is appropriate to do so.

EDIT: The other thing you need to bear in mind is if there are likely to be other grand kids in the future and ensure you treat them all equally.

This is where an account under your control may give you more flexibility on how much you need to contribute - depending on how cash affluent you are.

jimjames

For those sorts of timescales I wouldn't be looking at savings accounts but investments either in JISA or investment trust plans

xylophone

3 year old grandson and over the next 20 years

You need to decide whether you are making a gifts to the child now and in the future or whether you are setting aside money which you plan to give to the child at a time of your choosing.

You may contribute to the child's JISA (available up to 18 when the child becomes absolutely entitled to access) - income and gains will be free of tax.

You may contribute to a savings/investment account outside the JISA but still in the child's name with you/another as bare trustee.

The child's personal tax/CGT allowance will be applicable to income/gains.

The child will have the absolute right to access and control at the age of 18.

If you do not want the child to have the right to access and control of the cash/assets at the age of 18, then you do not make gifts to the child.

You might consider your own ISA as "earmarked" for the child to enable you to make a gift at the time of your choosing.

You might consider setting up an investment trust savings plan in a "designated" account indicating to you (and your executors if such should be the case) that you intend the money to be given to the child.

But the income and gains will be taxable on you and you would have to give a specific direction in your will that the money in this account was to go to the child in question because this money remains part of your estate until it is given.

Have a look here under FAQ for details of designation/bare trust.

http://www.sit.co.uk/private-investors/products/stockplan-a-flying-start

talexuser

For my grandchild the parents did not want him to have total control of the money at 18. My daughter did not use all her ISA allowance, so we all decided she should have the money in an ISA in her name and top up every year. I went for a solid investment trust with a history of good dividends, cheapest was going direct to the company rather than a platform. Since then another grandchild has arrived so more top ups required.

With an 18 year timescale, investments has to be the way to go, though no reason also to have small savings account in the child+parent's name for later for treats at birthdays etc.

Some would even say start a pension, though you can't get at the money till 55 which takes out uni fees or first car/flat it would be one hell of a compounding!