Investment for children

Ljhumph

I need advice please! My children have inherited just under 40k each. They are 13 and the clause in the will states they cannot access this money until they are 25. They know nothing about it, and i want it to stay that way fir as long as possible. I want to give them the best deal obviously, but I am struggling to know where to put the money to give them the best return. They've just been sent a portion of this- 17k - and the lawyer is asking for proof of what I am doing with this money so any immediate advice for this sum would be much appreciated, and then for the rest if the inheritance when they receive it.

Thanks

Lisa

Yorkshireman99

Ljhumph wrote: »

I need advice please! My children have inherited just under 40k each. They are 13 and the clause in the will states they cannot access this money until they are 25. They know nothing about it, and i want it to stay that way fir as long as possible. I want to give them the best deal obviously, but I am struggling to know where to put the money to give them the best return. They've just been sent a portion of this- 17k - and the lawyer is asking for proof of what I am doing with this money so any immediate advice for this sum would be much appreciated, and then for the rest if the inheritance when they receive it.

Thanks

Lisa

Put it in a Halifax JISA that offers the best deal. The clause restricting the payout to age 25 is likely to unenforcable.

tacpot12

Yorkshireman99's assertion that the restriction on paying out before 25 is likely to be unenforceable is correct. English law allows the beneficiaries of a trust to require the assets of the trust to be handed over to them if all are over 18 and none are disabled to the point where they cannot manage the money. (The Will is likley to have created a single truust with two beneficiaries, the solicitor handling the will should be able to confirm this.)

This does not mean that the beneficiaries will do this, but you cannot keep the trust a secret, so they might. The best option is to tell them about the trust, tell them that it was intended for their long term benefit, and that the person who left them the money wanted it to grow for at least 10 years before they had it, and if they continue to let it grow it will be worth more. This generous legacy is an excellent tool to teach your children about how to manage investments and the benefits of investing. With luck they will be guided by you. In my humble opinion, you will have more success with this approach if you tell them about it now. The earlier you sow the seed that they can't touch it until the are 25, the more likely they are to respect the wishes of the donor. But you know your own children.

Now you are a trustee you need to be aware of your responsibilities, which are:
- to manage the trust in the best interests of the beneficiaries
- to avoid conflicts of interest between the beneficiaries and yourself
- to exercise such skill and care in managing the trust as is reasonable under the circumstances
- to only invest in suitable investments and consider whether there is a need to diversify the investments
- to obtain and consider the advice of someone who you reasonably believe is qualified and competent to advise on investment matters

£40K per child is a significant sum, and can reasonably be expected to double over 12 years, so paying for some financial advice is probably necessary. (The cost of the advice is paid by the trust).

I've had a quick look and can't see that a Junior ISA is a good place for these funds. i) you can't take them out of the Junior ISA 'environment' once you have put them in, ii) it automatically passes to the child when they are 18 iii) you can only invest £4080 into the Junior ISA environment per annum.

Perhaps others will have better suggestions. You should be looking for a temporary home for the funds, while you take advice, and should let the solicitor know that this is what you are doing. This should reassure them.

Yorkshireman99

tacpot12 wrote: »

Yorkshireman99's assertion that the restriction on paying out before 25 is likely to be unenforceable is correct. English law allows the beneficiaries of a trust to require the assets of the trust to be handed over to them if all are over 18 and none are disabled to the point where they cannot manage the money. (The Will is likley to have created a single truust with two beneficiaries, the solicitor handling the will should be able to confirm this.)

This does not mean that the beneficiaries will do this, but you cannot keep the trust a secret, so they might. The best option is to tell them about the trust, tell them that it was intended for their long term benefit, and that the person who left them the money wanted it to grow for at least 10 years before they had it, and if they continue to let it grow it will be worth more. This generous legacy is an excellent tool to teach your children about how to manage investments and the benefits of investing. With luck they will be guided by you. In my humble opinion, you will have more success with this approach if you tell them about it now. The earlier you sow the seed that they can't touch it until the are 25, the more likely they are to respect the wishes of the donor. But you know your own children.

Now you are a trustee you need to be aware of your responsibilities, which are:
- to manage the trust in the best interests of the beneficiaries
- to avoid conflicts of interest between the beneficiaries and yourself
- to exercise such skill and care in managing the trust as is reasonable under the circumstances
- to only invest in suitable investments and consider whether there is a need to diversify the investments
- to obtain and consider the advice of someone who you reasonably believe is qualified and competent to advise on investment matters

£40K per child is a significant sum, and can reasonably be expected to double over 12 years, so paying for some financial advice is probably necessary. (The cost of the advice is paid by the trust).

I've had a quick look and can't see that a Junior ISA is a good place for these funds. i) you can't take them out of the Junior ISA 'environment' once you have put them in, ii) it automatically passes to the child when they are 18 iii) you can only invest £4080 into the Junior ISA environment per annum.

Perhaps others will have better suggestions. You should be looking for a temporary home for the funds, while you take advice, and should let the solicitor know that this is what you are doing. This should reassure them.

Noted on the limits. Where do you think you can invest at a rate to double in seven years?

tacpot12

I was calculating the time the funds would be invested as from Age 13 to Age 25 years old, so 12 years. :-)

Yorkshireman99

tacpot12 wrote: »

I was calculating the time the funds would be invested as from Age 13 to Age 25 years old, so 12 years. :-)

Noted but the trust is probably unenforceable after age 18 but there are loopholes.

SevenOfNine

.......and fill in an annual tax return.

We're currently setting up trusts for our grandsons. Our STEP solicitor has not said our instruction that the money cannot be accessed until age 25 (apart from interim payments at the discretion of the trustees) is unenforcible.

securityguy

SevenOfNine wrote: »

.......and fill in an annual tax return.

We're currently setting up trusts for our grandsons. Our STEP solicitor has not said our instruction that the money cannot be accessed until age 25 (apart from interim payments at the discretion of the trustees) is unenforcible.

Discretionary trusts are enforceable, if properly drawn up. My understanding (corrections please) is that they usually give wide powers to trusted trustees, with probably a letter of guidance, and the "beneficiaries" are not, in law, named as the beneficiaries, or are not named as the sole set of beneficiaries.

However, unless they are either pre-existing, or established explicitly in a will, the executors of a will which just leaves money to minors, or administrators of an intestacy where the punchline is money being left to minors, cannot establish a discretionary trust which meets these tests (you can't take someone's inheritance and place it in a trust which they are not the explicitly named beneficiaries of, no matter how high-minded your intentions). If you're the executor/administrator in this case, you'll be creating a separate bare trust for each minor beneficiary. Bare trusts in the name of a sole beneficiary are not enforceable past 18.

Even if, hypothetically, they were to be enforceable, at the age of 18 the beneficiary could sue the executor, personally, for their legacy, and the defence "I've put it in a trust you can't access" wouldn't serve as a defence.
People aged 18 are entitled to wind up bare trusts. People aged 18 are entitled to demand that assets left to them by name in wills are paid to them.

Yorkshireman99

The rules are not as clear as you suggest. The OP needs to go back to his solicitor and discuss the point.

SevenOfNine

We're opting for a discretionary trust, my understanding is that with a bare trust the beneficiary IS entitled to the money at 18, but with a discretionary trust the age CAN be determined & adhered to.

Perhaps OP can clarify what the Will states further, that way more specific advice as opposed to blanket answers may be given.

OP, try the savings & investments forum seeing as your initial question centres around where to put the £17k to get the best ,to satisfy the solicitor before he/she will release the balance.

We're only prepared to use risk free, FSCS protected homes for the money. Unfortunately, interest rates are poor at the moment.