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Where oh where to invest

Hi all

My 2 boys ( 6&3 ) have some inheritance ( £150,000) I would like to make it grow for them, thought about buying and renting a property (about 5k per annum from rent) and of course capital growth from the property and looked at putting 50k in Halifax at 2.5% 20k in nationwide and the rest left with hsbc...bringing in about 3.5k with no risk, any other ideas please?

Thanks
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Comments

  • AnotherJoe
    AnotherJoe Posts: 19,622 Forumite
    10,000 Posts Fifth Anniversary Name Dropper Photogenic
    Buying a property would be extremely problematic.

    First off all children arent allowed to own property so I imagine some sort of trust would be needed (if thats even allowed).

    Second, there is the complexity of the two boys "owning" one thing, what happens if one of them wants their money at 18 when the other is only 15?

    You also say "of course capital growth" as if that's a given, which it isn't. Odds are with you but it is not a given.

    Then you have maintenance cost (who's paying for that?), tenant risk, management fees, the legal complexities of being a landlord which get more onerous each passing year.

    Your second idea is the other extreme, savings provide an amount that essentially is below inflation, so in 15 years time the boys might have the equivalent of say £120k in todays money.

    The "sensible" but scary thing is to invest the money in funds. But over a 15 year timescale it should outperform inflation savings accounts and property. It can probably be sheltered from tax by careful management as well, which a property cant be. You are probably going to need some help with that so you'd have to find an IFA Independent Financial Adviser. Note that the "I" is key. Must be Independent.
  • ValiantSon
    ValiantSon Posts: 2,586 Forumite
    edited 29 January 2018 at 6:47PM
    Entsman wrote: »
    Hi all

    My 2 boys ( 6&3 ) have some inheritance ( £150,000) I would like to make it grow for them, thought about buying and renting a property (about 5k per annum from rent) and of course capital growth from the property and looked at putting 50k in Halifax at 2.5% 20k in nationwide and the rest left with hsbc...bringing in about 3.5k with no risk, any other ideas please?

    Thanks

    Don't buy a property: it is fraught with pitfalls and risks.

    If you have no real understanding or experience of investments then you have two options, really:

    1) Speak to an IFA who will help you find appropriate investments to meet your objectives in line with your attitude to risk.

    2) Read up about investing and manage those investments yourself.

    Option 1 should result in reasonable investments, but will be the more expensive option (including higher ongoing costs). Option 2 will require more work from you but will be the cheaper option. Only you can know which option is best for you. Do you have the time, interest and inclination to learn about investing? Do you have the nerve not to sell up when there is a market correction and your investments lose 30-50%? If the answer is no to either of these questions then I'd suggest option 1 might be the best bet.
  • xylophone
    xylophone Posts: 45,741 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    You should check the terms of the will and if necessary clarify the nature of the Trust that has arisen.

    Assuming that this money has been left to your children without contingency, ("indefeasibly vested") then the money belongs to the children absolutely and you hold in bare trust only.

    https://www.gov.uk/hmrc-internal-manuals/trusts-settlements-and-estates-manual/tsem1563

    This means that each child can call for access and control of his inheritance at age 18.

    Presumably half of the capital sum belongs to each child.

    I suspect that using the money to buy a property is beyond your legal powers as bare trustee - you can consult the solicitor who drafted the will.



    https://www.michelmores.com/news-views/news/trustees-and-investments

    See also

    https://www.gov.uk/trusts-taxes/types-of-trust
  • Entsman
    Entsman Posts: 26 Forumite
    Hi Joe

    I am already a landlord and historically over the past 15 years have done well here in the south east with property having one we bought for 55k having an offer of 140k on it and I had taken costs into consideration with my conservative annual rent profit after costs, however always a gamble on house prices rising enough and having good tenants..but it’s all the eggs in one basket... I will speak to an IFA to chat about the stock market investments route which I have been unsure of because I know nothing about it at all.. thanks for reply
  • Entsman
    Entsman Posts: 26 Forumite
    Hi xylophone

    No will as the grandparent is still alive..I understand completely that the money is theirs but as they are minors we are bare trust guardians and their parents and as such we have the ability to invest the money how we think will be in their best interest, this is what I’m struggling with not the moral or legal issues surrounding it. To buy property and rent it, to just bank it or to invest it in their best interest..😊
  • xylophone
    xylophone Posts: 45,741 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    No will as the grandparent is still alive.

    Then this is not an inheritance but a direct gift from grandparent to child?

    Or do you mean that the grandparent has made a gift into Trust and there is a Trust Deed with specific powers?

    I still doubt that if this is a bare trust that you have the legal right to use the money for a property or to link each child's individual gift.

    You should still check the tax situation.
  • xylophone
    xylophone Posts: 45,741 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    And had you looked at Junior ISAs?

    https://www.gov.uk/junior-individual-savings-accounts
  • Peelerfart
    Peelerfart Posts: 2,177 Forumite
    Part of the Furniture 1,000 Posts Combo Breaker
    Really I am no expert,

    Is the a possibility of deliberate depravation of assets here?

    I accept I may be talking rubbish.
    Space available for rent
  • ValiantSon
    ValiantSon Posts: 2,586 Forumite
    Peelerfart wrote: »
    Really I am no expert,

    Is the a possibility of deliberate depravation of assets here?

    I accept I may be talking rubbish.

    Possibly, although we don't know exactly what the arrangement is with regards to this money. It could be that the grandparent has bequeathed the sum (in equal share???) to their grandsons and the OP is speculating about what to do when they die. The more likely explanation is that a trust fund has been set up, but then the OP doesn't really seem to know what the rules of that fund are. Alternatively it is a straightforward gift and deprivation of assets could become an issue as could IHT.

    The OP may know the answers to this and be clear about the situation, but based on what they have told us this all looks very murky and, like others, I have suspicion that some of the OP's plans/ideas would not be legal (although I am not suggesting any intent, but rather possible ignorance of the law - ignorance is, of course, not a valid defence).
  • Peelerfart wrote: »
    Really I am no expert,

    Is the a possibility of deliberate depravation of assets here?

    I accept I may be talking rubbish.

    Good point, the second one, not the first and third. There are definite tax implications for this as others have said.

    As to where to invest, over 15+ years equities will almost certainly far outdo savings accounts and cash. Assuming you invest wisely. Do so unwisely and you could lose money.

    Like many here I have invested for ~20 years in equities with success. It’s not hard, but you do have to learn the basics and not panic in downturns. Or hire a shiny suited financial person called an IFA.
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