Kids savings account v overpaying mortgage

WantToRetireEarly

As expected, it isn't black and white, even when the father has literally stolen his child's savings and done a runner. Here is a question on this answered by the man himself - Martin Lewis

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Q My ex has taken my children's savings. Can I do anything about it?

I got this tweet from a mother last week. It turns out to be £15,000 of their savings; the dad's absconded and has no contact.

If the money is in a child's name, it's their cash. However, for younger children the usual practice is to nominate a signatory (for example a parent or grandparent) who can manage and withdraw the cash without the child's approval, usually until the child is 16 – though some accounts let you give the child control earlier.

So for younger children it's quite easy for parents to use their cash; for older ones, you would need their permission.

As for whether it is legal to do so, I've consulted lawyers who, as is often the case, had mixed views. Some say it is criminal fraud, others say there's nothing in practice to stop it – though you could attempt a civil suit for breach of fiduciary responsibility.

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https://www.telegraph.co.uk/finance/personalfinance/investing/11286926/Martin-Lewis-the-eight-questions-Im-always-asked-about-childrens-savings.html

ruperts wrote: »

is there any case law giving guidance as to what acting in the child's best interests actually means?

xylophone

What makes this slightly different is that the OP has declared that in order to obtain a pecuniary advantage, his intention is to open a Trustee account and use the money as his own.....

muhandis

What? You're joking. Come on, what does Martin know about these things?

Are you saying that there's some nuance to this issue? Even when the dad has scampered off with the money?! I'm shocked. :eek:

WantToRetireEarly wrote: »

As expected, it isn't black and white, even when the father has literally stolen his child's savings and done a runner. Here is a question on this answered by the man himself - Martin Lewis

---

Q My ex has taken my children's savings. Can I do anything about it?

I got this tweet from a mother last week. It turns out to be £15,000 of their savings; the dad's absconded and has no contact.

If the money is in a child's name, it's their cash. However, for younger children the usual practice is to nominate a signatory (for example a parent or grandparent) who can manage and withdraw the cash without the child's approval, usually until the child is 16 – though some accounts let you give the child control earlier.

So for younger children it's quite easy for parents to use their cash; for older ones, you would need their permission.

As for whether it is legal to do so, I've consulted lawyers who, as is often the case, had mixed views. Some say it is criminal fraud, others say there's nothing in practice to stop it – though you could attempt a civil suit for breach of fiduciary responsibility.

---

https://www.telegraph.co.uk/finance/personalfinance/investing/11286926/Martin-Lewis-the-eight-questions-Im-always-asked-about-childrens-savings.html

WantToRetireEarly

By absconding with 15k of the childs money and breaking off contact, I think that that man's intention is crystal clear as well

What you mention below is what the OP said in his initial post asking for advice. He then got lots of advice. The OP has also declared later on in the thread that he has no intention of breaking the law so I would just leave it at that. You or I can hardly do anything to stop him in whatever he chooses to do.

xylophone wrote: »

What makes this slightly different is that the OP has declared that in order to obtain a pecuniary advantage, his intention is to open a Trustee account and use the money as his own.....

dissstressed

So much needless to and fro!

To summarise -

1. OP wants to open a children's savings account to save interest and wants to know the implications
2. There are tax implications
3. The money is the child's once gifted
4. There are legal implications to managing the money on behalf of the child
5. The child's money needs to be managed in their best interest (no agreement on what the child's best interests are)
6. Some people hate what the OP is doing, some people have given advice and left it at that
7. OP has (hopefully!) read all the advice and said he does not intend to do anything illegal
8. OP will do what he wants to do. For his sake, let's hope it's all aboveboard.
9. I think the OP and the rest of us should all move on and stop clogging up the S&I forum.

Can a moderator lock the thread please?

THE END.

muhandis

Haha, finally something we can agree on!

IanManc wrote: »

I think we're all free to contribute to the forum whether you like it or not actually.

Terry_Towelling

Just before anyone locks the thread can I throw my twopenneth in?

For sure, there is no one in the land who could reasonably argue that paying down a mortgage with a child's savings is in the child's best interests when those savings were actually created out of money intended to pay down the mortgage in the first place. The only gain in the whole process being a marginal amount of interest (tax dependent) and that gain benefitting no one but the mortgagee by way of a decrease in their debt.

However, might it be in the child's interest to have their money used this way if the trustee created a fully-paid-up share in the ownership of the house to the value of the child's contribution? Obviously, the legal costs of doing so would outweigh any benefit gained from a slightly better interest rate but would anyone agree that that could be a situation whereby OPs idea might be workable?

WantToRetireEarly

@Terry I am not sure it's that clear cut. What if any gain was used to better the child's circumstances (better clothes, new shoes, books, sending the child on a school trip), or offset against expenses incurred to bring up the child which would otherwise not happen?

Say the OP has control over £10,000 in the child's savings account. The school is organising an optional trip to Europe which costs (say) £1,000 per child. The OP pays for the trip and then reimburses that payment from the child's savings account. Or the OP pays for the trip and a couple of weeks later moves £1,000 from the savings account to the mortgage.

I think the basic premise is that the parents know best and that they would act in the child's best interests. The bar for proving that that isn't the case, especially for the relatively small amounts we're talking about here, will necessarily be quite high. I imagine that the cases that get to court deal with very large estates, inheritances, big trust funds, etc.

Terry_Towelling

WantToRetireEarly wrote: »

@Terry I am not sure it's that clear cut. What if any gain was used to better the child's circumstances (better clothes, new shoes, books, sending the child on a school trip), or offset against expenses incurred to bring up the child which would otherwise not happen?

Say the OP has £10,000 in the child's savings account. The school is organising an optional trip to Europe which costs (say) £1,000 per child. The OP pays for the trip and then reimburses that payment from the child's savings account. Or the OP pays for the trip and a couple of weeks later moves £1,000 from the savings account to the mortgage.

Fair point, but my example centred around nothing but OP's implied intention to only use the fund to obtain a better interest rate prior to paying down the mortgage.

In your example, the issue of what is best for the child is transferred somewhat. Is the expenditure in the child's best interests and was it appropriate for the child to pay for it themselves? If so, the mortgage paying issue then becomes unconnected because the trustee is simply reimbursing their own expenditure. The fact that they then decide to pay down their mortgage by the same amount is coincidental and (on the basis that it has been deemed appropriate for the child to pay for the 'thing' themselves) the trustee is not actually gaining from either the cash or the enhanced interest rate being offered by the child's account.

So, yes, you are right in that it does create a further patch of grey in our desire to achieve a black and white image but it doesn't amount to the trustee gaining at the expense of the child by 'misusing' their account and the child will have received some material benefit as a result of the process. With OP's suggestion, there was no evidence that the child would have anything tangible to show for the removal of funds from their account - unless they did indeed receive a paid-up share in the property.

WantToRetireEarly

You have a point. But we might be reading too much into what the OP said at the very beginning of this thread, well before all the following posts. If you go by what he says, he also says later on that he doesn't intend to break the law.

Maybe (like one of the legal opinions Martin cites in his article about childrens savings) he thinks that "there's nothing in practice to stop it" from him using the money in what he feels to be in the child's best interests. Or if he's smart, maybe he'll just do what bowlhead said "may use their discretionary powers under The Trustee Act 1925 to use the funds under their management for maintenance and education or benefit of the child." to get the same end result.

Or maybe we're only talking about a couple of hundred pounds a month and he's decided to drop the plan!

Terry_Towelling wrote: »

Fair point, but my example centred around nothing but OP's implied intention to only use the fund to obtain a better interest rate prior to paying down the mortgage.

In your example, the issue of what is best for the child is transferred somewhat. Is the expenditure in the child's best interests and was it appropriate for the child to pay for it themselves? If so, the mortgage paying issue then becomes unconnected because the trustee is simply reimbursing their own expenditure. The fact that they then decide to pay down their mortgage by the same amount is coincidental and (on the basis that it has been deemed appropriate for the child to pay for the 'thing' themselves) the trustee is not actually gaining from either the cash or the enhanced interest rate being offered by the child's account.

So, yes, you are right in that it does create a further patch of grey in our desire to achieve a black and white image but it doesn't amount to the trustee gaining at the expense of the child by 'misusing' their account and the child will have received some material benefit as a result of the process. With OP's suggestion, there was no evidence that the child would have anything tangible to show for the removal of funds from their account - unless they did indeed receive a paid-up share in the property.