Investing a critical illness payout for a 16yr old

Boo266

Hello
I have recently had a £15k payout from my critical illness policy, following my 16 year old stepdaughter’s illness.
Luckily, she is doing well now after a major organ transplant.
I have given £3k cash to her to do what she wants with. (A bit of enjoyment for her as she loves shopping!)
The remaining £12k balance is currently in one of my bank accounts earning 2.01% interest.
Out of the £12k balance, I will be paying £200 p/m into her Help to Buy ISA (which she opened last year just before the scheme closed).
However, my stepdaughter and her Mum are asking that I hand over the remaining balance, for my stepdaughter to save in her own accounts which I think includes another ISA account. She has said that she will then make regular payments into her HTB ISA.
I’m very nervous of handing over all of the £12k to manage herself, because she is only 16. With the best will in the world, the temptation to spend the money will exist and I don’t want the money to be dwindled away, because ultimately it’s for a future life changing event like her buying a house. I also wouldn’t be able to know if she would be making the regular payments into the HTB ISA which I feel is paramount because it’s such a great scheme.
So I would like some advice on how I can please my stepdaughter (and her Mum) by way of investing the balance which will feel like my stepdaughter has control of it, but will not be able to access it until it is needed for a major reason, and will still enable regular payments to the HTB ISA.

Thank you!

macman

If the CI policy is in your name, but it also covers your stepchildren, then what are the terms and conditions relating to this? I see no reason in theory that you have to hand over anything at all. Are you separated or divorced from Mum, what financial settlements are in place?
There is a minimum age limit of 16 for opening HTB or Cash ISA's, was your daughter 16 when these were opened last year? There is no way you can compel her to make payments into an ISA that is in her own name, though you can pay into it for her.

steampowered

Sorry to hear about the illness.

Could you sit down with your step daughter and your mum to discuss all of this? If you explain to your step daughter and her mum - i.e. that you want to ensure the money is used for a life changing payment and that there is no temptation to waste it -  and that the money will be held in a separate ring-fenced account - they might be happy with that.

Or, they might propose some other arrangement - for example the Mother might agree to hold it in a separate account.

Malthusian

As Macman says, unless your policy says otherwise, it's your money, regardless of it being paid out due to your child's illness. So it's entirely up to you how much you give her and when.

So I would like some advice on how I can please my stepdaughter (and her Mum) by way of investing the balance which will feel like my stepdaughter has control of it, but will not be able to access it until it is needed for a major reason, and will still enable regular payments to the HTB ISA.

Keep it in your own name, accept instructions from her as long as they aren't withdrawals, and forward the statements to her. That is essentially as much as you can do without giving her the money. You will be taxed on the interest but if you want to remain in control, that's life.

Any kind of bare trust arrangement would give her full access to the money at 18 (or now if you're in Scotland and it's not a Junior ISA) and I'm assuming that's not desired as it's so close. So your choices are essentially to either hang on to the money until you feel she is ready or to give it to her now.

If you pay money into her Help to Buy ISA I believe there's nothing to stop her withdrawing the money immediately and spending it (unlike a bare trust account outside Scotland or a junior ISA until age 18). Even I'm wrong it matters little if she has to wait until 18.

You have no control over whether she maximises the benefits of the ISA. However, you could always point out to her that you'll be handing over the £12k quicker if she continues paying into the help to buy ISA, a) because she'll be in a position to buy a house sooner and b) because she'll have demonstrated she'll use the money wisely.

xylophone

Does she have a CTF/JISA?

Boo266

Thank you all for your advice & information.
My step-daughter is my husband's daughter from his 1st marriage.
Technically, the money does belong to me as the policy is in my name and it had a child element tagged onto it, which is how I was able to claim for her.  There is nothing in the policy to say I have to hand it over to the child.
I have verbally said that all the money is for her future, as I wouldn't feel right keeping it all because it wasn't me that nearly died.
I just don't want the relationship between me and my stepdaughter (and her Mum) to break down due to me wanting to control the spending of it.
I assume there is a CTF which could be an option as she wouldn't be able to access funds until she's 18 I think?
Will consider the advice given.
Thanks again! 

xylophone

I assume there is a CTF which could be an option as she wouldn't be able to access funds until she's 18 I think?

That is the case.

Ask about the CTF and come back with the details.

jscol

Why does your step daughter and her mum want you to hand over control of the money? I can't help wondering what the motivation is? 
What you've done seems like a very generous gesture. 

Petriix

Have you considered that it may be ok if she wants to spend the money enjoying her life now rather than saving it? Obviously I don't know her prognosis, but it's worth considering the possibility that she might make better use of the money in the short term.