Bare Trusts for child

ANGLICANPAT

I  did a bare trust for my grandaughter after  being an executor to a will  that left her  £5000 . Parents  had already done a CTF  for her  ,  one of them  along with myself  and OH  are the trustees  and it was decided to  put the money into  SMT fund .    Another  £5000 was  bequeathed to her when my mother died , which was also added, and her grandfather added a further £5 a bit later . Its taken me by surprise that its  grown fast  , now  50k ,  and there is only 7 years till shes 18 and may need it  for uni .Feel its so high its likely to take a big dive if we have the expected severe recession,and wont have time to recover ,  so  Im wondering  what options there are for  moving a fund in a bare trust, to   a different fund, either cash or  somethng less  risky . Can it move in a trust 'wrapper'? I will read all the trust details   for any info they might give me , but meanwhile  wondering if anyone else has  a bare trust  (ours is with HL platform)   and has investigated if and how to move it ? 

xylophone

You and the child's father hold a Hargreaves Lansdown Stocks and shares account in bare trust for your grand child.

The only asset is a holding of SMT currently valued at £50,000?

You wish to sell all or part of the fund in order to buy another fund?

This is just a standard transaction within a stocks and shares account?

ANGLICANPAT

Yes , the child's mother, me and my OH .  I have  active savings account with HL in my name .  Otherwise  just this   s/s bare trust which  is  in grandaughter's name . I access it  with   her   client number  and   password. with my date of birth .   So  I could leave half where it is in SMT  and move half out still in the original trust to another   fund  with HL  , or maybe even to a different cheaper platform  ? ( It was originally direct with SMT , but a year or so ago they  wrote to say they were transferring  the  paperwork to HL ) 

xylophone

https://www.hl.co.uk/news/articles/archive/why-bare-trusts-offer-a-simple-and-effective-way-to-invest-for-a-grandchild#:~:text=The%20bare%20trust%20account%20offered,download%20and%20return%20a%20form.

You/spouse/daughter hold the above as Bare Trustees for your grandchild?
It holds only one investment Trust?

If so, I don't understand the reference to moving to a cheaper platform -  according to above link
 there is no charge to hold shares, investment trusts or ETFs in the account. 

You would pay a dealing fee to sell part of SMT and buy another investment trust.

You mention a CTF - is it a cash CTF or a stocks and shares CTF?

ANGLICANPAT

I havent actually checked the charges tbh ,  just presumed HL would be (by reputation)  dearer than any other platform , plus when  the paperwork from SMT came  , moving it to HL said they had  got assurance from HL that  for 2 years,  HL wouldnt charge any more than  SMT for holding  it.     I  put the original inheritance into  SMT  for the child  , using the bare trust form  SMT gave me , and  my OH , me , and daughter are trustees of it .   Yes its just  the one fund , SMT .  not certain about  the  CTF , would it make a difference?

ANGLICANPAT

 Just was thinking  it was probably getting towards the end of the two years   hence maybe time to move platforms if I was going to  change funds anyway .  If theres no charge then  of course I  will leave it with HL  . Will look tomorrow. Possibly  theres a charge because its  an investment trust held in  a bare trust  as oppose to not being  held in one 

bowlhead99

ANGLICANPAT said:

I havent actually checked the charges tbh ,  just presumed HL would be (by reputation)  dearer than any other platform , plus when  the paperwork from SMT came  , moving it to HL said they had  got assurance from HL that  for 2 years,  HL wouldnt charge any more than  SMT for holding  it.     

Standard terms that HL offered when taking on the business, but the fact is that HL don't charge for  holding  company or IT shares in a general investment account, only for buying and selling those shares, or holding funds.  They do have a (capped) annual charge for holding shares if it's an ISA account, which some customers migrated from SMT/ Baillie Gifford would be using.

ANGLICANPAT said:

 Possibly  theres a charge because its  an investment trust held in  a bare trust  as oppose to not being  held in one 

Unlikely as they are simply providing you with a custody service / trading account, whether it's for you or your trust. They are not the trustee - so you are responsible for running the trust, not them.  It's not like if you wanted an ISA or pension account where there would be extra HMRC reporting and compliance implications. If you only want a general investment account they will give you that for free and hope to make money out of you through transaction fees on share trades or percentage-based fees on holding open-ended funds.

ANGLICANPAT

IQuote xylophone "https://www.hl.co.uk/news/articles/archive/why-bare-trusts-offer-a-simple-and-effective-way-to-invest-for-a-grandchild#:~:text=The%20bare%20trust%20account%20offered,download%20and%20return%20a%20form.
You/spouse/daughter hold the above as Bare Trustees for your grandchild?"

I m  presumiing I hold the above , but dont know till  I check today.   When  SMT sent papers to change to HL  it said  nothing would change  but the administration  so  client wasnt required to do anything , so I  didnt .    Ive only ever filled in trust paperwork once ,when I opened the fund, so I hope I wasnt required to re do it at the change over?      Re HMRC  Ill have to check if  the rise in funds last year went over the  childs  CGT allowance . Spoke to childs parents last night  -- the   CTF they have is cash , and hasnt been funded  last or this year      

xylophone

 Re HMRC  Ill have to check if  the rise in funds last year went over the  childs  CGT allowance 

I don't follow this at all - why are you worrying about CGT if there has been no sale of shares in SMT?

The child beneficiary has the standard CGT allowance, (£12,300 for 20/21).

The child beneficiary also has the standard Personal Allowance  (£12,500) for income arising within the Trust.

https://www.taxinsider.co.uk/the-bare-essentials-bare-trusts-ta

If you sell part of the holding in SMT, you would then check on the CGT position. 

You mention that the child has  a CTF - it would be possible to add the full subscription for the CTF year, transfer CTF to JISA and then add the full subscription for the current tax year.

https://forums.moneysavingexpert.com/discussion/comment/77373541/#Comment_77373541

Thus you might sell £18,000 of SMT for this purpose.

The JISA could remain in cash (NS&I offers 3.25% currently) - you might think that this together with keeping SMT in the bare trust would provide some diversification for the child.

Or the JISA could be  stocks and shares - in this case, transferring the CTF to a JISA with HL could be a possibility.

ANGLICANPAT

Thanks very  much xylophone, Id got muddled over the  CGT  - it will be this year not last  , that I may have to just check on the tax  position if   I sell the whole fund to move it elsewhere.   I appreciate yours and bowlheads help thanks. 

ANGLICANPAT

Could I just query something else please  .  I like the  idea to  put £9k into cash CTF , move to Jisa ,add further £9k, and leave as cash   + Id like to move £23k to something much much less exciting   within HL  leaving  £11k  in SM  . That means I will have to sell a big wadge of SM  .Two questions  arise

 1) Im still a bit unclear on how Im retaining  the trust  bit (which I presume I have to do to prove the money isnt for me? )(There was nothing in the will about a trust) -   
once part of  the SMT   52k is  sold to move some to a  cash ctf/jisa and a safer investment fund,  does each of those  splits ie  CTF/ jisa  and buy new safer fund ,still  keep  the trust wrapper round them automatically , or would I have to fill in new  trust forms for each ?