Investing on behalf of children (not my own)

DiamondLil

Malthusian said:

If they are irrevocably designated to the grandchildren, they are the grandchildren's for tax purposes. They are "in DiamondLil's name" only in the sense that DiamondLil is the trustee. An irrevocable designation can be made in various ways but it can be as simple as attaching the grandchild's initials to the account. This would be a gift so IHT would only come into play if the donor failed to survive the required period (typically 7 years but can be up to 14). Regular savings might be automatically exempt from IHT under the "gifts out of regular income" rule if they don't compromise standard of living.

Malthusian is correct and explains it far better than I could.

Malthusian

If I did explain it correctly then as Xylophone points out, the sentence "doing it this way gives me control over when I gift the monies" (which I overlooked) doesn't make sense. If they are in bare trust you have already gifted the monies and they need to be handed to the beneficiaries when they turn 18 (16 in Scotland).

In addition, for even minimal tax to have been payable, the grandchildren would normally have needed a lot of money in their own name.

If the funds are still under your control and taxable as yours they have not been irrevocably designated to the grandchildren. If the designation is not irrevocable and part of the formation of a bare trust, it is just a mental earmark and has no legal effect.

dunroving

Malthusian said:

If I did explain it correctly then as Xylophone points out, the sentence "doing it this way gives me control over when I gift the monies" (which I overlooked) doesn't make sense. If they are in bare trust you have already gifted the monies and they need to be handed to the beneficiaries when they turn 18 (16 in Scotland).

In addition, for even minimal tax to have been payable, the grandchildren would normally have needed a lot of money in their own name.

If the funds are still under your control and taxable as yours they have not been irrevocably designated to the grandchildren. If the designation is not irrevocable and part of the formation of a bare trust, it is just a mental earmark and has no legal effect.

Hi, could I ask a couple of follow-up Q's, as it sounds like the bare trust option is what I need (i.e., held until each child is 18; parents can not cash it in, etc.)

How complicated is it to put an investment account in bare trust? Would this require (expensive) legal costs?

Would the parents need to file a self-assessment on behalf of the children? I'm talking about contributions that wouldn't exceed £1,000 per child per year.

You refer to the funds being "under your control" (you were referring to Malthusian, but in my case, it would be me). Presumably, even if a bare trust exists, the responsible adult could control (switch, etc.) the holdings? As I've said, I anticipate just investing in a low-cost global tracker for the next 15 years, but I hate the idea that if the market necessitates a rebalance, or switch, nobody can control this.

xylophone

You mention more than one child.
You mention that you want to gift into bare trust.
Really this necessitates a separate account for each child.
https://www.youinvest.co.uk/investing-for-children/dealing-accounts-for-children
If you have more than one child you are saving for, then you need to open a bare trust dealing account for each child. There are no limits on how much you can put into a bare trust dealing account.
Once again, it is unclear whether anyone other than a parent or grandparent would be able to open the accounts.

You and a parent could be joint Trustees I suppose.

Any income and gains would be taxable on the child who has his own PA and CGT allowance .

It is unlikely that a modest annual investment would give rise to any liability.

Managing the account is just like managing your own accounts with regard to buying and selling etc.

Malthusian

How complicated is it to put an investment account in bare trust? Would this require (expensive) legal costs?

Depending on the platform it can be as simple as opening a normal investment account with a few initials addded

Would the parents need to file a self-assessment on behalf of the children? I'm talking about contributions that wouldn't exceed £1,000 per child per year.

Not unless they have another income  income or realised gains exceed their allowances.

You refer to the funds being "under your control" (you were referring to Malthusian, but in my case, it would be me). Presumably, even if a bare trust exists, the responsible adult could control (switch, etc.) the holdings?

Until they turn 18 (16 in Scotland) you will have pretty much the same powers to switch / manage the holdings that you do with your own money (within the legal responsibilities of a Trustee).

DiamondLil

Sorry, I didn't make myself clear - I have six accounts with CSD; each one of these is designated to a grandchild. If I die before I've given the money away, the funds will form part of my estate as they are in my name and control, just designated (marked in CSD to each g'child by name).

My will states what is to happen to the funds once I'm gone. Tax is currently zero as there is no income. Other taxes I (or others) will worry about when the time comes. Despite (or perhaps because of) my handle, I'm not wealthy enough to worry unduly about the tax man.