Large child inheritance - which account?

Helsbelz

Back last year my Nanna passed away and left my 8 year old a large inheritance, the solicitor had it in an account while the will etc was sorted, now that is done we have been appointed trustees and need to open an account for the money to stay in until she is 21

Any advice on which account would be best? I’ve looked at junior Isas but they say it’s £9k limit per year, on that basis it would be years before the full amount is in the account, also, the banks all say 18 - does that mean she will automatically get access at 18 or can we stipulate she can’t have it until 21?

Thanks for any advice  

xylophone

Back last year my Nanna passed away and left my 8 year old a large inheritance, 

If the inheritance has "indefeasibly vested" in the child, then she is the beneficial owner of the  money and it needs to be held in bare trust for her.

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

Any income arising  belongs to her and is taxable on her and she has her own personal tax allowance/ savings allowance and CGT allowance. 

Notwithstanding the direction as to age 21, the beneficiary of a bare trust has the absolute right to access and control at age 18 (16 in Scotland) and  she could challenge the Trustees on that basis.

It would not be impossible to hold funds in a Bare Trust account beyond the age of 18 but of course the young adult would need to be advised of the existence of the Trust and income etc as she would be responsible for her own tax affairs from that point and any such income might make a  difference  to her tax position.

It would be possible to  use a JISA for £9000 of the bequest and hold the balance in an account held in bare trust for the child, moving the money to the JISA in subsequent years.

Example https://www.bathbuildingsociety.co.uk/savings/personal-savings/Junior%20Saver

The JISA may be cash or stocks and shares or a mixture of both.

It is possible to open a non jisa stocks and shares account in bare trust for a child -  example

https://www.hl.co.uk/investment-services/investing-for-children/junior-investment-account

An IFA could advise on suitable investments if required.

https://adviserbook.co.uk/

Helsbelz

Thank you @xylophone

We already have a saving account open for her so assuming the bank can change it to be accessible by both myself and my husband (a condition of the trust) then we can place the balance in there and transfer 9k over to a junior isa each year 

we do not want any risk at all so are happy to just go on A fixed saving route. 

theoretica

I think it would be simpler to have this money separate from your savings for her - easier than untangling it later.  For instance she might have good use for your savings for university, or a car, but want to respect her great Nanna's wishes and not touch than portion until 21.

Helsbelz

Thanks @theoretica - it would only be in her standard savings account until it is all transferred into the isa, this would take around 5 -6 years depending on interest so would be in there long before she reaches 18 

Helsbelz

I’ve just checked our accounts

in her name she has a savings account and an ISA

I think that children can only have one ISA in their name, is that correct? If so then we will need to add the money to that account and it would be added to what we already have saved for her 

the savings account has a balance of 0 as we put everything into the isa which has much better interest 

xylophone

I think that children can only have one ISA in their name, is that correct? 

A child can have both a stocks and shares element and a cash element if desired but only £9000  can be subscribed across the two elements in any one tax year.

https://www.gov.uk/junior-individual-savings-accounts

If nothing has been subscribed into her JISA in this tax year then the whole £9000 can be subscribed to her JISA account.

The best cash JISA rate (3.25%) is currently offered by NS&I and transfers in are accepted but the service is slow at the moment.

In your position, I would be inclined to open a fresh savings account (s) to hold the Trust money.

https://uk.virginmoney.com/savings/products/virgin_young_saver_issue_7 Would take up to £25000.

National Savings can be held in Trust  https://www.nsandi.com/how-do-i-manage-accounts-other-people see the information for Trustees leaflet - the whole sum could be held there but the interest rate is only 1% on the Direct Saver.