ISA question

Greasyreagan

Hi,

Just wanted to get a view on this suggestion.

I was thinking about giving money to my children so they could each open a cash ISA.

They would keep the interest and at term end they would transfer the initial amount back to me.

Just not sure if there would be any financial implications in doing this so any advice welcome.

masonic

Are these adult children? The main financial implication is that as soon as the money is added to an ISA in their name it is legally theirs and they do not have to give it back. There are also deprivation of assets issues if you could be considered to reasonably anticipate needing state funded care at the time of the gift. Furthermore, if the children are married, the money could be considered in a settlement in the event they divorce. So not entirely without implications...

Keep_pedalling

So you don’t want to gift anything just give them an interest free loan.

saajan_12

Greasyreagan said:

Hi,

Just wanted to get a view on this suggestion.

I was thinking about giving money to my children so they could each open a cash ISA.

They would keep the interest and at term end they would transfer the initial amount back to me.

Just not sure if there would be any financial implications in doing this so any advice welcome.

Essentially sounds like you're loaning them £<amount> for 0% interest for <term>. 

You can bolster this by writing up a little loan note stating the above, to avoid any potential issues with inheritance tax / deprivation of assets / claims by a spouse etc. 

Each child may place the amount in an interest bearing account / ISA and retain the interest, or just put it under the bed.. no consequence to you. 

jimjames

Greasyreagan said:

Hi,

Just wanted to get a view on this suggestion.

I was thinking about giving money to my children so they could each open a cash ISA.

They would keep the interest and at term end they would transfer the initial amount back to me.

Just not sure if there would be any financial implications in doing this so any advice welcome.

Maybe it would help if you explain the rationale behind your plan? If it's reducing tax then it might cause more problems than it solves as outlined above. Also you state you are giving your children money then that you want it back which would suggest it's not a gift after all. There are no limits for giving money but anything given within 7 years of a death would be liable for IHT. It might be easier to just give them the interest if that was your aim as it will avoid the other complications.

Bigwheels1111

I forsee the future, Bank accounts frozen ( money laundering ).
Tax avoidance.
Ask for adjoining cells.

TiVo_Lad

You do have the £3,000 annual gift exemption that you could use, but that is on the basis that the money you give to your children is a gift (you're not expecting it back), whereas what you're proposing is a loan. Depending on the amounts you're talking about you could just put it all into an ISA (assuming you haven't already used your £20K allowance) and give the chldren the interest as a gift. If it's larger amounts, you probably need to go down the loan route, but you'll need legal advice to set this up properly, which will likely swallow up a huge amount of the benefit you envisaged.

You might be better off just giving them the "interest" and not faff around with the principal in an ISA. Again, depending on the envisaged amount you might be able to get this under the £3K allowance (which you can roll over once from the previous tax year so potentially £6K total in the first year). Note this is £3K/£6K in total, not per child.