HELP...advice on investing child's inheritance

Christinencl_2

My 16 year old son has just inherited a tidy sum. It needs to go into a trust until he is 18 (14 months away) and I would appreciate any advice on the best place to store it until he is of age.

cloud_dog

Based on the timespan I think you can only look at a savings account, and get the interest paid gross - form IR85, and assuming your son doesn't earn in excess of his tax allowance.

The alternative is to speak with him now and get him to agree that some of the money should be invested for the future, either in a pension or investments (shares, investments funds, etc). I would favour the second approach and agree on the splits.

cloud_dog

Christinencl_2

thanks for that...I might need to add that my son is severely disabled..he is autistic and consequently doesnt earn anything. He would probably find it difficult to appreciate any talk about investments etc so its down to me to make the right decisions I'm afraid..and I have NO clue

cloud_dog

I'm affraid we would need to get into legal discussions about whether you will retain 'power of attourney' over your sons affairs once he reaches 18.

If this is the case then you really need to seek the advice of a finacial advised who has expereince of long term planning, and taking into consideration eventualities we probably would not want to think about.

There is a memeber, Dunstoh, who frequesnts this board and is an IFA, and I would hope (s)he would be able to give you specific direction for the type of advice you need.

cloud_dog

dunstonh

The trustees have to do what is best for your son. They also have to be seen to be doing the best as well. Getting advice from a forum wouldnt wash it. Although its great for opinions and views.

The short timescale would eliminate many products areas but it depends on what is going to happen to the money after that time as well. Before and after may be interlinked.

Christinencl_2

I am one of the trustees....executor of estate is the other...I had heard something about chldrens investment or bonds which pay high rate of interest with no risk...any thoughts where I might find info on these or similar.
By the way ... he looks after his own money....tight as a fish's whatsit...shrewd lad in his own little way. so after he is 18 he will have control...and I will be happy just to put him on right path etc
Thanks for this by the way...much appreciated :O)

DaveO

Christinencl wrote:

thanks for that...I might need to add that my son is severely disabled..he is autistic and consequently doesnt earn anything. He would probably find it difficult to appreciate any talk about investments etc so its down to me to make the right decisions I'm afraid..and I have NO clue

One of my children is autistic as well and I am currently trying to work out the best way to invest for his future. He is 8 so there is more time for the investment to grow but that does not deal with the issues of our children being autisticand how the money is mangaed once they turn 18.

If you go over to the Motley Fool web site there is an investing for children message board. I have not as yet, posed my question about how best to invest for my son on there but you may as well take a look to see if anyone has any ideas.

I recently read a book I got free from the Fool about Making your Child a Millionaire.

To cut a long story short the advice in the book was basically very simple:

a) The stock market is the only place to invest via an Index Tracker long term.
b) Set the investment up as a bare trust, which is very simple to do.

Bare trusts "mature" when the benificiary is 18 and basically they get their mits on the money at 18.

The advice in the book was don't bother trying for any different kind of trust as it cost money (thus diluting what you can invest) and you should just trust your children at 18 anyway having educated them in the ways of the financial world.

Of course this is based on long term investing starting when the kids are 0 yaers old and ignores the specific situation you and I are in.

I have not as yet come up with any ideas as to how best to plan for the financial future of my son but one route I am serously considering is setting up a stakeholder pension. This will guarantee at least some form of pension for my son at age 55 long after I am gone and removes the posibility of the money being frittered away sooner.

The problem is, what to do to help out financially in the intervening years 18 to 55?

As I said as yet I don't have a solution.

One thing to be aware of is tax. Depending what you do your sons income from the inheritance cold end up getting taxed at your marginal tax rate but for more information on that again I would recommend a vist to the Motley Fool investing for children message board. The Fool if you didn't already know is at https://www.fool.co.uk

Dave

DaveO

Christinencl wrote:

I am one of the trustees....executor of estate is the other...I had heard something about chldrens investment or bonds which pay high rate of interest with no risk...any thoughts where I might find info on these or similar.
By the way ... he looks after his own money....tight as a fish's whatsit...shrewd lad in his own little way. so after he is 18 he will have control...and I will be happy just to put him on right path etc
Thanks for this by the way...much appreciated :O)

Missed this before posting my other reply. If your son is going to look after the cash at 18 then the bare trust idea I mentioned in the post may be good enough for you.

To get one set up you need to invest the money in something that allows it to be declared as such. Again I suggest a vist to the Fool to discuss this further.

One thing that crossed my mind having read your post above is that once you set up a bare trust and the money reverts to his control at 18 I assume he isn't going to blow it all at once from what you say?

If so then putting the money into a bare trust now in a suitbale investment seems a no-brainer from what I have read. This is because once he gets control he can leave the money in the investment and let it continue to grow should he wish to do so as he gets full control of the account.

What I am trying to say is that you don't need to consider a short term investment for the money of just two years but could put it in something with a longer term investment goal should you wish to do so. By looking at it this way you are not limiting yourself to short term two year investments just because of the coming of age issue at 18.

Bare trusts are very easy to set up by the way, you don't need a solicitor or IFA and you don't even need to tell the Inland Revenue but many people do anyway (and it cost all of 50p to do that last time I looked).

Dave