Savings for the grandchildren

trailingspouse

I've reached that stage in life where I want to put money into a savings account for the grandchildren. I used to buy presents for birthdays/Christmas, but as they get older I've no idea what they're 'in' to, and as they all live a distance away postage is also an issue.

What I would like to do is give them the £250 small gifts exemption (thinking IHT here) each (5 grandchildren). They are aged 15, 6, 5, 4 and 3. Obviously the 4 younger ones will have time for their savings to accumulate - and I'll use the £3000 annual exemption this year to bump up the savings for the 15 year old (I know I can't give them both in the same year). I plan for them to access their savings at 18.

Slight complication - don't know if it makes any difference - 4 of the kids are actually step-grandchildren.

Is there anything out there that would do the job?

Flugelhorn

makes no difference whether they are full or step grandchildren. Is your estate likely to be liable for IHT? Would you say that this is payable each year out of excess income rather than savings?

Albermarle

These gift levels ( £250, £3000 etc ) are only relevant if your estate will definitely be liable for IHT and you die within 7 years.

Otherwise a Stocks and shares JISA is usually recommended for the younger children. Perhaps a savings account for the 15 year old.
For the JISA's one of their parents will have to open them, probably the savings account too.

Top children's savings accounts: 5.8% interest (moneysavingexpert.com)
Top junior ISAs: 4.95% children's ISA tax free - MSE (moneysavingexpert.com)

xylophone

Do the children have junior ISAs?  If so, you might consider explaining what you would like to do to their parents and setting up a suitable arrangement.

trailingspouse

Yes, liable for IHT. Planning to live more than 7 years, but who can tell? Two of the 5 kids live in Australia, so JISA not possible for them. Payments are out of income not capital.

I'd prefer to 'do it for them' rather than expect the parents to set things up. I just find a sensible account, open 5 in the kids' names and then pay the money across each year? Presumably if the accounts are in the kids' names the IHT side of things is simple? The plan would be to give No1 grandchild (aged 15) £3000 this year then £250 each year until they're 18. The others will get £250 a year until they're 18.

xylophone

You will find it very difficult (if not impossible) to open accounts in the name of the non-resident grandchildren.
It really would be much easier to contact the parents and ask them to set up a suitable account in Australia.

https://www.savings.com.au/savings-accounts/high-interest-savings-accounts-for-kids-and-children

With regard to the UK resident children, the JISA really is the easiest option.

If the fifteen year old is resident and you can easily access a branch of Saffron BS, this might be suitable

https://www.saffronbs.co.uk/savings/savings-accounts/childrens-accounts

Otherwise perhaps

https://www.skipton.co.uk/savings/childrens/childrens-trust-saver

Flugelhorn

trailingspouse said:

Yes, liable for IHT. Planning to live more than 7 years, but who can tell? Two of the 5 kids live in Australia, so JISA not possible for them. Payments are out of income not capital.

If you make regular payments to people out of excess income and maintain your usual lifestyle then it does not need to considered as taxable gifts and  part of your estate - keep good records re this for your execs. 

I give my offspring probably about 15K a year on a  monthly basis and this is to stop the size of estate increasing and hence ultimately reduce the amount of the estate liable to IHT 

Don't know about opening accounts for non-resident children who are not your children - suspect only parents can do this 

Nardy

Flugelhorn said:

makes no difference whether they are full or step grandchildren. Is your estate likely to be liable for IHT? Would you say that this is payable each year out of excess income rather than savings?

This is something I don't understand, excess money is surely savings, even if it's accruing very low interest in a current account or no interest in a cardboard box in the loft.

RedImp_2

Maybe someone can clarify but why worry about keeping the gifts under the threshold?
The limits are there to prevent people circumventing IHT presumably.
I’m therefore presuming if your estate was liable for IHT then in theory this would be calculated taking into account over the limit payments but if you hadn’t made them then the calculation is still the same.  Hopefully you live loads longer and it falls out of your estate so much the better.

Nardy

Albermarle said:

These gift levels ( £250, £3000 etc ) are only relevant if your estate will definitely be liable for IHT and you die within 7 years.

Otherwise a Stocks and shares JISA is usually recommended for the younger children. Perhaps a savings account for the 15 year old.
For the JISA's one of their parents will have to open them, probably the savings account too.

Top children's savings accounts: 5.8% interest (moneysavingexpert.com)
Top junior ISAs: 4.95% children's ISA tax free - MSE (moneysavingexpert.com)

It's very long term, but what about paying into a pension fund for grandchildren?

eskbanker

Nardy said:

Flugelhorn said:

makes no difference whether they are full or step grandchildren. Is your estate likely to be liable for IHT? Would you say that this is payable each year out of excess income rather than savings?

This is something I don't understand, excess money is surely savings, even if it's accruing very low interest in a current account or no interest in a cardboard box in the loft.

The term is specifically excess income rather than excess money, i.e. for the purposes of establishing whether gifts are in or out of an estate for IHT, the test is to validate that gifts are made from excess income (i.e. monthly earnings/receipts minus monthly expenditure) rather than from savings:

You can make regular payments to another person, for example to help with their living costs. There’s no limit to how much you can give tax free, as long as:

• you can afford the payments after meeting your usual living costs
• you pay from your regular monthly income

https://www.gov.uk/inheritance-tax/gifts
https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm14255