Inheritance to 10 year old son

spudfather72

Hi there,

I should start by saying I have very little experience when it comes to managing any amount of money beyond my monthly pay!

My 10 year old son (born 2013) will receive approximately £28k through inheritance from his late great aunt, my aunt.

The terms of my aunt's will are that the money must be held in trust until my son is 18 years old.

The solicitor is going to pay the money to me and I have to provide evidence to the executor that the money is being safely held.

I've Googled to no avail and really have no idea what to do with it.

I don't want to place the money in a stocks or investment linked option that puts his capital at risk. JISA's don't seem to have a high enough limit, savings accounts also appear to be limited.

Please can I ask for opinions on what the options might be, and any potential pitfalls.

Thanks so much.

SF72

YBR

You could put up to the annual limit in a JISA now, and the rest in (an) other appropriate account(s), but transfer more into a JISA each year.

Other appropriate accounts might be a set of fixed term savings accounts which mature each year, or a limited access/notice account.

lr1277

Out of curiosity if the money is put in a savings account with taxable interest does the £100 interest rule for tax purposes come into play? Say 4% on £28k is £1120 in interest. Even if the first £10k was put in a JISA, the remaining £18k would have to be put somewhere. Again at 4% that is £720 over a year.

If you can get the money before April 5th, you can £10k in this tax year and £10k in next tax year from April 6th. The interest received and any tax payable might depend on when you get the money and hence open any accounts.

Alternatively or additionally, you could put the money in premium bonds as any winnings are tax free to both the parent and child I think.

wmb194

lr1277 said:

Out of curiosity if the money is put in a savings account with taxable interest does the £100 interest rule for tax purposes come into play? Say 4% on £28k is £1120 in interest. Even if the first £10k was put in a JISA, the remaining £18k would have to be put somewhere. Again at 4% that is £720 over a year.

If you can get the money before April 5th, you can £10k in this tax year and £10k in next tax year from April 6th. The interest received and any tax payable might depend on when you get the money and hence open any accounts.

Alternatively or additionally, you could put the money in premium bonds as any winnings are tax free to both the parent and child I think.

*£9,000 per tax year for Jisas. No, the £100 rule doesn't apply, because the money isn't coming from a parent.

wmb194

spudfather72 said:

Hi there,

I should start by saying I have very little experience when it comes to managing any amount of money beyond my monthly pay!

My 10 year old son (born 2013) will receive approximately £28k through inheritance from his late great aunt, my aunt.

The terms of my aunt's will are that the money must be held in trust until my son is 18 years old.

The solicitor is going to pay the money to me and I have to provide evidence to the executor that the money is being safely held.

I've Googled to no avail and really have no idea what to do with it.

I don't want to place the money in a stocks or investment linked option that puts his capital at risk. JISA's don't seem to have a high enough limit, savings accounts also appear to be limited.

Please can I ask for opinions on what the options might be, and any potential pitfalls.

Thanks so much.

SF72

I would reconsider not investing any of it but the simplest thing to do is open a children's savings account in their name with you as the trustee. These are, 'bare trusts.' 

mebu60

Interest over £100 within a tax year on a child's account has to be declared to HMRC and tax paid by the parent.

I would suggest for a straightforward approach, if you're quick you can get £9k into a JISA this tax year then on or after 6 April you can add another £9k to that for 24/25 tax year. Put the balance into premium bonds in your son's name. This would appear to meet your objectives without incurring any tax complications. 

NewPieman

mebu60 said:

Interest over £100 within a tax year on a child's account has to be declared to HMRC and tax paid by the parent.

I would suggest for a straightforward approach, if you're quick you can get £9k into a JISA this tax year then on or after 6 April you can add another £9k to that for 24/25 tax year. Put the balance into premium bonds in your son's name. This would appear to meet your objectives without incurring any tax complications. 

Just one thing - Premium Bonds transfer to the child when they reach their 16th Birthday (after you fill in the relevant paperwork etc).

Albermarle

Top children's savings accounts: 5.8% interest (moneysavingexpert.com)

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

lr1277

wmb194 said:

lr1277 said:

Out of curiosity if the money is put in a savings account with taxable interest does the £100 interest rule for tax purposes come into play? Say 4% on £28k is £1120 in interest. Even if the first £10k was put in a JISA, the remaining £18k would have to be put somewhere. Again at 4% that is £720 over a year.

If you can get the money before April 5th, you can £10k in this tax year and £10k in next tax year from April 6th. The interest received and any tax payable might depend on when you get the money and hence open any accounts.

Alternatively or additionally, you could put the money in premium bonds as any winnings are tax free to bothh the parent and child I think.

*£9,000 per tax year for Jisas. No, the £100 rule doesn't apply, because the money isn't coming from a parent.

Thanks. No idea where I got the £10k figure from.

mebu60

NewPieman said:

mebu60 said:

Interest over £100 within a tax year on a child's account has to be declared to HMRC and tax paid by the parent.

I would suggest for a straightforward approach, if you're quick you can get £9k into a JISA this tax year then on or after 6 April you can add another £9k to that for 24/25 tax year. Put the balance into premium bonds in your son's name. This would appear to meet your objectives without incurring any tax complications. 

Just one thing - Premium Bonds transfer to the child when they reach their 16th Birthday (after you fill in the relevant paperwork etc).

True, that wouldn't quite meet the 18th birthday requirement but the residual amount in PBs now could be transferred into the JISA in subsequent tax years if that is deemed critical. 

xylophone

Interest over £100 within a tax year on a child's account has to be declared to HMRC and tax paid by the parent.

That would only be the case if the interest arising was on  capital  gifted to  a minor unmarried child by the parent (outside a JISA).

https://www.gov.uk/savings-for-children#:~:text=There's usually no tax to,their own Personal Savings Allowance.

In this case, the money was a bequest to the child  - it would appear that the gift has indefeasibly vested in the child (so is his absolutely) but is to be held in trust until he reaches the age of 18.

When the parent receives the money, he/she could contribute £9000 to a Junior ISA  in the current tax year,

The best rate currently generally available is offered by Coventry BS,

https://www.thisismoney.co.uk/money/saving/article-1583863/Best-savings-rates-Junior-Isas-children-s-accounts.html

The balance could be held in  another child account in trust and moved into the JISA in subsequent tax years starting on 6 April.

https://www.thisismoney.co.uk/money/saving/article-1583863/Best-savings-rates-Junior-Isas-children-s-accounts.html