Best way to invest for grandchildren.

abrack66

My mother wishes to give each of her grandchildren £10,000 out of their grandfathers estate.
Their ages range from 12 to 20. Two are in England, two in Scotland and one in Australia.

She wants the money to be "in trust" until their 25th birthday. By this I think she just means she doesn't want them to have access to it until they are 25.

What is the best way to achieve this?

Thoughts welcome.

Keep_pedalling

A trust for the children who are considered adults if going to be difficult as discretionary trusts are a pain to manage and are subject to hefty taxation.

is there any element of IHT planning in this? 

thegreenone

Maths is not my strong point so happy to be corrected.

The 20 year old will get less than the 12 year old overall.  Why doesn't Mum keep the £50k in a separate but high interest paying account and give money to the grandchildren for special occasions ie 21st birthdays, weddings, new home etc.  The fund should keep building so the younger ones still get the same and the money may last longer.  I realise inflation plays it's part here.

abrack66

Keep_pedalling said:

A trust for the children who are considered adults if going to be difficult as discretionary trusts are a pain to manage and are subject to hefty taxation.

is there any element of IHT planning in this? 

No - I think it is just that she doesnt want them to have access till they are 25! Simple as that.
Not IHT planning per se - estate isnt big enough.

pinkshoes

She could just hold onto the money in a savings account, then once they turn 25 give them a lump sum?

Or give them £100 a week for 2 years once they turn 20? They can then choose to save it or spend it, without the temptation of a lump sum to blow in one go! 

The interest she gets on the account can be used to adjust the amount due to inflation. 

silvercar

In similar in similar circumstances, we’ve opened accounts in the grandchildren’s names and not told them about it until they reach the prescribed age. Always the risk that someone will spill the beans, but it’s a lot less hassle. Given that the grandfather didn’t actually write this into his will, grandmother is making a gift to the grandchildren, so there is no executor to complain that the will wasn’t followed.

Newly_retired

I don't think it is possible to open accounts for under 16s without their parents providing full details to the bank, who then has a duty to inform the child once they reach the age of 16, so this means that parents cannot hide the money until they are 25, unless they keep it in their own name, which has its own pitfalls.

silvercar

Newly_retired said:

I don't think it is possible to open accounts for under 16s without their parents providing full details to the bank, who then has a duty to inform the child once they reach the age of 16, so this means that parents cannot hide the money until they are 25, unless they keep it in their own name, which has its own pitfalls.

Little kids won’t have their own email addresses so any notification will come by post. Quite easy for a parent to file that away until an appropriate time.

sheramber

You should consult a solicitor to draw up a trust to ensure it is correct.

That could  cost as much as the gift.

thegreenone

Compound Interest Calculator - Daily, Monthly, Yearly Compounding (thecalculatorsite.com)

I've been playing with this.  Start with putting £50k in for five years until eldest grandchild hits 25.  Deduct £10k.  I don't know the ages of the middle three, so put in 17 and two 15 year olds and then the 12 year old.  Deduct 10k after three years for the 17 y/o.  Recalculate.  I then deducted 20k after 2 years for the two 15 year olds.  Recalculate.  Deduct 10k for the 12 year after three years.  The figures are interesting.  Interest rates will vary.

If your Mum gave each child 10k at 25 and left the money there (interest rates will vary), there could be still be another decent payout to each child 10 years later or on your Mum's passing, she could stipulate that all money in that account should be divided equally between her grandchildren.  

A lot simpler than trusts.