Account for child/minor vs. Bare trust for child/minor

itwasntme001

If grand parents want to gift some money to a grandchild who is younger than 18 years, I understand this can be done by opening an account for the child with trustees appointed or a bare trust be set up.

Is there a difference between the two or is a child account automatically a bare trust, given that trustees need to be assigned?

If the child's parents divorce, is the child's account included in the marital assets, and if different, does a bare trust better protect the child's money from being included in marital assets?

itwasntme001

[Deleted User] said:

itwasntme001 said:

If grand parents want to gift some money to a grandchild who is younger than 18 years, I understand this can be done by opening an account for the child with trustees appointed or a bare trust be set up.

Is there a difference between the two or is a child account automatically a bare trust, given that trustees need to be assigned?

If the child's parents divorce, is the child's account included in the marital assets, and if different, does a bare trust better protect the child's money from being included in marital assets?

Essentially, there's no difference.  A bare trust is just a way of someone holding the assets on behalf of a beneficiary.  The person doing the holding can be called a trustee or nominee.  With a bare trust, there is no discretion at all about who benefits.  In your case, it would be the child and no one else.  Once the child is 18 (or 16 in Scotland) the child can require the assets to be transferred into their name.  

As it's the child's money, the child pays tax on any interest in the normal way (e.g. personal allowance is available, etc) although the trustee can account for any tax to HMRC if they want to.  There is an exception to this tax treatment where a parent (directly or indirectly) provided the funds.  

As it's the child's money it has nothing to do with marital assets, even if the trustee is a parent.

Thanks for the explanation.

So am I right in assuming that all child accounts need to be setup as bare trusts, or is there a clear distinction between an account opened using a bare trust, and an account opened for a child simply assigning a nominee instead of using a bare trustl?

If there is a clear distinction, for the account without using a bare trust, can the account have additional "beneficiaries" added later on such as another grandchild, or is it the same rules as a bare trust, in that you can not ammend the beneficiairies once setup?

Keep_pedalling

Another option is to get the parents to open a JISA and for you to fund it.

itwasntme001

[Deleted User] said:

itwasntme001 said:

[Deleted User] said:

itwasntme001 said:

If grand parents want to gift some money to a grandchild who is younger than 18 years, I understand this can be done by opening an account for the child with trustees appointed or a bare trust be set up.

Is there a difference between the two or is a child account automatically a bare trust, given that trustees need to be assigned?

If the child's parents divorce, is the child's account included in the marital assets, and if different, does a bare trust better protect the child's money from being included in marital assets?

Essentially, there's no difference.  A bare trust is just a way of someone holding the assets on behalf of a beneficiary.  The person doing the holding can be called a trustee or nominee.  With a bare trust, there is no discretion at all about who benefits.  In your case, it would be the child and no one else.  Once the child is 18 (or 16 in Scotland) the child can require the assets to be transferred into their name.  

As it's the child's money, the child pays tax on any interest in the normal way (e.g. personal allowance is available, etc) although the trustee can account for any tax to HMRC if they want to.  There is an exception to this tax treatment where a parent (directly or indirectly) provided the funds.  

As it's the child's money it has nothing to do with marital assets, even if the trustee is a parent.

Thanks for the explanation.

So am I right in assuming that all child accounts need to be setup as bare trusts, or is there a clear distinction between an account opened using a bare trust, and an account opened for a child simply assigning a nominee instead of using a bare trustl?

If there is a clear distinction, for the account without using a bare trust, can the account have additional "beneficiaries" added later on such as another grandchild, or is it the same rules as a bare trust, in that you can not ammend the beneficiairies once setup?

Have a look at what the terms and conditions of the account you want to use and see what it says.  This is a link to a Nationwide one that mentions bare trust: https://www.nationwide.co.uk/-/assets/nationwidecouk/documents/savings/terms-and-conditions/p2781-smart-limited-access.pdf

If the account you want doesn't mention bare trust or similar, it would be best to document that you are holding the account as bare trustee.

The terms and conditions will determine whether you can add other beneficiaries.  I personally would not do that.  If, for example, there's £100 in there and you add a second beneficiary and add £50 for the second child you'd have to remember that two-thirds of the balance belongs to the first child and £50 belongs to the second.  You could not say that it is now £75 each as you would then be stealing £25 from the first child.  Much easier with two accounts.

Why is it important to document about holding account as bare trustee?  What I am trying to understand is what is the benefit of a bare trust setup as opposed ot one without?  Surely in both cases the money is the child's and the grandparents are responsible how to invest it etc but money is only to be spent on the child?

Can the existing pot which is initially for child1 be split in half when child2 comes along and so essentially split the pot in two for the two children?

itwasntme001

Keep_pedalling said:

Another option is to get the parents to open a JISA and for you to fund it.

The sums we are talking about is in the hundreds of thousands.  The parents would setup a JISA separately with their own money.

Keep_pedalling

itwasntme001 said:

Keep_pedalling said:

Another option is to get the parents to open a JISA and for you to fund it.

The sums we are talking about is in the hundreds of thousands.  The parents would setup a JISA separately with their own money.

Are you aware that with a bare trust your grandchildren will be entitled to do what they like with it on their 18th birthday?

xylophone

If you are considering settling hundreds of thousands on your grandchild/grandchildren, I would strongly  suggest that you consult a solicitor expert in Wills and Trusts.

https://www.step.org/directory/members

itwasntme001

Keep_pedalling said:

itwasntme001 said:

Keep_pedalling said:

Another option is to get the parents to open a JISA and for you to fund it.

The sums we are talking about is in the hundreds of thousands.  The parents would setup a JISA separately with their own money.

Are you aware that with a bare trust your grandchildren will be entitled to do what they like with it on their 18th birthday?

Yes aware this is the case and it is a good point.  It is probably the only issue preventing us from being 100% certain a bare trust is the way.  The problem is the alternative, a discretionary trust, is a lot more comple xin terms of admin and charges.  But there does not seem to be any other options.

itwasntme001

xylophone said:

If you are considering settling hundreds of thousands on your grandchild/grandchildren, I would strongly  suggest that you consult a solicitor expert in Wills and Trusts.

https://www.step.org/directory/members

I thought an estate planner is the best person to talk to initially.  TO decide on the best option to take.  Then go to a solicitor if needed to make sure legally it is done properly.  But I was told by a financial advisor to set up a discretionary trust you do not even need a solicitor.  The fund management company who would manage the assets would handle it all for you.

IanManc

itwasntme001 said:

xylophone said:

If you are considering settling hundreds of thousands on your grandchild/grandchildren, I would strongly  suggest that you consult a solicitor expert in Wills and Trusts.

https://www.step.org/directory/members

I thought an estate planner is the best person to talk to initially. TO decide on the best option to take.

Yes, and you can pay them a lot of money. And then you can go to an expert wills and trusts solicitor for proper expert advice afterwards.

Then go to a solicitor if needed to make sure legally it is done properly.

So you'll have paid twice. But at least you'll have got the correct advice from the solicitor.

But I was told by a financial advisor to set up a discretionary trust you do not even need a solicitor.

Financial advisors are just salesman. A financial advisor won't be an expert in discretionary trusts, but clearly feels qualified enough to tell someone who may be settling tens of thousands of pounds in trusts that they don't need an expert in the field. 

 The fund management company who would manage the assets would handle it all for you.

I'm sure they would - and you would pay through the nose for the privilege.

                  

itwasntme001

IanManc said:

itwasntme001 said:

xylophone said:

If you are considering settling hundreds of thousands on your grandchild/grandchildren, I would strongly  suggest that you consult a solicitor expert in Wills and Trusts.

https://www.step.org/directory/members

I thought an estate planner is the best person to talk to initially. TO decide on the best option to take.

Yes, and you can pay them a lot of money. And then you can go to an expert wills and trusts solicitor for proper expert advice afterwards.

Then go to a solicitor if needed to make sure legally it is done properly.

So you'll have paid twice. But at least you'll have got the correct advice from the solicitor.

But I was told by a financial advisor to set up a discretionary trust you do not even need a solicitor.

Financial advisors are just salesman. A financial advisor won't be an expert in discretionary trusts, but clearly feels qualified enough to tell someone who may be settling tens of thousands of pounds in trusts that they don't need an expert in the field. 

 The fund management company who would manage the assets would handle it all for you.

I'm sure they would - and you would pay through the nose for the privilege.

                  

Yeh I understand all that.  It is just that who do I go to for advice?  On thsi forum everyone says to posters to get financial advice as no point asking random people on the internet, especially with large sums involved.

Do solicitors give advice, I thought they just carry out legal services so you have to know what you want first?