Giving an Inheritance to Children and Grandchildren

Ginger_chap

silvercar said:

My kids, as minors, were left an inheritance from their great grandmother. With the instruction that they should not receive it until they were 25 and spend it on enjoying themselves. We just opened a savings account in their names and didn’t tell them about it until they were 25. Sometimes people complicate things with “what ifs” far too much.

I'm in a similar position with my 2 kids (left good sum of money from grandfather). I was going to do that same and put money into a savings acccount until 25. However once they turn 18 they can have access to it and the provider writes to both the trustee and beneficary and 'we' no longer have control of the account. Money would default in easy access account (on low interest rate no doubt). See below from Yorkshire BS (one of best rates for childrens accounts on MSE tables). So if you dont want the kids to have access till they are 25 your stuck with shoddy poor rate of interest for many years. Is there any way around this to help compound upward? 

What happens when you turn 18?

The Childrens Saver will be transferred to an easy access savings account. We'll write to you with full details at least 14 days before the Childrens Saver ends.

If the account is in trust, we will write to both the beneficiary and trustee. The trustee will be automatically removed. Before the beneficiary can manage the account or take money out, they need to complete an application form and provide ID.

silvercar

Ginger_chap said:

silvercar said:

My kids, as minors, were left an inheritance from their great grandmother. With the instruction that they should not receive it until they were 25 and spend it on enjoying themselves. We just opened a savings account in their names and didn’t tell them about it until they were 25. Sometimes people complicate things with “what ifs” far too much.

I'm in a similar position with my 2 kids (left good sum of money from grandfather). I was going to do that same and put money into a savings acccount until 25. However once they turn 18 they can have access to it and the provider writes to both the trustee and beneficary and 'we' no longer have control of the account. Money would default in easy access account (on low interest rate no doubt). See below from Yorkshire BS (one of best rates for childrens accounts on MSE tables). So if you dont want the kids to have access till they are 25 your stuck with shoddy poor rate of interest for many years. Is there any way around this to help compound upward? 

What happens when you turn 18?

The Childrens Saver will be transferred to an easy access savings account. We'll write to you with full details at least 14 days before the Childrens Saver ends.

If the account is in trust, we will write to both the beneficiary and trustee. The trustee will be automatically removed. Before the beneficiary can manage the account or take money out, they need to complete an application form and provide ID.

Two options - keep the accounts online to get better rates or invest the money in stocks and shares from the start, then there won't be a date when the interest rate drops. 

At the end of the day, when they are 25 you tell them that great grandma left them X, it has grown to Y, and great grandma requested that you spend it on enjoying yourself. Whose going to argue?

In our case the amount wasn't that significant. In fact one son used it for a weekend away with his girlfriend, that would have had prudish great grandma turning in her grave.

madbadrob

One thing to consider and its something we have been discussing in another thread.  If your father left the money to yourselves and you then gave either as a gift or a DoV then should you for whatever reason need help from the DWP (no one knows if their job is secure for example) that by just handing this money over could lead to a claim that you have deliberately deprived yourself of money that could have been used etc.  I understand your reasoning behind what you are doing but for clarity in this instance I would have your fatehr set up trusts with their parents as trustees until they attained the age of 18 or yourselves made as trustees.  

The pitfalls that could occur in the future are such that I would probably seek some legal/financial guidance on this before your father was to pass so that this could all be dealt with in a way that his money goes to where he wants it to go.  

Rob

Ginger_chap

madbadrob said:

One thing to consider and its something we have been discussing in another thread.  If your father left the money to yourselves and you then gave either as a gift or a DoV then should you for whatever reason need help from the DWP (no one knows if their job is secure for example) that by just handing this money over could lead to a claim that you have deliberately deprived yourself of money that could have been used etc.  I understand your reasoning behind what you are doing but for clarity in this instance I would have your fatehr set up trusts with their parents as trustees until they attained the age of 18 or yourselves made as trustees.  

The pitfalls that could occur in the future are such that I would probably seek some legal/financial guidance on this before your father was to pass so that this could all be dealt with in a way that his money goes to where he wants it to go.  

Rob

I'd be bit nervous about S&S investment, not that I know much but think a market correction is due. Online is fine until they reach 18 then I cant transfer from account to account as and when the rate plumets when they hit 18 (and it defaults to easy access rate). Unless I invest in my name but my ISA allowance is already used. I was talking about a childrens account in their name and not one in mine, if that makes sense.

madbadrob

Ginger_chap said:

madbadrob said:

One thing to consider and its something we have been discussing in another thread.  If your father left the money to yourselves and you then gave either as a gift or a DoV then should you for whatever reason need help from the DWP (no one knows if their job is secure for example) that by just handing this money over could lead to a claim that you have deliberately deprived yourself of money that could have been used etc.  I understand your reasoning behind what you are doing but for clarity in this instance I would have your fatehr set up trusts with their parents as trustees until they attained the age of 18 or yourselves made as trustees.  

The pitfalls that could occur in the future are such that I would probably seek some legal/financial guidance on this before your father was to pass so that this could all be dealt with in a way that his money goes to where he wants it to go.  

Rob

I'd be bit nervous about S&S investment, not that I know much but think a market correction is due. Online is fine until they reach 18 then I cant transfer from account to account as and when the rate plumets when they hit 18 (and it defaults to easy access rate). Unless I invest in my name but my ISA allowance is already used. I was talking about a childrens account in their name and not one in mine, if that makes sense.

Im not sure you have replied to the correct person because your reply is nothing like what I have said lol

silvercar

madbadrob said:

Ginger_chap said:

madbadrob said:

One thing to consider and its something we have been discussing in another thread.  If your father left the money to yourselves and you then gave either as a gift or a DoV then should you for whatever reason need help from the DWP (no one knows if their job is secure for example) that by just handing this money over could lead to a claim that you have deliberately deprived yourself of money that could have been used etc.  I understand your reasoning behind what you are doing but for clarity in this instance I would have your fatehr set up trusts with their parents as trustees until they attained the age of 18 or yourselves made as trustees.  

The pitfalls that could occur in the future are such that I would probably seek some legal/financial guidance on this before your father was to pass so that this could all be dealt with in a way that his money goes to where he wants it to go.  

Rob

I'd be bit nervous about S&S investment, not that I know much but think a market correction is due. Online is fine until they reach 18 then I cant transfer from account to account as and when the rate plumets when they hit 18 (and it defaults to easy access rate). Unless I invest in my name but my ISA allowance is already used. I was talking about a childrens account in their name and not one in mine, if that makes sense.

Im not sure you have replied to the correct person because your reply is nothing like what I have said lol

Was probably a reply to me. Surely if you are controlling the accounts you continue to do so until you reveal the inheritance to your children? I mean what are your children going to do when they find out at 25 that they have a lump sum? Sue you?

Savvy_Sue

silvercar said:

madbadrob said:

Ginger_chap said:

I'd be bit nervous about S&S investment, not that I know much but think a market correction is due. Online is fine until they reach 18 then I cant transfer from account to account as and when the rate plumets when they hit 18 (and it defaults to easy access rate). Unless I invest in my name but my ISA allowance is already used. I was talking about a childrens account in their name and not one in mine, if that makes sense.

Im not sure you have replied to the correct person because your reply is nothing like what I have said lol

Was probably a reply to me. Surely if you are controlling the accounts you continue to do so until you reveal the inheritance to your children? I mean what are your children going to do when they find out at 25 that they have a lump sum? Sue you?

I guess the issue is with the difference between the parent keeping a legacy in an account in their own name and not telling the child about it until they are 25, and putting the legacy into an account in the child's name. 

There are risks with each: if it's in the parent's name, any interest is counted as part of the parent's income and may therefore be subject to tax. Plus, there's nothing to stop the parent spending it. Plus, if there's any claim for means-tested benefits, or a divorce, then it counts towards their assets (although if it's clearly in trust for the child then the latter doesn't apply.)

But if it's in the child's name, they can't simply be kept in ignorance after the age of 18, at which point they may spend the lot. 

silvercar

Savvy_Sue said:

silvercar said:

madbadrob said:

Ginger_chap said:

I'd be bit nervous about S&S investment, not that I know much but think a market correction is due. Online is fine until they reach 18 then I cant transfer from account to account as and when the rate plumets when they hit 18 (and it defaults to easy access rate). Unless I invest in my name but my ISA allowance is already used. I was talking about a childrens account in their name and not one in mine, if that makes sense.

Im not sure you have replied to the correct person because your reply is nothing like what I have said lol

Was probably a reply to me. Surely if you are controlling the accounts you continue to do so until you reveal the inheritance to your children? I mean what are your children going to do when they find out at 25 that they have a lump sum? Sue you?

I guess the issue is with the difference between the parent keeping a legacy in an account in their own name and not telling the child about it until they are 25, and putting the legacy into an account in the child's name. 

There are risks with each: if it's in the parent's name, any interest is counted as part of the parent's income and may therefore be subject to tax. Plus, there's nothing to stop the parent spending it. Plus, if there's any claim for means-tested benefits, or a divorce, then it counts towards their assets (although if it's clearly in trust for the child then the latter doesn't apply.)

But if it's in the child's name, they can't simply be kept in ignorance after the age of 18, at which point they may spend the lot. 

Always put it in the child’s name as it is their money. Always a risk that the parent’s pass away before a child hits 25 and so you don’t want the money in the parent’s name at that point.

As for your last sentence; trust me, it’s very easy to not mention it to your children until they hit 25! They barely notice the landline, actually picking up mail from the front door mat would be far too much effort. If by chance they did stumble on something, you can honestly say ‘it is just money grandma left you for when you turn 25. ’

Newly_retired

Usually a bank or Building society will contact a child when they turn 18 inviting them to turn their Junior ISA or other child's account into an adult version. I don't know what happens if they don't get a reply. My grandchildren have been sufficiently well educated to want to make the best use of their savings. The youngest at 17 is already looking to see what his options are at 18.

BikingBud

silvercar said:

madbadrob said:

Ginger_chap said:

madbadrob said:

One thing to consider and its something we have been discussing in another thread.  If your father left the money to yourselves and you then gave either as a gift or a DoV then should you for whatever reason need help from the DWP (no one knows if their job is secure for example) that by just handing this money over could lead to a claim that you have deliberately deprived yourself of money that could have been used etc.  I understand your reasoning behind what you are doing but for clarity in this instance I would have your fatehr set up trusts with their parents as trustees until they attained the age of 18 or yourselves made as trustees.  

The pitfalls that could occur in the future are such that I would probably seek some legal/financial guidance on this before your father was to pass so that this could all be dealt with in a way that his money goes to where he wants it to go.  

Rob

I'd be bit nervous about S&S investment, not that I know much but think a market correction is due. Online is fine until they reach 18 then I cant transfer from account to account as and when the rate plumets when they hit 18 (and it defaults to easy access rate). Unless I invest in my name but my ISA allowance is already used. I was talking about a childrens account in their name and not one in mine, if that makes sense.

Im not sure you have replied to the correct person because your reply is nothing like what I have said lol

Was probably a reply to me. Surely if you are controlling the accounts you continue to do so until you reveal the inheritance to your children? I mean what are your children going to do when they find out at 25 that they have a lump sum? Sue you?

Nowadays, who knows?

What if the sum left was £100K and if given access at say 18 they could have invested and turned that into 160-180 K, or set up a business, or bought a house and set themselves up with accommodation, then your actions might be considered to be prejudicial to their interests.

Further this doesn't tally with your later comment about opening the account in the child's name. How does that work and you maintain secrecy?