Child account funds held till 21

GeorgePig1413

Hi my parents want to open bank accounts for their grandchildren and put a lump sum into it but with no access until age 21. They went to Nationwide and were told they can't do anything as our 8 year old is too young. They also spoke to their solicitor who confirmed this was correct? Any advice would be great, thanks. 

eskbanker

A competent solicitor ought to be able to explain how a trust would need to be set up in order to achieve this, but it's not something that can be done by a bank or building society, who (in the absence of any such trust being set up) would only be able to open accounts that would be accessible at 18.

Baldytyke88

A savings account could pay more interest than inflation at the moment, but you should ask yourself what type of investment is the best for over 10 years.

400ixl

Would need to be a trust, bank account access cannot be restricted beyond 18.

GeorgePig1413

Both my parents are very elderly and not in the best health - If funds are held in trust (or in an account till 18) and something happens to them within 7 years are there any tax implications or if they go into a nursing home and money has been 'disposed of' recently are there issues there? 

eskbanker

GeorgePig1413 said:

Both my parents are very elderly and not in the best health - If funds are held in trust (or in an account till 18) and something happens to them within 7 years are there any tax implications or if they go into a nursing home and money has been 'disposed of' recently are there issues there? 

Yes to both, so, given this disclosure, it would probably make more sense for the money to be passed to the grandchildren via their wills.

GeorgePig1413

That's what we thought the plan was but they seem keen to get it done and put into accounts for them now?!

Keep_pedalling

GeorgePig1413 said:

Both my parents are very elderly and not in the best health - If funds are held in trust (or in an account till 18) and something happens to them within 7 years are there any tax implications or if they go into a nursing home and money has been 'disposed of' recently are there issues there? 

Gifts to trusts are treated the same as direct gifts to people for UHT purposes (unless they are tensioning a beneficial interest in the trust). The main problem is that this is going to have to be a discretionary trust which are a pain to manage and are subject to high levels of taxation. How much are we talking about here? If we are not talking about very large sums of money the S&Ss Junior n might be worth looking at (which is what we have done for our grand children) They will have access from 18 but it gives you a change of teaching them the value of investing.

LHW99

There is an annual £3000 gift allowance, which takes that amount out of the estate for IHT.

On the other hand, regular gifts from income, assuming they don't affect their standard of living are also free of IHT, and possibly wouldn't trigger deprivation of assets considerations (though I'm no expert).

daveyjp

I'd say 21 is too old. When further education was more or less free it probably made sense, but now I'd stick it in a long term investment until 18 as they will have need for money at that age.  Whether it be for Uni, or costs associated with working.

Bigwheels1111

As a side note 18 or 21 is irrelevant if you as parents have not thought the kids what money is.
I only see two futures on the horizon, they spend every penny in a few months or save it.
My niece got 3k on her 21st, lasted 3 months max. ( Mum ) daughter below.

My great niece will get 1k from me & my late wife next year on her 21st, I informed her of this last week.
After saying thank you, her first words were that will help towards my house deposit.
If she holds to this I will give her another thousand when she buys a property.
She works part time after college, tries to save half what she earns.
There is hope in the world.