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Bare Trust Investment Account - For Minor's Own Assets
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Yes, this was discussed with HMRC - if the income could be seen as settled by my father as it’s derived from the trusts he did settle (but legally leaves those trusts when paid to the beneficiaries). They would not commit to that being correct though!
In terms of the bank accounts, some are in the names of the children, some in ‘child savings accounts’ where I am bare trustee as not all children are is old enough to have their own accounts
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I may need access to the funds for school fees before any child reaches 18, so it can’t go in a JISA.
Yes, the accrued income is diminishing year on year, but that doesn’t mean there isn’t an amount worth investing in the short to medium term.
Given I’ve stated a JISA is not suitable, I’m not sure what other tax efficient options there are? Investing in funds would allow use of their capital gains allowance which is currently unused (income and savings allowances used against trust income and personal bank interest today)
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Lawyers also set up trusts ‘as agent’ for people without the capacity; there is precedent there.
That's where a lawyer is appointed as a professional deputy by the Court of Protection for someone who doesn't have mental capacity.
That doesn't set any sort of "precedent" for a parent to do what you want to do.
My intent was to use my fiduciary responsibility for the child to place their assets into trust - purely to allow me to invest them on their behalf.
It's already been explained to you that you can't do this.
Fiduciary responsibility is an obligation to act in someone's best interests. It isn't a power or authority to do anything. It's not something you can "use".
It’s not really any different to managing his money in his JISA or JSIPP
It's completely different.
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It's not clear to me how much income (between the trust and bank interest) the child is receiving, but if it greatly exceeds £18,570 per year then that would make things more challenging.
However caution should be exercised if targeting funds generating a significant proportion of their growth through capital gains, as these would typically be investments that should be held for a minimum of 10 years and I'm assuming if a JISA is unsuitable, so would such a fund be.
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I have to admit that my thinking about paying the income from the IIP to the bare trust was that it would be no different to paying the income from the IIP trust to the current bank account. I suspect the bank account itself is a bare trust for the child. After all the child presumably isn't writing cheques on the account or otherwise running it himself.
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OP I now understand your predicament.
The trust income distributed to your child is already in a bank account in its own name where you already stand ( in essence ) as bare trustee/ custodian until age 18.
However you want to invest for potential better returns on one of the popular platforms but have hit a brick wall because there is no formal bare trust deed you can present to the platform.
The solution in my view is to create a ' pilot' bare trust funded by a living grandparent/Uncle/Aunt (whomever is convenient for this task really). A notional £100 would suffice ( the minimum to access the platform I reccomend).
This follows the suggestion made by @DRS1 in this thread, and in a way its a variation on the theme of the Rysaffe pilot discretionary trusts created by your father to receive substantial trust funds under the terms of his will. However in this case the additional trust funds to be added to the bare trust after its creation by an adult relative, will be your child's own monies.
Given you want the flexibility of using the bare trust funds for the child's benefit prior to age 18, you need a Bare Trust template that accommodates such flexible powers.
In this regard I have already ascertained on behalf of another OP that AJ Bell's template is hopeless for this purpose. By contrast it was clear to me that Hargreaves Lansdown's version was a carefully thought out document that just might suit your particular circumstances if you are happy to use that platform.
I attach HL's Bare Trust details below for you to download their application and bare trust template for perusal -
You will find the trust template after scrolling down towards the bottom of the application form.
Note in particular the power to distribute income and capital prior to age 18 is covered by clause 3 of the bare trust deed. Also note the exclusion of sections 31 and 32 of the trustee Act 1925 which would otherwise fetter the Bare trustees discretion in applying funds on the child's behalf.
I freely admit this approach is a bit of a fudge ( legally), and you just might want to run it pass the family lawyer for another opinion. However given your desire to access an investment platform on your child's behalf without the constraints of an JISA, I see no other solution.
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HMRC disagree, said I could do it and had no issue with me naming a minor as settlor on TRS!
I meant the precedent exists for differentiating between the signature on the deed and the owner of the assets; and that, ultimately, the real settlor (using HMRC terms) is the owner of the assets.
I still fail to see how me, as parent, putting my child’s own money into a JISA and managing it on their behalf should be any different from using a standard dealing account (tax aside)?
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Less than £18k, so I don’t necessarily need a tax efficient scheme (although it reduces the probability of a tax liability).
I’m comfortable with the risks of investing within the timeframe a JISA would not be suitable for.
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https://forums.moneysavingexpert.com/discussion/comment/81967806#Comment_81967806
Thanks, you are about 95% of the way there, but correct on all material points.
Will seek professional advice on creation of a pilot trust with a living grandparent as settlor and the ability for other settlors to then add funds to that trust.
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If it is less than £18k, then there will be no tax liability for the savings interest, and the income will decrease over time based on what you've said. So I do not understand the desire to generate capital gains rather than income for any of the funds. I'm sceptical that after all fees you will be able to generate a net total return much above 4% with low risk investments over a less than 10 year time horizon with a high probability of success. There is a risk that you would be considered to have adversely affected the beneficiary's interests if you are unlucky in your market timing. You've not mentioned wishing to hedge against inflation with some of the funds, but that is something that would necessitate an investment account and may make sense.
Regarding HMRC's opinion on trust law, it is worthless. It is the provider you will need to convince. @DRS1's first suggestion as expanded on by @poseidon1 might have legs as it uses a living adult to establish the account, thereafter the onus is on you to ensure you are acting within your remit, which can be confirmed with a proper legal view if you are in any doubt.
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