Confused - child inheritance??

back2square1

Hi I have briefly had a look at the options but I am not sure what is the best thing to do.

My daughter is 8yrs old and has just received £18,000 from a late relative. This money will be used for university or if she doesn't take that route in life then I shall give it to her when she wants to buy a property, whenever that may be.

Can anyone please advise on what I should do, your help would be most appreciated.

Many thanks

Mimi_Arc_en_ciel

ill save it for ya . . . . lol

im useless with money so cant adviuse im afraid - but i know my dad put my inheritance in a high interest bank account which i couldnt touch until i was 21 (apprently they knew i wasnt going to be mature enough at 18, ok they were right but still lol)

martinman3

If you were investing for the longer term, more than five years, unit trusts are the thing to look at. You would see an IFA for proper advice. However, the stock market is very volatile at the moment and I would wait until things calm down.
You can put it in savings accounts, fixed and variable, and later, if you wish, move some of it somewhere else. It is better for you if the money stays in the child's name so that the interest can be paid gross with the submission of a R85 and, as the money can be proven to have been received from a relative and not a parent, you will not be affected by the HMRC £100 rule.

A good idea would be to place some in an instant access childs account, some in a fixed interest savings bond and some in an index linked savings bond for example as the bonds don't (always) allow access until they mature.

See http://www.moneyfacts.co.uk/savings/bestbuys/childrens-savings-accounts.aspx for instant access.

Yorkshire BS has a 2 year fixed rate at 7.00% which can be opened in trust for a child. Note that it is currently better than their Treasure Bond specifically for children at 6.3% !
http://www.ybs.co.uk/savings/future/2yrfixed/index.jsp

Derbyshire BS has a 1 year fixed rate at 7.00%
http://www.thederbyshire.co.uk/savings/fixed_rate_bonds/1_year_fixed_rate_bond.aspx?ekmensel=2152299f_24_0_182_4

You should look out for other fixed rates from other organisations which can be opened like this.

Leeds BS has a 2 year index-linked savings bond which pays RPI+2.5% which can also be opened in trust for a child. Note that it is much better than the current issue of NS&I Index Linked certs for a non tax-payer.
http://www.leedsbuildingsociety.co.uk/savings/inflation_buster_bond.html

Ensure that you fill in a R85 for each account you open and have the interest added to the account.

Also read http://www.moneysavingexpert.com/savings/child-savings-tax-free

back2square1

Thanks Martinman for your advice. I definitely will not wish to have access to this money. The earliest time will be when she turns 18yrs old if she wishes to go University. If she decides not to go University then I wouldn't touch it until she is at least 25yrs and trying to buy a property.

The money was left to her in a will and my mum was the executor the money has not come from me at all. I would presume the cheque stating it is from the late relative would confirm the money is not from me.

So am I best to spread it across different accounts? To be honest I just want to get it sorted now and then leave it for at least 10yrs.

sdooley

Over at least 10 years it would probably be worth putting some of the money in a stock-market or bond-based investment. Cash accounts are fine but it is all too tempting to 'dip' into them as and when your daughter needs things.

martinman3

back2square1 wrote: »

So am I best to spread it across different accounts? To be honest I just want to get it sorted now and then leave it for at least 10yrs.

It is better to spread across different types of account as we cannot be certain which way the economy/interest rates are heading. A common mistake is to lock away all your money and then find that you need some in an emergency so having some in an instant access account is a good idea. Besides, if rates rise you can use some to take advantage of even higher fixed rate savings bonds.

Those fixed rate and index linked savings bonds only have a term of two years so at that point you would need to decide what to do with the proceeds. The banks/building societies are hoping that interest rates/money market rates will be lower in the future so they are currently not offering 7% fixed for more than 2 years.

The stock market has fallen at least 10% in the last year and I personally would not be investing in it now. The sensible money waits until the falls stop, remember you should buy low sell high and buying in now could mean a couple of years of losses. Review the situation when the savings bonds mature and jump in then if the time is right.

martinman3

martinman3 wrote: »

Yorkshire BS have a 2 year fixed rate at 7.00% which can be opened in trust for a child. Note that it is currently better than their Treasure Bond specifically for children at 6.3% !
http://www.ybs.co.uk/savings/future/2yrfixed/index.jsp

Too late ! It has gone.:(