Children's savings

Entsman · 4 September 2017 at 2:16PM

Hi... both my young children have been given 75k each from their grandparent..we are not sure where we should put it?... I'm thinking, as they are both under 5 is that we invest in bricks and mortar and become trustees.. this means we hope that the property will appreciate in the next 15 yrs and they can both earn from the rental income..where can we put it for now without tying it up

Thanks

Reaper · 4 September 2017 at 2:44PM

I wouldn't. The government has been gradually cracking down on Buy-to-Lets plus they can be a lot of work (periods of absence, repairs, evictions etc)

While in recent years the housing market did well looking over a 30 year period the stock market did better.
http://www.thisismoney.co.uk/money/investing/article-2958803/Cash-stocks-property-best-returns-past-30-years.html

I prefer the stock market where you can be trustees with a lot less effort beyond choosing what to invest in.

I used a mixture of CTF (now replaced by Junior ISAs), Investment Trust and Child Pension for my son. Though the last option may be a bit extreme for you.

Malthusian · 4 September 2017 at 3:08PM

Did the grandparents give the money to you (with a non-binding wish that it be used for your children's benefit) or did they give it to the children to be held by you in trust?

If the money has been given to your children in trust then as trustees you have a legal duty to invest their money as a prudent person of business would. Putting all their eggs in one residential property basket does not meet that.

In addition, they will be absolutely entitled to access the money at 18. You didn't say they were twins, so presumably they will reach 18 at different times. That means putting all their money in a single property is especially unsuitable as the elder child will need to be able to access their half when they turn 18.

As to your original question, NS&I Income Bonds are easy access, guaranteed by the government and can be straightforwardly opened by trustees. There may be higher rates available but you will have to do some research to find which ones can be opened by trustees.

Entsman · 4 September 2017 at 4:25PM

Yes the money was given to the boys as a cheque with there name on that still sits in a drawer as need to bank it in the first instance but don't know where?..I will look into the options in the threads 👍

xylophone · 4 September 2017 at 4:53PM

Grandparent should make a note with his/her will as to the date and amount of the gift.

If this money has been given to each child absolutely and unconditionally, then you will hold it in bare trust for each child. This gives the child the absolute right to access and control at the age of 18.

If you have not done so already, you can open a JISA for each child and contribute the full subscription.

https://www.gov.uk/junior-individual-savings-accounts/overview

You may choose cash/stocks and shares or both.

You may choose to hedge your bets and open both.

At the present time the Coventry BS offers the best cash rate.

You can make the full subscription to each of these in succeeding years.

If you have an account with Nationwide and your child has a savings account, you can open and manage a Smart Limited access account account on behalf of each child until each reaches the 16th birthday.
http://www.nationwide.co.uk/products/savings/smart-limited-access/features-and-benefits

Virgin Money will permit you to open and manage an account on behalf of a child and offers the chance to retain Trustee status after the age of 16 -/B] see here under 16th Birthday.

https://uk.virginmoney.com/virgin/savings/learn/childrens-accounts/

It is possible to hold stocks and shares investments in bare trust outside a JISA.

http://www.hl.co.uk/faqs/contact-us/can-i-invest-on-behalf-of-a-child

https://www.bailliegifford.com/individual-investors/how-to-invest/childrens-savings-plan/

In a bare trust, the child is the beneficial owner of income and capital - interest (except where capital has been provided by a parent and exceeds £100) is chargeable on the child who has his own Personal Allowance and GGT Allowance.

http://www.thepfs.org/knowledge/technical-articles/articles/new-tax-year-for-trusts-trustees-and-beneficiaries/40936

Entsman · 5 September 2017 at 8:05AM

I am thinking about a jisa but not sure if I want to tie the money up without access and I know it's tax free savings but the boys won't get taxed anyway unless they are above personal allowance? Am I correct in that assumption?

Keep_pedalling · 5 September 2017 at 8:40AM

Entsman wrote: »

I am thinking about a jisa but not sure if I want to tie the money up without access and I know it's tax free savings but the boys won't get taxed anyway unless they are above personal allowance? Am I correct in that assumption?

Considering their ages a JISA is for long term savings / investments, so S&S is the better option, and I why would you want access? it is their money you can't touch it (although you can move the investments around). It's not just IT that is protected in an ISA but capital gains.

As the bulk of this gift remains a part of the GPs estate for IHT proposes for the next 7 years they need to keep records of this and other substancial gifts with a copy of their wills to keep things simple for their executors when the time comes.

Malthusian · 5 September 2017 at 9:38AM

Entsman wrote: »

I am thinking about a jisa but not sure if I want to tie the money up without access and I know it's tax free savings but the boys won't get taxed anyway unless they are above personal allowance? Am I correct in that assumption?

Correct. If you have spare cash it would be more tax efficient to use their Junior ISA allowances using your own money, and invest the grandparents' money in bare trust. But if the Junior ISA allowances would otherwise go unused, it makes little difference.

Is there a possibility the trust funds will be spent on private school fees or something else for their sole benefit? If not, access is a non-issue until they reach age 18. (And personally, if you weren't planning to send them to private school before the gifts, I wouldn't change that now. It is highly likely that the money will be of more benefit to them later in life.)

Keep pedalling mentions capital gains tax, but they each have an £11,300 annual capital gains allowance so for an investment of £75,000 this should not be an issue unless growth is absolutely stratospheric or you don't bother to use it. (Regular use of capital gains allowances requires some admin, but it isn't difficult.)

xylophone · 7 September 2017 at 10:31AM

I am thinking about a jisa but not sure if I want to tie the money up without access and I know it's tax free savings but the boys won't get taxed anyway unless they are above personal allowance? Am I correct in that assumption?

The money has been provided by a grandparent, not a parent so this is a non parental bare trust.

Link in post 5 above.

http://www.thepfs.org/knowledge/technical-articles/articles/new-tax-year-for-trusts-trustees-and-beneficiaries/40936

The Basics
Bare trusts

This means that under a non-parental bare trust all income and, under any bare trust, all capital gains are assessed on the beneficiary at the beneficiary's tax rate(s). The PSA and the dividend allowance are available as well as the full annual CGT exemption.

Children's savings

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