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  • FIRST POST
    • Entsman
    • By Entsman 29th Jan 18, 4:48 PM
    • 26Posts
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    Entsman
    Where oh where to invest
    • #1
    • 29th Jan 18, 4:48 PM
    Where oh where to invest 29th Jan 18 at 4:48 PM
    Hi all

    My 2 boys ( 6&3 ) have some inheritance ( £150,000) I would like to make it grow for them, thought about buying and renting a property (about 5k per annum from rent) and of course capital growth from the property and looked at putting 50k in Halifax at 2.5% 20k in nationwide and the rest left with hsbc...bringing in about 3.5k with no risk, any other ideas please?

    Thanks
Page 1
    • AnotherJoe
    • By AnotherJoe 29th Jan 18, 5:40 PM
    • 9,034 Posts
    • 9,929 Thanks
    AnotherJoe
    • #2
    • 29th Jan 18, 5:40 PM
    • #2
    • 29th Jan 18, 5:40 PM
    Buying a property would be extremely problematic.

    First off all children arent allowed to own property so I imagine some sort of trust would be needed (if thats even allowed).

    Second, there is the complexity of the two boys "owning" one thing, what happens if one of them wants their money at 18 when the other is only 15?

    You also say "of course capital growth" as if that's a given, which it isn't. Odds are with you but it is not a given.

    Then you have maintenance cost (who's paying for that?), tenant risk, management fees, the legal complexities of being a landlord which get more onerous each passing year.

    Your second idea is the other extreme, savings provide an amount that essentially is below inflation, so in 15 years time the boys might have the equivalent of say £120k in todays money.

    The "sensible" but scary thing is to invest the money in funds. But over a 15 year timescale it should outperform inflation savings accounts and property. It can probably be sheltered from tax by careful management as well, which a property cant be. You are probably going to need some help with that so you'd have to find an IFA Independent Financial Adviser. Note that the "I" is key. Must be Independent.
    • ValiantSon
    • By ValiantSon 29th Jan 18, 5:42 PM
    • 1,596 Posts
    • 1,338 Thanks
    ValiantSon
    • #3
    • 29th Jan 18, 5:42 PM
    • #3
    • 29th Jan 18, 5:42 PM
    Hi all

    My 2 boys ( 6&3 ) have some inheritance ( £150,000) I would like to make it grow for them, thought about buying and renting a property (about 5k per annum from rent) and of course capital growth from the property and looked at putting 50k in Halifax at 2.5% 20k in nationwide and the rest left with hsbc...bringing in about 3.5k with no risk, any other ideas please?

    Thanks
    Originally posted by Entsman
    Don't buy a property: it is fraught with pitfalls and risks.

    If you have no real understanding or experience of investments then you have two options, really:

    1) Speak to an IFA who will help you find appropriate investments to meet your objectives in line with your attitude to risk.

    2) Read up about investing and manage those investments yourself.

    Option 1 should result in reasonable investments, but will be the more expensive option (including higher ongoing costs). Option 2 will require more work from you but will be the cheaper option. Only you can know which option is best for you. Do you have the time, interest and inclination to learn about investing? Do you have the nerve not to sell up when there is a market correction and your investments lose 30-50%? If the answer is no to either of these questions then I'd suggest option 1 might be the best bet.
    Last edited by ValiantSon; 29-01-2018 at 5:47 PM.
    • xylophone
    • By xylophone 29th Jan 18, 5:52 PM
    • 25,176 Posts
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    xylophone
    • #4
    • 29th Jan 18, 5:52 PM
    • #4
    • 29th Jan 18, 5:52 PM
    You should check the terms of the will and if necessary clarify the nature of the Trust that has arisen.

    Assuming that this money has been left to your children without contingency, ("indefeasibly vested") then the money belongs to the children absolutely and you hold in bare trust only.

    https://www.gov.uk/hmrc-internal-manuals/trusts-settlements-and-estates-manual/tsem1563

    This means that each child can call for access and control of his inheritance at age 18.

    Presumably half of the capital sum belongs to each child.

    I suspect that using the money to buy a property is beyond your legal powers as bare trustee - you can consult the solicitor who drafted the will.



    https://www.michelmores.com/news-views/news/trustees-and-investments

    See also

    https://www.gov.uk/trusts-taxes/types-of-trust
    • Entsman
    • By Entsman 29th Jan 18, 5:56 PM
    • 26 Posts
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    Entsman
    • #5
    • 29th Jan 18, 5:56 PM
    Investing
    • #5
    • 29th Jan 18, 5:56 PM
    Hi Joe

    I am already a landlord and historically over the past 15 years have done well here in the south east with property having one we bought for 55k having an offer of 140k on it and I had taken costs into consideration with my conservative annual rent profit after costs, however always a gamble on house prices rising enough and having good tenants..but itís all the eggs in one basket... I will speak to an IFA to chat about the stock market investments route which I have been unsure of because I know nothing about it at all.. thanks for reply
    • Entsman
    • By Entsman 29th Jan 18, 6:08 PM
    • 26 Posts
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    Entsman
    • #6
    • 29th Jan 18, 6:08 PM
    Investing
    • #6
    • 29th Jan 18, 6:08 PM
    Hi xylophone

    No will as the grandparent is still alive..I understand completely that the money is theirs but as they are minors we are bare trust guardians and their parents and as such we have the ability to invest the money how we think will be in their best interest, this is what Iím struggling with not the moral or legal issues surrounding it. To buy property and rent it, to just bank it or to invest it in their best interest..!!!128522;
    • xylophone
    • By xylophone 29th Jan 18, 6:33 PM
    • 25,176 Posts
    • 14,823 Thanks
    xylophone
    • #7
    • 29th Jan 18, 6:33 PM
    • #7
    • 29th Jan 18, 6:33 PM
    No will as the grandparent is still alive.
    Then this is not an inheritance but a direct gift from grandparent to child?

    Or do you mean that the grandparent has made a gift into Trust and there is a Trust Deed with specific powers?

    I still doubt that if this is a bare trust that you have the legal right to use the money for a property or to link each child's individual gift.

    You should still check the tax situation.
    • xylophone
    • By xylophone 29th Jan 18, 6:38 PM
    • 25,176 Posts
    • 14,823 Thanks
    xylophone
    • #8
    • 29th Jan 18, 6:38 PM
    • #8
    • 29th Jan 18, 6:38 PM
    And had you looked at Junior ISAs?

    https://www.gov.uk/junior-individual-savings-accounts
    • IanManc
    • By IanManc 29th Jan 18, 7:46 PM
    • 521 Posts
    • 847 Thanks
    IanManc
    • #9
    • 29th Jan 18, 7:46 PM
    • #9
    • 29th Jan 18, 7:46 PM
    Hi xylophone

    No will as the grandparent is still alive..I understand completely that the money is theirs but as they are minors we are bare trust guardians and their parents and as such we have the ability to invest the money how we think will be in their best interest, this is what Iím struggling with not the moral or legal issues surrounding it. To buy property and rent it, to just bank it or to invest it in their best interest..!!!128522;
    Originally posted by Entsman
    The bit I've highlighted doesn't make sense: you are not able to consider buying a property without thinking of the legal issues - not least because those issues are insurmountable.
    • Peelerfart
    • By Peelerfart 29th Jan 18, 7:57 PM
    • 1,879 Posts
    • 1,661 Thanks
    Peelerfart
    Really I am no expert,

    Is the a possibility of deliberate depravation of assets here?

    I accept I may be talking rubbish.
    Space available for rent
    • ValiantSon
    • By ValiantSon 29th Jan 18, 9:16 PM
    • 1,596 Posts
    • 1,338 Thanks
    ValiantSon
    Really I am no expert,

    Is the a possibility of deliberate depravation of assets here?

    I accept I may be talking rubbish.
    Originally posted by Peelerfart
    Possibly, although we don't know exactly what the arrangement is with regards to this money. It could be that the grandparent has bequeathed the sum (in equal share???) to their grandsons and the OP is speculating about what to do when they die. The more likely explanation is that a trust fund has been set up, but then the OP doesn't really seem to know what the rules of that fund are. Alternatively it is a straightforward gift and deprivation of assets could become an issue as could IHT.

    The OP may know the answers to this and be clear about the situation, but based on what they have told us this all looks very murky and, like others, I have suspicion that some of the OP's plans/ideas would not be legal (although I am not suggesting any intent, but rather possible ignorance of the law - ignorance is, of course, not a valid defence).
    • BananaRepublic
    • By BananaRepublic 29th Jan 18, 9:16 PM
    • 1,191 Posts
    • 871 Thanks
    BananaRepublic
    Really I am no expert,

    Is the a possibility of deliberate depravation of assets here?

    I accept I may be talking rubbish.
    Originally posted by Peelerfart
    Good point, the second one, not the first and third. There are definite tax implications for this as others have said.

    As to where to invest, over 15+ years equities will almost certainly far outdo savings accounts and cash. Assuming you invest wisely. Do so unwisely and you could lose money.

    Like many here I have invested for ~20 years in equities with success. Itís not hard, but you do have to learn the basics and not panic in downturns. Or hire a shiny suited financial person called an IFA.
    • Peelerfart
    • By Peelerfart 29th Jan 18, 9:35 PM
    • 1,879 Posts
    • 1,661 Thanks
    Peelerfart
    !!!8221;Good point, the second one, not the first and third"

    Thanks banana, I've always had my doubters !!!55357;!!!56834;, fortunately I've never been one of them.

    Think we'll have to wait for clarification from the OP.
    Space available for rent
    • steampowered
    • By steampowered 29th Jan 18, 10:04 PM
    • 2,411 Posts
    • 2,332 Thanks
    steampowered
    Please consider that, if you use the money to buy a property for the children, you will risk making them ineligible for government support for first time buyers (such as the help to buy scheme), since they would have already had an interest in property.

    You also risk making your children liable for additional stamp duty when they want to buy their own property.

    You also make it difficult for one of the children to get the money when they need it - they are different ages and may need to access the money at different times.

    Investing in a single property is also a higher risk approach than a balanced stock market fund which is diversified across different countries and different sectors.

    I suggest considering stock market investments, such as leaving the money in a balanced fund (which is exactly how pensions work). Not to mention the tax benefits which are available for stock market investments but not property.
    Last edited by steampowered; 29-01-2018 at 10:09 PM.
    • Malthusian
    • By Malthusian 30th Jan 18, 10:34 AM
    • 3,918 Posts
    • 6,117 Thanks
    Malthusian
    You need professional independent financial advice. Doing as you have suggested would be a breach of your legal duty as trustee to invest the money as a prudent person of business would. Due to the failure to sensibly diversify, and the fact that the eldest beneficiary potentially won't be able to access the money he is absolutely entitled to when he turns 18. Plus the potential tax consequences (stamp duty, support for first time buyers).

    Your children would be entitled to sue you if the result is that your eldest can't access the money when he turns 18 or the property becomes a duff investment.

    Taking independent regulated professional advice ensures you have met your duty to invest the money prudently.
    • ValiantSon
    • By ValiantSon 30th Jan 18, 3:25 PM
    • 1,596 Posts
    • 1,338 Thanks
    ValiantSon
    You need professional independent financial advice. Doing as you have suggested would be a breach of your legal duty as trustee to invest the money as a prudent person of business would. Due to the failure to sensibly diversify, and the fact that the eldest beneficiary potentially won't be able to access the money he is absolutely entitled to when he turns 18. Plus the potential tax consequences (stamp duty, support for first time buyers).

    Your children would be entitled to sue you if the result is that your eldest can't access the money when he turns 18 or the property becomes a duff investment.


    Taking independent regulated professional advice ensures you have met your duty to invest the money prudently.
    Originally posted by Malthusian
    Absolutely. OP, please don't dismiss the possibility of your children taking legal action in the future. Many families have been torn apart over money. None of us would want to think that it would happen in our own family, but it remains a possibility.

    As a trustee you have significant legal duties. You cannot treat the money as you might your own. What you would do with a £150,000 windfall is not the same as what you should do with your children's £150,000 windfall.
    • thenewcomer
    • By thenewcomer 30th Jan 18, 11:33 PM
    • 82 Posts
    • 15 Thanks
    thenewcomer
    property is a good investment. but like what others have pointed out:

    1. it is risky. even as an experienced property investor, for every 5 properties you buy, two will be of not good investment.

    2. they will lose their first time buyer privileges. my dad did this to my brother and when he was financially stable, he was not happy with it!
    • Entsman
    • By Entsman 6th Feb 18, 2:02 PM
    • 26 Posts
    • 0 Thanks
    Entsman
    Property
    Good point but children are not allowed to own property in the uk until they are 18 so it would be sold before they reached this age avoiding them both having any legal involvement in the property until then.. From our point of view it would act as capital investment with the bonus of rental income achieving a much higher yield at this present time than other investments on offer..
    • Entsman
    • By Entsman 6th Feb 18, 2:17 PM
    • 26 Posts
    • 0 Thanks
    Entsman
    Investment
    Hi xylophone

    Their grandfather basically gave this money to them as his FA said he needed to get shot of some of his money as the only person benifiting was the tax man.. I think we are bare trustees and as both boys are very young our solicitor said we can do what we want with the money as trustees but we want to make it work for them obviously...
    reading all the posts fund investment seems to be the best option but Iím always wary of a shiny suit.. I think I will talk to a FA, I have seen companies online like ď easy investĒ etc but again am wary about handing over my sons monies
    • Entsman
    • By Entsman 6th Feb 18, 2:29 PM
    • 26 Posts
    • 0 Thanks
    Entsman
    Junior isa
    Yes I have and the stocks & shares isa also..worried that if we have horrible 18 yr olds they may spend spend spend..
    I am thinking for now of putting 50k in nationwide 2.5% pa
    20k in Halifax 2% pa until I do more research into fund investments
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