My wife's mother has gifted our son and daughter £15,000 each from a house sale. I'm looking for advice on what might be the best way to take care of this inheritance for them. Our children are two and four so we'll be looking at locking the money away for quite a long term. I'm not that clued up on what the best thing to do might be, the most I've ever done is stick a few quid in an ISA and pay into my pension. I see you can only invest 4K per annum in a kids ISA. So what might be a sensible, relatively low risk way to get the most out of their inheritance? Does it make any difference that the mother-in-law has transferred the money to my wife's current account? Will it be seen that the money is a gift from my wife to the children as far as tax is concerned?
Thanks for any initial advice or ideas.
James
Why do you want low risk if it is for the long run? This is exactly the situation where you can afford to take some risk.
Buy a cheap equity index fund, invest half of the money now and the other half in six or twelve months. Let it sit and do not touch it. Your kids will be happy for it.
It's not an "inheritance" but a grandparental gift. You are concerned as to whether the funds passing through your wife's bank account creates a problem. There are anti-avoidance rules- the "parental settlement" rules- which are intended to catch parents diverting income via their minor children or trusts for their minor children. In such cases the income is taxed as if it is the parent's. This should not apply in your circumstances but to avoid possible problems down the line it would be wise to document the grandparent's intent with a simple trust deed or even a letter of intent.
Children's cash ISA's off the best value for money and safest return. Their money is locked away till they're 18 though. Put in the max you can on the drip over the next 4 years and leave alone and relax. If you want you can put the balance left after each year into premium bonds and draw down from that to transfer into ISA's
Agree with Raffe- you can afford to put it in more "risky" investments over a 10 years plus period.
Of course the other thing to mention is the statutory duty to obtain proper investment advice imposed by tHe Trustee Act 2000. What this means in practice is that you should consult an IFA before actually making any investment decision.
I wouldn't want this thread to turn in the wrong direction, but are you sure you want your children to access a large amount of money on their 18th birthday?
I'm only asking as I was in a similar situation not that long ago and I've decided against it.
Best of luck.
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It's a good point - How sensible would you have been with 20 grand at 18?Originally Posted by Deckard81
Mmmm - "This'll help me through University" or "Cool, I can afford a fast car that'll cost a shedload to insure!"
I didn't go to University and car insurance wasn't as draconian as it is now, but I'm sure I'd blow it on the car if I was in the position now!
M
Genuine question, would 30K be enough for a depoist on a BTL property.
Yes there will be tax charges, mgmt costs and other issues so its cetainly not as easy as just chucking it in an ISA, But might be worth considering an almost mortgage free property in 20 years may well be very worth while.
Depening on where you live and how much grief you want from it that is.
I'm considering putting my childrens cash into a property - seems a bit risky to do that with my kids future but property in and around London is sought after, and my kids will need to be on the ladder at some point.
Just need to get 50K together for a deposit!
Take professional advice is essential. Get a good IFA. Set up a proper trust. Simple ones don't need to be expensive and control what the money can be used for until the trust matures. You can choose at what age that happens when the trust is set-up. Does not stop the trustees helping with Uni fees and the like, that can all be written in.
As to investment strategy, I'd go for a mix of Cash ISA specifically for minors and the rest in a sensible spread of investments. But see what the IFA says.
You can look on line for IFA's or talk to your friends to find a good one. It will be a long relationship so choose carefully.
I'd consider setting them up with a pension each. That amount of money over 60+ years will appreciate significantly. Like others have said you should take independent financial advice on this though.
+1. As I said above, professional advice is a necessity here.
Very sensible, the drip will even out fluctuations and stop the error involved with trying to time an investment. Like the premium bond bit too.
Also this is something anyone can do rather than pay someone to tell you exactly that.
Cheers,
Neil.
Neil, with respect I'm a qualified Trust & Estate Practitioner. I own a trust company and a tax consultancy firm and have been doing trust work since the 1980s. What you say is fine if someone is investing their own money but as I said above, when you're investing someone else's money, there is a statutory duty to take advice under the TA2000.
I don't have a big amount but we've set up junior ISAs for both of my sons. The plan is when they're 18 they'll have enough to either pay towards uni fees, a car or even a house deposit. I'm hoping over the next 18 years I can raise two boys wise enough to use the money wisely! It's something I wish I could've had when I grew up really
So a statutory duty to pay someone to tell you what you already know?
Ridiculous.
I could understand if it were millions but £30k/2?
Cheers,
Neil.
^^^ It's vital that various blokes in ties get an initial cut of the dosh, and then if possible, that they get a nice little earner every year from it. This is how the world works.
Don't I know it!
Cheers,
Neil.
Don't shoot the messenger, chaps! There is another way of looking at it. With the best will in the world-
1. The world is only likely to become more regulated and more litigious.
2. We can't know for certain whether our children will grow up to like us.
3. Investments can sometimes fail.
To put it bluntly, appointing a professional to advise will cover the trustee's backside in the event that something goes wrong.
Boring as buggery, but why not open a junior sipp pension for them? £3.6k a year allowed in, tax man adds 20%, should set them up nicely. Won't be able to blow it at 18, but can at 55
Brighty
If you funded a child up to 18 every year in a pension, that would probably completely take care of their retirement. The figure though is 2880 per annum and the tax relief takes it to 3600.
Some good ideas guys and a few things I hadn't considered.
BTL isn't really something we'd consider, I'd rather not have the hassle of dealing with a property, be it through an agency or otherwise.
As for the pension idea, we'd all rather them have the money earlier on than in later life, to hopefully help get them on their way. Although 18 might be pushing it, I'd hope that they turn out to be sensible enough to not blow it.
I'm not averse to risk, I'd like the money to work for them, but I'm very conscious of not blowing it for them. We will certainly look to obtain some "proper" independent advice, but really do appreciate the experience and comments of everyone here.
I appreciate inheritance was probably the wrong choice of phrase but didn't know what best to call it.
definately convince them to use ot to get onto the property ladder...
at 18 going to uni I would have blown it on travelling and cars - but I had a similar thing when I was 13 and I did not touch the money until I bought a property together with my now wife, when I was almost 30 ...
Its not all about how you bring them up. I have two children brought up exactly the same and they are chalk and cheese when it comes to spending and saving money... Obviously you have an input into how your children grow up, but its never 100%,
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