How to 'ringfence' money for child3?

[Thriftshoppe]

My dad died last year and has left me £20k. I'm keeping this separate and don't need to use it at the moment.
I want to pass this inheritance on to Child3 who is now 16. Child1 and Child2 are my stepchildren and I want the money from my dad to be kept separate from me and DH's estate when we die so that the full £20k all goes directly to Child3, as my dad would have wanted.
I think Child3 is too young to give the money to now, but I want him to have it later in his life, or on my death. Is this a legal issue? Can I put something in my will?
Any advice would be welcome.

[Farrowandbawl]

Open up a trust fund or seperate account for him.

[Thriftshoppe]

Thanks Farrowandbawl - but trust fund has costs associated with it and would not be worth it for 20k , which is a 'small' amount. Separate account - yes, could do that but there's no way of hiding the money away from him, he would know he had a bank account with 20k in it...at 16 he's not mature enough to be trusted with that!

[Braganza]

You can't really hide it away and give it to him at the same time. However, you could tie it up in a fixed-term bond. Putting it in a 5-year savings bond would mean that he couldn't access it before he was 21, but it nwould be in his name.

[antshouse]

I have a similar issue with money left for my daughter. It's to be kept until she is 25. It currently in a childrens account paying 3% but needs moving this year as she turns 16. Its in her name but I control it at the moment. I have put some into a stocks and shares junior Isa with Hargreaves lansdown and it cannot be withdrawn until she is 18. Next years Isa allowance will be in cash or shares depending on interest rate offers at the time. The rest may end up in long term bonds in her name.

[BCFPete]

Totally agree with Farrowandball- you've described a trust fund. You're right in thinking there are costs, and hiring an adviser who charges £150 per hour would be proportionately a lot more expensive than if you had £200k. But there are still a few firms who charge a percentage of the size of the investment, which could be a lot more cost efficient. I'd look into it in more detail before assuming you can't do a trust fund.

[Thriftshoppe]

BCFPete, thanks . "there are still a few firms who charge a percentage of the size of the investment, which could be a lot more cost efficient. I'd look into it in more detail before assuming you can't do a trust fund." - would you be able to advise me on how to find these firms who'd charge a percentage of the investment? I've only got the internet to advise me and I'm a bit bewildered tbh. We got legal advice when my dad died and solicitor said there would be costs for a trust fund of about £2k = per year.
Antshouse, does your daughter know she has the inheritance money, did you tell her? For the long term bonds , i thought you had to be 18 to buy bonds, so how can they be in her name?

[antshouse]

Yes she knows as she has older siblings who already have their money. She also knows that it for when she is 25.

She has her own current account with a debit card for her pocket money and paper round earnings and I have deliberately avoided using the same bank for the lump sum. Its in her name but under my control in a building society the moment - I avoided having it in my sole name as it would become 'family money' if anything happened to me.

Her isas are online investments that I have passwords for and nothing can be withdrawn from them (even by me) until after she's 18.

At 16 she is no longer eligible for her child savings account and I was told I can start an adult account for her, i'm hoping I can start a joint one so I still have some control.

Nationwide has Fixed rate e-bonds for up to 5 years from 16 but would need a current account at the same branch (which I want to avoid) and lloyds also has some but with lower interest rates. In our case I am waiting to see what the interest rates and options are after April. Quite a few advisors in branch suggested opening accounts for her but not giving her the details.

She is a bit put out that she can't go on a spending spree at top shop with some of it but I've told her that at 25 she'll be pretty annoyed with me if I was daft enough to let her . I also worked out how much interest it was making weekly at the moment and that shut her up as she's only had pennies before.

[BCFPete]

Hi Antshouse,

Nationwide's 5y e-bonds pay the same as their regular branch based bonds, which have a minimum age of 7 and don't need a current account. I wonder why your branch staff didn't tell you that?

[antshouse]

Hi,
Thanks for that, your right. I think my head was spinning with all the options I've looked at. I have a couple of months before I need to decide and it will be the next tax year before she turns 16. It looks like I could put both names on the account too.
Can 16 year olds still hold both child and adult isa's or has that loophole been closed now?

[BCFPete]

Quite possibly- you can have a cash ISA at 16, and your parents can pay into a junior ISA for you until 18. I've never read anything saying that you can't do your cash ISA from 16 if your parents are doing a JISA. But...

In my experience you can't open an ISA account on behalf of another party (eg as a trustee). This would mean by doing a cash ISA you would effectively be giving the money to your daughter to do with as she wishes, and asking her to open a cash ISA. (In the same way, she is entitled to the JISA money from the age of 18, and if she approached the provider they would have to give it to her).

[Braganza]

If you have £20k, forget ISAs as this is about 4 times the annual subscription limit for an adult ISA, 6 times that for a Junior ISA. If you can apply online, First Save offer a 7-year fixed interest bond at the moment. You could also look at Investec Structured Deposits, but you'd need to go through an IFA for that, and they would probably make you pay through the nose.

[antshouse]

Will look at first save too. Thank you. Bit scary commiting for seven years even though those interest rates look tempting at the moment.

Have you decided what to go with your son's money yet thriftshoppe?