Alternative to Junior ISA (so parents stay in control)? Discretionary trust? WWYD?

[SouthLondonDaddy]

We have been saving for our daughter, putting money into a junior ISA. What scares me is that she’ll legally be able to spend the money when she turns 18, and we’ll have no say whatsoever over it. Of course I hope she’ll turn into the most responsible, sensible, mature etc. etc. young adult ever… we just cannot be sure!

Are there alternatives that leave us parents in control?
AFAIK there are only these two; any comment or clarification would be most welcome:

1. We invest the money in our name, as though it were ours. If we already use all of our ISA allowance, this investment may be taxed depending on our tax situation. However, there might be inheritance tax implications if we were to pass away.

2. We set up a discretionary trust. We could set it up so that we, or some trusted family member if we pass away, control when/whether/how she gets the money. There shouldn’t be inheritance tax. However, taxation may be higher, and the trust would probably be too expensive and complicated to set up, for the kind of money we plan to invest (roughly the ca. £4k junior isa allowance per year).

Note that this is not a pedagogical question on how to bring up responsible children, but purely a legal/tax question. I appreciate every person can be different, I appreciate some 18 year olds can be more responsible than some 40-year olds while others will fritter the money away in a month, but that’s not the question.

Also, for colour, I am not only worried about her frittering the money away in a handful of large expenses (big car, holiday around the world, etc.), but also about the possibility of dilapidating the savings by dipping into them ‘a little bit’ every month: £100 more pounds now, £150 next month, £500 in August because of the summer holidays, etc., and it quickly adds up to a big sum.

PS Note this question is different from www.mumsnet.com/Talk/investments/3021513-Would-you-trust-your-18-year-old-with-30000 - in that case a trust fund had already been set up

Hmm a tricky one. The discretionary trust needs to use particular investment structures due to tax and that is going to be difficult with your amounts.

Investment in your name, is as you say more difficult for different reasons. Is IHT an issue now it's increased? If so then it's a control v cost really.

I'm afraid that really there is no silver bullet on this one.

I don't know about discretionary trusts. However, is your pension at full capacity? If you had children late, it might be possible to put more towards the pension and then be able to take the lump sum when their still at uni. So if the money is intended to help with things such as property deposits, it could work. You'll be able to withdraw 25% of the pot as a tax free lump sum so it could be a substantial amount. If anything should happen in the meantime, they'd inherit the lot tax free.

Or perhaps use that money to overpay the mortgage. Once you've paid it off, you could save the money you intend to gift in a much shorter space of time. Or if it still isn't paid off at that time, you could just remortgage to release some equity.