Trust fund for children - what do I need to decide?

[tabletopgreen]

My parents have given a bunch of money to my older siblings, and in order to even it up they are going to gift some money to my dcs. All good.

I've book in for an hour with a solicitor to discuss. But what will they ask me to decide on? Don't want to waste £££ time!

Age: on 25
Money: Invested in ETFs / shares
Who the trustee would be - me?
Do I need to create an isa or similar in advance?
Tax: Not looking to avoid tax but avoid inflation. Plus also make sure the docs benefit now.

I have a google and look like it would be 'discretionary' trust. But I still don't get how the trust is linked to the shares.

Anyone got some good pointers?

Whether it’s worth doing is the first consideration. Trusts can be expensive to set up. You are effectively buying products with the money and they might have setting up fees.

We have put lump sums into savings vehicles for our DC via investment companies recommended by our financial adviser. For all our investments, the whole lot is in ISAs to shelter from tax as far as possible.

You need advice on how the money will be invested, whether a trust is worth it and who is actually managing the investments?

Good point. The dcs have isas in their name, but as far as I know, a trust fund is the only way to ring fence until they are 18.

Plus we don’t want to pay tax on it if under own name.

Are there any other options ?

If they have give money to your siblings how does it even it up by giving money to your children rather than you out of interest?

We have used Witan Jump for our DC. The attached is the tax position for children.

Yes if you want your children to benefit before the age of 25 - say for uni costs - then it needs to be a discretionary trust. The relationship between the isa or other investment vehicle is that the trust owns them not you even though you would control them in your capacity as trustee.

You definitely need to ask about:

• the tax implications
• the set up costs
• the ongoing costs (would you need to have annual accounts prepared for example?)

Thanks all.

So I need to set up the investment vehicle, then the trust 'owns' it and give it to dc when they are 25?

To answers the questions:
Witan jump looks good. Makes sense.
Uni feeds are already covered, this is from gps and they want it ring fenced.
Tax - so that might be an issue when they want to get the money out depending on what they are earning.
Re siblings / re dc. I don't need the money, and would prefer to have dc to have it. It's a bonus really as this money was 'written off' for one sibling but now is being evened up.

Bare trusts ring fence. I think that’s what our Witan Jump ones are. They do mean each DC can have all of the money after 18. Ours have decided to let the investments grow.

It could be liable for IHT if gps don’t survive 7 years after the gift.

I don’t think DC can avoid tax if they have sufficient income - one way or another! But you can minimise it. As in the examples I posted. The same would apply if they got income from a building society type saving.

We also invested for DC by buying a house for each of them. Older DC wanted the money from that to buy a property elsewhere but CGT was payable on the gain because we owned it. It’s always difficult to huddle who does what but we took the rental income from the houses and invested that for DC. Gets a bit complicated and DC will be more than OK financially. No grandparents with spare money though.

I have bare trusts for all my children with money from a grandparent. It was really easy to set up with a normal share dealing platform. They are entitled to the money at 18 with a bare trust so that's obviously not exactly what you want but in practice I don't think they need to know about it if you're concerned that they're not ready and it doesn't automatically switch to their name like a JISA.

Yes. Ours kept the money in place way after 18. It’s their decision but the trusts have made a lot of money with no decision making from us!

ah this is the crux of it - thank you @UnbeatenMum and @TizerorFizz

'access' to the money at 18 = cheap and easy to set up via Witan Jump etc. No need to pay for trust, trustee or upkeep.

'no access' until 25 = need to have a trust created which costs money to set up, and run, and no obvious investment benefit.

will chat to gps - see what they think.

Sadly can't afford to buy dcs their own property. Also hate extra property ownership. I don't like owning things I can't see.

Why can’t you see an extra property? We’ve had lovely people in our houses!

The issue about something like Witan vs the discretionary trust is that you keep DC in the loop re when they need the money. It might be 21, 25 or 30. Our 29 year old still has hers intact. We didn’t use it for university and she decided to have a mortgage for her fiat as well as the “gift” of the house. You haven’t said how much money you are talking about but that makes quite a bit of difference re decisions.

Hopefully it’ll be 50k each. I am thinking witan and just tell them to be sensible. They will have another isas of 15k they can piss up the wall

The trust sounds a lot of update for the chance they can’t be trusted

You can agree with them that they don’t have the money before they are 25 or keep it for a house deposit. You should maybe get financial advice as to the best product right now because we invested years ago. You can keep the investment in place for longer than 18 if you and they agree. Also sensible DC (and I’m sure yours are) can be trusted! They have sensible parents and that helps.