Best Trust/ISA for children?

[merryandbrightdelight]

Hi, I’m after some advice.

Not long ago we sadly lost someone very close to us and we’ve since found out that we have been left legacy payments in their will. Our two children aged 5 and 7 have been left some money that I have been told by the solicitor has to go into a Statutory Trust and be held until both turn 18, at which point the money will pass to them.

We have no idea how much money they have been left, and aren’t likely to know for 12-18 months.

I’d like to open some sort of bank account for them that I can pay any birthday and Christmas money into, and also add in their inheritance into it when it comes through. Any ideas?

I bank with Nationwide and whilst I really like them, they have nothing for children. I’ve looked online and with ChatGPT and a lot of the banks they are throwing up I’ve never heard of before.

I understand that for tax purposes most accounts will only let you pay in £9k per financial year.

Any advice greatly received!

Only ISAs have the 9k limit, other types og accounts won't do
We have a JP Morgan stocks and shares junior ISA and a separate bank account . Have you looked at Martin Lewis website? They will lots ideas.

First off, if it's held in trust, you might have restrictions on what you are allowed to do. Only a parent can open an ISA for a child, I don't know how the trust affects this. Money held in trust may be subject to different tax rules. Legal and tax advice for a trust is extremely expensive, so bear that in mind. Who will the trustees be?

Without a trust I would suggest You might want to consider what you are saving for.
If short term for big spends, like a new bike or Xmas pressies, then a bank account is fine. You don't need an isa unless the kids become eligible for tax. In fact you would normally open an account in your name for their savings. Banks like Chase allowance you to open multiple linked accounts and name them. However as it's part of a trust you might have to put it in their names. As they won't have access to it, just a normal savings account is fine, no need for a child account .

For long term savings 5 years plus, then the best place for the money is in a stocks and shares ISA. You can open a child's s&s ISA, and even without a trust the child can't touch it before turning 18. This is a great way to grow a nest egg for uni fees or a house deposit as growth will compound, and over the long term the stock market has always massively outperformed bank savings interest.

But only the parents are allowed to open a child's ISA, I don't know how the trust affects this.

Thank you for this! I will check Martin Lewis and see what I can find.

Thank you for this, so all the solicitor has said is that it needs to go in a statutory trust. So from what I know, the money is to help my DDs if they want to go to university, but there are no conditions to this (so if they want to use it for something else then this is OK) so which is why I’m thinking it will be something substantial (as in, more than a few hundred). This is why I’d like to be able to pay extra money in because I’m thinking they could pissible use it towards a deposit for a house. I’m thinking that interest would add to this.

I didn’t think of the tax loopholes for if it’s a child saving ISA. If we did an ISA, the trustees would be myself and my husband.

If I went for a stocks and shares ISA, is this risky?

A stocks and shares ISA is likely to give a better return than a cash ISA since the ages of your children mean it will be invested for a long time - the main risk is if there is a dip when you’re only investing for a short timeframe.

You could invest in an index tracker fund which is basically representative of the performance of the companies in the index. For example the FTSE 100 which is the 100 biggest companies in the UK. The risk with that type of investment is lower than with individual shares. There are lots of different things you can invest in though. There’s advice online or it may be worth speaking to a financial advisor if it turns out to be a very significant sum.

Whatever you open, think carefully about whether you add any funds from yourself to it.

I personally know quite a few 18 year olds & older who blew everything single penny their parents saved for them in their child trust funds when they got control of it at 18 (more than 1 on drugs, partying, holiday for friends etc). Slme of these wete £20/30k. You wont have to look far on mn to find similar stories.

Everyone thinks it wouldnt be their child who does this but you honestly dont know at 7/8 what they may be like at 18.

Amazing, thank you for this. I am going to speak with a FA and see what they say.

Thank you, I’d honestly never even thought of that!

I would keep the inheritance separate from any savings you choose to do for your children.

Local building societies are quite good for younger children short term savings. Try moneyfacts website for current rates. When they are older a mini current account would be an option. If you give them money then if interest is >£100 it will be treated as yours for tax purposes. Longer term savings are best in a shares JISA. All of these will give the child full control at 18 so if you haven't used your own ISA allowances then consider that first.

S&S are riskier than cash, yes, but the rewards are far greater over time.

If your kids are young and you have a minimum 5 year horizon to lock the money away, you can ride out the dips. EG last year Trump's tariffs wiped 20% off my investments for about 3 months, but a month after that they came back up to where they were. If I'd needed the money in those 3 months then I would have had a problem, and that's where the risk it. But I didn't, and now the value of my investments is far higher than it would have been if only in a high interest cash account since May last year.

So with the long horizon you're looking at, if you want a decent house deposit then you've got plenty of time to ride out the dips and allow the growth to happen.

Re the age they can take it, just don't tell them about it and intervene when they receive the letter in the post! THat's what we're doing with my son.

Sorry for your loss. Something worth thinking about alongside where to put it: by 18 they'll have the trust money plus whatever you've saved, so the years between now and then are a great runway for teaching them about money. At 5 and 7, something as simple as giving them a say in what happens to their birthday money (some to spend, some to save) and showing them a savings balance grow does a lot. By their teens they can be involved in decisions, so the money doesn't feel like a mystery windfall when it lands.