Ask Money: can I control when my grandchildren inherit investments?

Jason Hollands of Tilney Group advises a reader who wants his grandchildren to inherit savings at the age of 21.

January 5, 2019

In a recent article regarding gifts for children, the use of either a bare trust or a designated account was mentioned for investment trust savings schemes. As I understand it, for either scheme the child is automatically entitled to the investment when reaching 18. I save for my grandchildren via both schemes (with F&C and Alliance Trust), but wish them to have the investment at age 21. Can you advise how to expedite this?
Tim Reavell, by email

Jason Hollands of Tilney Group replies: Popular ways of saving for children include statutory schemes such as Junior Isas and Child Trust Funds, or a legal arrangement known as a bare trust where the investments are held for the beneficial ownership of the child until they reach adulthood. But in each case the child becomes the full legal owner at age 18. 

For those wishing to exercise more control and discretionary over the funds, there are other options. One simple route is for the parent or grandparent to utilise their own adult Isa allowance of up to £20,000 a year and then to simply gift funds as and when they choose, potentially directly settling bills for specific items such as university fees or a property deposit as they arise.

Discretionary trusts are more complex and the set-up costs mean that they are usually suited to larger sums. They give you control over who receives the money, when it can be accessed and what it can be spent on. This means they can be used to make gifts across several generations. Trusts can be effective for larger sums and there is no upper limit to the amount you can pay into one, but for smaller amounts the benefits may be outweighed by charges. The assets in a trust leave the settlor’s estate after seven years, after which they are free from inheritance tax. However, there are other tax considerations and also ongoing costs such as accounts and tax returns involved. Consider speaking to a financial planner if you are interested in setting up a trust.

If the assets are already in a tax-advantaged scheme such as a Junior Isa or Child Trust Fund, they cannot be switched into some other arrangement.

If you need help with a tax, pension or financial planning problem, please email:

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