Investing for Grandchildren by Kevin Nelson

There is a growing need for the older generations to help those following on to establish themselves and to face the significant financial challenges of a world which is increasingly complicated. Investing for children is becoming a necessity not just a nice to do. It’s not just about helping towards the cost of a wedding but recognizing the difficulties for young people to get on the property ladder and that many will be burdened with debt for a considerable part of their early working life.

There are a variety of different ways in which the older generation can help and this article seeks to list some of them :

Child Trust Fund: this should be the first option for those born after 01/09/2002 since the government has started to provide some assistance to young people through the Child Trust Fund into which it makes an opening contribution of £250– all details can be accessed on www.childtrustfund.gov.uk – maximum contribution per year is £1200 and there is important information about providers and who is eligible to open and manage a CTF

For children born before the above date or for those who have the luxury to invest more than the above other options do exist:

ISAs – gifts can be made into Individual Savings Accounts for children as long as they meet the normal ISA criteria i.e. minimum of 16 years old for a cash ISA and 18 for a Stocks and Shares ISA. Alternatively parents/ grandparents could invest in their own ISAs and make lump sum gifts to their grandchildren.The child’s age and the adults’ unwillingness to sacrifice their own ISA allowance may make this an inappropriate choice

Unit Trusts – these are particularly effective vehicles for investing on behalf of children as the unit trust investment can be ‘designated ‘ in the child’s name which would mean that the parents or the grandparents would have control over it until the child reached 18 at which point they become the legal owner and have the right to demand the funds contained in the investment. Before the age of 18 income and/or capital can be distributed to the beneficiary ( the child )for their welfare ,maintenance or education.

There is a slight advantage here of grandparents investing on behalf of children since parents are potentially liable to tax if the income from any trust designated to a child (dividends/interest payments) exceeds £100 p.a. Where the grandparent has opened the trust any income is directly assessable to the beneficiary( the child) and unless the child is a higher rate taxpayer there is no further liability ( although they will be unable to reclaim the 10% tax credit paid net on dividends) It should also be remembered that the beneficiary (the child) is also liable to Capital Gains Tax but carries a full annual exemption of £9200 before there is any tax liability.

IHT benefits of investing for Children - funding out of income is still classed as an Inheritance Tax (IHT) exempt gift and therefore falls outside the donor’s estate .A regular unit trust savings plan would help to utilize this exemption and the annual individual gift allowance of £3000 could be used to fund savings into plans for one or more children.

This article article attempts to summarise some of the options open to parents/grandparents and has been written for grandparent times by Kevin NELSON of St. James’s Place Wealth Management - he will be happy to answer any questions you may have and can be contacted at St. James’s Place Wealth Management ,Chancellor Court, The Calls, Leeds LS2 7EH or on email at Kevin.nelson@sjpp.co.uk or on 07767 658 850

www.sjpp.co.uk/kevinnelson/

back to top

" There is nothing certain in life except death and taxes!"

(Benjamin Franklin, scientist and a founding father of the USA)

Everyone should make a will! That is unless you know how the rules of intestacy would work so that your property would go only to those whom you want it to go to when you die.

Tax is important when you die as well as when you are alive since Inheritance Tax can swallow 40% of the value of your property over the threshold of £300,000 (the value of many homes today). Grandparents who wish to leave gifts for grandchildren will almost certainly need to make a will in order to do so, and even more so if you are in the unfortunate position of not knowing all your grandchildren, but wish to ensure that all of them benefit. The help that a grandparent can give by a wisely made will can be very valuable to a grandchild. It can help to ensure that they are able to go to university, or to set up in business, as well as giving them a start on the housing ladder. As an Association we therefore encourage grandparents to make a will.

Do consider the question of making a will, no matter what your circumstances may be. The cost of doing so is well worth the peace of mind that it will bring, in the assurance that only those whom you want to benefit when you die are those who will do so.

Most of the members of our Lawyers List of solicitors have experts in wills and probate, who can provide you with specialist advice and, thereby, peace of mind. The solicitors on our list have an interest in ensuring that their client grandparents’ wishes are carried out, and can also act as executors as well as obtaining probate when the time comes. Most will undertake home visits where necessary, and our list is made up on a town and county basis for convenience.

Peter Harris

Chairman of The Grandparents Association

back to top

We are all living longer that’s the good news. The bad news is that Alzheimer’s disease and dementia are increasingly taking their toll on families. There are important steps that can be taken to address some of the financial and/or welfare problems that can occur in such situations. One of these steps is to make a Lasting Power of Attorney (LPA) which is a legal document usually set up by a solicitor whereby you appoint someone to deal with your finances and/or your welfare should you become unable to manage these areas yourself.

On 1st October 2007 the former document granting someone power over finances (an Enduring Power of Attorney) was replaced by the new LPA, under the Mental Capacity Act 2005.

Under an LPA it is now possible to choose someone to manage your finances and property should you become incapable but also to make health and welfare decisions for you. You can allow Attorneys to make decisions in different areas including consent to medical treatment and (somewhat controversially) end of life treatment if you wish.

LPA forms are quite lengthy and must be registered with the office of the Public Guardian by you or your Attorneys, before they can act under the document. Sometimes medical professionals may need to consulted during the process which does add to the expense. We recommend however, that making an LPA be seriously considered by individuals because of the problems which can occur if lack of capacity becomes an issue in the future. We also recommend proper legal advice be taken during the process.

Solicitors costs for an LPA vary from firm to firm, and in different regions of the country. We generally find that our costs range between £400.00 and £500.00, depending on the circumstances of the case, although sometimes costs may be in excess of this if a particular matter is more complicated.

For more information, please ask for a consultation with a member of the Private Client Department at Ridley and Hall solicitors (01484-538421) or visit our website at www.ridleyandhall.co.uk

Other useful contact details :-

Office of the Public Guardian

Archway Tower

2 Junction Road

London

N19 5SZ

Telephone Number: 0845 330 2900

Text Phone: 0207 664 7755

Fax Number: 0207 664 7705

Website: www.publicguardian.gov.uk

back to top