Can I protect an ISA?
Discussion
In order to give my children a leg-up, I'm planning to max out their ISAs each year from age 18 (already doing the same with JISAs). The idea is that it will assist with buying their first property in due course (maybe in about 10 years time).
I'm acutely aware that as adults they will have full control over these ISAs and could of course do whatever they wanted with them. I'd rather avoid this risk if possible but it would appear that using a trust would not be possible.
Is there any mechanism by which I can maximise their ISA contributions but only release the funds when my wife and myself are happy to do so?
I'm acutely aware that as adults they will have full control over these ISAs and could of course do whatever they wanted with them. I'd rather avoid this risk if possible but it would appear that using a trust would not be possible.
Is there any mechanism by which I can maximise their ISA contributions but only release the funds when my wife and myself are happy to do so?
I don't believe so - they'd be adults and the ISAs would be in their names.
If the plan is to use the ISA funds to buy a first property, then I'd certainly consider putting £4k per annum into a Lifetime ISA (the current maximum allowable contribution). Not only would your children get the government's bonus on top, but the withdrawal restrictions would make them less likely to take out cash for frivolous purposes.
If the plan is to use the ISA funds to buy a first property, then I'd certainly consider putting £4k per annum into a Lifetime ISA (the current maximum allowable contribution). Not only would your children get the government's bonus on top, but the withdrawal restrictions would make them less likely to take out cash for frivolous purposes.
with their consent you could just make it more difficult for them to access by having access to their passwords and then changing the password so that only you know it, and perhaps changing the recipient bank account - that said, i have a feeling ( not 100%) that tthe isa can only be funded from an account associated with the holder of the isa account.
i guess depends on what you'd be doing inside the isa, if its just buying something passively and holding it til whenever, that should work until offspring get cute and request a new password and then withdraw; but it might atleast take away the snap / poor decision of thinking that funds are immediately available.
if you'd be trading inside it, then most would ask/eexpect a simple 3rd party type of power of attorney form, which is from their template and which you/offspring sign....did this for my wife as i manage her isa etc, that allows me to legally do stuff on her behalf, including talking with the provider etc without involving her.
i guess depends on what you'd be doing inside the isa, if its just buying something passively and holding it til whenever, that should work until offspring get cute and request a new password and then withdraw; but it might atleast take away the snap / poor decision of thinking that funds are immediately available.
if you'd be trading inside it, then most would ask/eexpect a simple 3rd party type of power of attorney form, which is from their template and which you/offspring sign....did this for my wife as i manage her isa etc, that allows me to legally do stuff on her behalf, including talking with the provider etc without involving her.
Peter911 said:
You don t have to tell them they ve got it? ?
Except the FI involved will be communicating with the 18 year olds directly. If the ISA was set up prior to this then they will still write when they turn 18.
I presume the OP was previously named as trustee per se for them on the account.
In fairness my 3 children all had Investment Trust accounts set up by us in this way and when they turned 18 I just said I would still operate them , open any statements and let them know if asked what the balance was.
They were all ok with this.
Peterpetrole said:
Not sure you're allowed to do this, surely the taxman will just say you're setting up ISAs for your own benefit.
This. If you're in control of what its to be used for then its not their money.I've put money into ISA's for my kids but all I can do is tell them what I'd like it to be used for (a home) but ultimately its their money. If they decide to cash it in a piss it away there is nothing I can do to stop them!
It does protect the money from inheritance tax though because its been legitimately gifted and I have no rights to it.
In my case, the Junior ISA provider (AJ Bell) wrote directly to my son to tell him about the account, just before he turned 18. They d notified me in advance that this would happen, and that I had no choice. However, they do allow continuing parental oversight of the account including dealing privileges, as long as the no-longer-child agrees.
One option I considered was transferring the money into a junior cash ISA and then putting it into 5-yr non-redeemable accounts to lock it up until he was 23.
In the end I decided that the best thing to do was to trust him - we ve had lots of conversations about money, investing etc and he s very sensible about money. Showing trust is apparently the best way to drive appropriate behaviours - or so I was taught on a management course :-)
One option I considered was transferring the money into a junior cash ISA and then putting it into 5-yr non-redeemable accounts to lock it up until he was 23.
In the end I decided that the best thing to do was to trust him - we ve had lots of conversations about money, investing etc and he s very sensible about money. Showing trust is apparently the best way to drive appropriate behaviours - or so I was taught on a management course :-)
c32dave said:
In my case, the Junior ISA provider (AJ Bell) wrote directly to my son to tell him about the account, just before he turned 18. They d notified me in advance that this would happen, and that I had no choice. However, they do allow continuing parental oversight of the account including dealing privileges, as long as the no-longer-child agrees.
One option I considered was transferring the money into a junior cash ISA and then putting it into 5-yr non-redeemable accounts to lock it up until he was 23.
In the end I decided that the best thing to do was to trust him - we ve had lots of conversations about money, investing etc and he s very sensible about money. Showing trust is apparently the best way to drive appropriate behaviours - or so I was taught on a management course :-)
HL also allow someone else to trade for for you. Its not a parent child specific thing though. My wife and kids have HL accounts and I manage what funds they are in because I'm the investor of the family. I believe I can trade but not transfer money out etc. One option I considered was transferring the money into a junior cash ISA and then putting it into 5-yr non-redeemable accounts to lock it up until he was 23.
In the end I decided that the best thing to do was to trust him - we ve had lots of conversations about money, investing etc and he s very sensible about money. Showing trust is apparently the best way to drive appropriate behaviours - or so I was taught on a management course :-)
They of course could simply log in and take that right away.
No. And trusts don't help because they can't open an ISA. (Trusts can help if there's enough £££ about to make it worthwhile running one without tax wrappers.)
In this modern era anti-money laundering regulations make secrecy almost impossible.
If you want to protect your kids split the cash between ISA and SIPP. They can't touch the SIPP until retirement age but having it there will allow them financial flexibility in other aspects of their life if they aren't so heavily burdened by future pension contributions. Nice tax relief even for non-taxpayers (extra £££) and then the free tax relief will itself cumulate tax free. Highly recommended IMO.
In this modern era anti-money laundering regulations make secrecy almost impossible.
If you want to protect your kids split the cash between ISA and SIPP. They can't touch the SIPP until retirement age but having it there will allow them financial flexibility in other aspects of their life if they aren't so heavily burdened by future pension contributions. Nice tax relief even for non-taxpayers (extra £££) and then the free tax relief will itself cumulate tax free. Highly recommended IMO.
greengreenwood7 said:
@the OP.....
there shouldn't be any issue with them wanting to contribute to a sep ISA....ie/ they could (via you) set up the one you fund and perhaps you keep the passwords etc) then they open another with a diff provider....no reason that all isa's need to be under same provider.
Plan is to pay in the max so any ISA contributions on their part would be over the limitthere shouldn't be any issue with them wanting to contribute to a sep ISA....ie/ they could (via you) set up the one you fund and perhaps you keep the passwords etc) then they open another with a diff provider....no reason that all isa's need to be under same provider.
98elise said:
This. If you're in control of what its to be used for then its not their money.
I've put money into ISA's for my kids but all I can do is tell them what I'd like it to be used for (a home) but ultimately its their money. If they decide to cash it in a piss it away there is nothing I can do to stop them!
It does protect the money from inheritance tax though because its been legitimately gifted and I have no rights to it.
Yes….I think ultimately I just need to trust them. My son, no problem….my daughter, more of a concern…..I've put money into ISA's for my kids but all I can do is tell them what I'd like it to be used for (a home) but ultimately its their money. If they decide to cash it in a piss it away there is nothing I can do to stop them!
It does protect the money from inheritance tax though because its been legitimately gifted and I have no rights to it.
Panamax said:
No. And trusts don't help because they can't open an ISA. (Trusts can help if there's enough £££ about to make it worthwhile running one without tax wrappers.)
In this modern era anti-money laundering regulations make secrecy almost impossible.
If you want to protect your kids split the cash between ISA and SIPP. They can't touch the SIPP until retirement age but having it there will allow them financial flexibility in other aspects of their life if they aren't so heavily burdened by future pension contributions. Nice tax relief even for non-taxpayers (extra £££) and then the free tax relief will itself cumulate tax free. Highly recommended IMO.
I like the pension idea…might look into that. Thank you.In this modern era anti-money laundering regulations make secrecy almost impossible.
If you want to protect your kids split the cash between ISA and SIPP. They can't touch the SIPP until retirement age but having it there will allow them financial flexibility in other aspects of their life if they aren't so heavily burdened by future pension contributions. Nice tax relief even for non-taxpayers (extra £££) and then the free tax relief will itself cumulate tax free. Highly recommended IMO.
Double Fault said:
I like the pension idea might look into that. Thank you.
Essentially you can pay in £2,880 p.a. of hard cash and the State then contributes 20% tax relief (free money!) meaning £3,600 gets invested for the little dear. The whole lot then cumulates tax free. Hargreaves Lansdown, Fidelity and many others can tick this box for you. Stick the investment into "global equities" or something similar, sit back and chill. Tax free cumulation for a few decades should tick the box nicely.
Get it done.
Double Fault said:
Panamax said:
No. And trusts don't help because they can't open an ISA. (Trusts can help if there's enough £££ about to make it worthwhile running one without tax wrappers.)
In this modern era anti-money laundering regulations make secrecy almost impossible.
If you want to protect your kids split the cash between ISA and SIPP. They can't touch the SIPP until retirement age but having it there will allow them financial flexibility in other aspects of their life if they aren't so heavily burdened by future pension contributions. Nice tax relief even for non-taxpayers (extra £££) and then the free tax relief will itself cumulate tax free. Highly recommended IMO.
In this modern era anti-money laundering regulations make secrecy almost impossible.
If you want to protect your kids split the cash between ISA and SIPP. They can't touch the SIPP until retirement age but having it there will allow them financial flexibility in other aspects of their life if they aren't so heavily burdened by future pension contributions. Nice tax relief even for non-taxpayers (extra £££) and then the free tax relief will itself cumulate tax free. Highly recommended IMO.
I like the pension idea might look into that. Thank you.
On PH it is only a matter of time before pensions are recommended.
So for your children, they would be stuck in a 50 year savings scheme, where governments can change the rules at any time.
You said you want the money to be used for help with their first property purchase.
Would they mind waiting until they are age 70, before buying their first home?
This was all easier years ago. I looked after a fund where the original money was provided by a grandparent. Tax relief was allowed to the grandparent and the annual gifts continued for I think 5 years. Forget what the scheme was called, but that encouragement no longer exists.
The funds grew and the youngsters only ever had vague knowledge about them.
The residual amounts were finally handed over when the kids were age about 40. It all worked well and the money was used wisely for the youngsters.
Everything is so overcomplicated these days. Makes one think why bother. Aspiration is certainly no longer encouraged, or even approved of by some groups.
Gassing Station | Finance | Top of Page | What's New | My Stuff