# Savings/investments for childrens future



## thos (9 May 2018)

Hi all,
I've got 2 kids under age of 3, and want to put some plans in place to save for their future. From various family gifts we have a starting pot of ~8k, and it became apparent that 18yrs of child benefit for 2 kids is worth €60k (at present rates) so really want to have a 100k target in mind for the term in question. We're financially stable otherwise - pensions, mortgages, other family savings & investments are in pretty good shape (so far), so the lump sump above plus regular redirection of child benefit into a dedicated fund is what I have in mind for something as a minimum point for the kids.

I'm looking for feedback on how people have handled this, and what might the future tax implications be? Do I want to keep this money in my name as extended rainy day fund but face gift taxes with the kids, or is there options to put it in their name now and allow compound interest to build a better pot for them?

I'm looking at various options from EBS Childrens savers (1.75% on 5k), buying shares directly, or ideally a fund (don't like MAPS but haven't tested ETFs yet). I'd love to have this setup out of sight and out of mind - redirect child benefit from 'day 1'. Am I right in treating this differently from my 'own' money in terms of the term being a bit more definite and also whether there might be decisions now which would have better tax outcomes in the future?

Answers on a postcard?

Thanks,
Tom


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## Gordon Gekko (9 May 2018)

Standard Life have a decent prepackaged Bare Trust product where all ongoing taxes are taken care of at source, it’s clear that the gifts have taken place for tax purposes, there’s no VAT on the management fee, and there are reasonable investment options.

Setting two of those up and lashing it all into something like MyFolio V wouldn’t be the worst approach in the world.


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## RedOnion (9 May 2018)

I did pretty much what @Gordon Gekko suggests, just with New Ireland. Most of the products have a reduced fee if you've a small lump sum at the start.

Just note, with a bare trust the money is theirs from the day it goes in. It can't be reversed at a later stage if you need it.

Also, think about whether you want the child to automatically get access to this kind of sum at 18, and check what the firm's allow for in that regard.


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## Gordon Gekko (9 May 2018)

RedOnion said:


> I did pretty much what @Gordon Gekko suggests, just with New Ireland. Most of the products have a reduced fee if you've a small lump sum at the start.
> 
> Just note, with a bare trust the money is theirs from the day it goes in. It can't be reversed at a later stage if you need it.
> 
> Also, think about whether you want the child to automatically get access to this kind of sum at 18, and check what the firm's allow for in that regard.



RedOnion is spot on.

The Bare Trust product is good in that gifts clearly take place upfront, typically using the €3k/€6k Small Gift Exemption, so the child’s Group A threshold is preserved. The problem with the other route is that the accumulated value of the investment pot eats into the child’s threshold down the line when he/she receives it. The clear downside with the Bare Trust product is that the donor can’t access the funds and the child can access the funds (at 18 from memory).


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## xoxoxo (10 May 2018)

What kind of timelines are we looking at for the above trust? 
My children are older - 14 and 12. Will be ok for University fees etc but would like them to have access when they are 23 - so 9/10 years. Their current savings are with EBS and UB and state savings. Thank you.


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## RedOnion (10 May 2018)

I don't want my children is automatically get access at 18, so I removed a clause that the trustees have to give automatically. I've been advised however that once children turn 18, I should get them to sign a document indemnifying trustees against investment losses if it remains in trust.

In terms of timeline - it's like any investment. The trust document is just something that sits outside it. So if investing in equities, the normal advice is a minimum horizon of 5 years.


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## qwerty5 (10 May 2018)

A couple of months ago I was looking at putting some money away each month. I wasn't mad about the returns in savings accounts so I've started putting a bit away each month to shares. I'm not going to give any advice here as I'm no expert but so far they're doing great but I don't expect them to continue at their current rate. Next month they could be doing disastrous. At the moment I'm only dipping a toe in.

It's worth educating yourself about them.
If you do I recommend having a look at the Little Book of Common Sense Investing and listen to the Motley Fool podcasts.
There are posts on this site on what to do about the tax implications if you make a profit or loss so that's essential reading too.


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## thos (10 May 2018)

Thanks for the feedback so far everyone, I wasnt aware or hadn't thought of this type of option.

Similar to RedOnion - I'm a bit dubious about them getting full access when they turn 18. I would intend the funds to be used for college, travel, first car, wedding, house deposit type things (lofty ambitions!) - so tempted to do something 50/50 where they have some funds available, but I would hold some funds directly myself to cover those type of costs. I would also be more comfortable with access at 21+.

I haven't had a chance to call Standard Life or New Ireland yet, but some questions to share here if anyone can help:
- is it possible to combine upfront sum plus monthly contributions in these funds?
- tax implications, I get the small gift €3k per year on money going in, but in terms of liability on growth within the fund, is this CGT or the 41% rate?
- is there any way to access funds before the beneficiary turns 18? I'm thinking family emergency, or something specific related to the child where funds may be required, as last resort?
- ideally, I'd love to have the child benefit go straight into this fund, never touching my account, would be great to see if anyone has managed this (I'm guessing the fund wants a specific reference on it, which may not be possible from Rev)

@qwerty5 - I had considered buying shares, and do so with some of my own funds but preference for the kids is 'out of sight, out of mind' let time and compound interest do it's thing. If I keep looking at it, I'd probably start to get tempted and rename one of my kids to 'Porsche' to explain to the wife why it's become Porsche fund ...

Thanks again everyone,
Tom


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## RedOnion (10 May 2018)

You'll get the bare trust documents with a quick Google and they have FAQs.

The alternative for me was taking a life policy in my name, and enter a deed of assignment to children, but they automatically get access at 18.



thos said:


> - is it possible to combine upfront sum plus monthly contributions in these funds?


Yes



thos said:


> is this CGT or the 41% rate?


41% as it's an investment fund. Applied every 8 years.



thos said:


> - is there any way to access funds before the beneficiary turns 18?


This is something you have to decide upfront. For example with New Ireland:
"
The declaration of trust contains a clause which prohibits payment to a beneficiary before they reach the age of 
18. It is open to a settlor(s) to exclude this clause if they wish to do so at the time of setting up the trust to enable 
a trustee(s) pay the trust funds to a parent or a guardian of a beneficiary if deemed necessary to do so before 
they reach the age of 18. A settlor(s) may exclude the clause from the declaration of trust by deleting it and 
initialling the deletion."


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## LDFerguson (10 May 2018)

Just one small detail to add - the Standard Life / New Ireland / other life company savings plans are also subject to a 1% Government levy on contributions, taken at the time of investing.  There is a lot of lobbying going on to have this levy removed as it doesn't apply to people who save in a deposit account so in my opinion it's unfair, but that's another day's work.  At the time of writing, it exists.  

Regards, 

Liam
http://ferga.com


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## pauric (6 Aug 2020)

I know this is an old thread but I’m basically in the same position as the original poster.

Have any more options come to the market since the last post? Is it possible to setup an account in your child’s name (20months old) on DEGIRO or Revolut?

Are there any clever ways to pay less tax here?


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