FINANCE BANK ACCOUNTS
Longer-term saving
Elizabeth Neale of Bircham Dyson Bell
explains the differences between trust funds


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An alternative to setting up a bank account would
be to create a ‘bare’ trust for a child. Under a bare
trust arrangement the assets given to the child
actually belong to them in law, but they cannot
claim them, or the income from them, until they
are 18. In the meantime, the trustees (possibly the
parents) effectively manage the assets on the child’s
behalf. The capital might well be invested in a bank
account if that seems best. However the drawback
to a bare trust is that the child must be paid the
capital and accrued income when he or she reaches
18 – something parents are often relaxed about
when their children are tiny, but misgivings and the
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teenage years tend to arrive together!
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If a parent wishes to pass larger sums of money to
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their child during their lifetime or make provisions
for their children in their Will then a ‘proper’ trust
advice. HSBC have a SchoolBank scheme, which encourages
Operating a ‘hole may be the answer. A trust can be set up on broad
in the wall’ cash
kids to run a bank branch in their school, with guidance from
machine is one
discretionary terms, giving the trustees a high degree
of life’s key skills,
local HSBC employees, where participants can gain work
of control, so that the beneficiary receives income
along with
writing cheques from the trust at say, 18 but does not get capital until
experience and/or a certificate of achievement from the bank.
and interpreting
Which bank account you choose for your child is likely to be
bank statements.
they are 25, 30, 35 or even older.
lead by whatever bank you as a parent use. Opening an account 
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at the same bank as your own makes it easier and quicker to
For the tax year 2009/10 the first £6,475 of a child’s
make transfers. Even if you bank at a private institution such as
income and £10,100 of capital gains are free of tax.
Coutts & Co, who have no specific child accounts as such, it is
However, generally if the assets derived originally
still possible. Children over eight can have a ‘re’ account, which
from the child’s parent then the income (after the
first £100 of the child’s income in any tax year) is
is in the child’s name but operated by the parent. You may also
taxed as if it were the parent’s. For that reason it
find it useful to open an account with a bank that has a branch
is usually more tax efficient for the child to receive
near you so your little saver can pay in cheques and make
any significant lifetime gifts of capital from its
withdrawals easily, and get to experience life as a ‘grown up’.
grandparents, other relatives and friends, as the
Ultimately, opening a bank account for your child is a great
income will then be taxed as the child’s and so be tax
way to introduce them to the concept of money management
free or the child’s basic rate band will be available.
(and the paperwork that often accompanies it), which is an
important life skill. But you don’t have to ditch the piggy bank

 

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These income tax rules mean that if parents are
yet. There’s no reason why the two can’t happily exist together
settling assets on trust for their children then it may
for a good few years. %
be best if funds are invested for capital growth as
opposed to income while the children are minors.
FURTHER INFORMATION
This is not a problem for gifts by grandparents, who
have a golden opportunity here to help fund school
Accounts
and university fees.


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Elizabeth Neale is a partner in the Private Wealth


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www.rbsmoneysense.co.uk
www.halifax.co.uk


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issues including UK trust and estate planning and
www.hsbc.co.uk


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international succession. www.bdb-law.co.uk


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This note is written in general terms and is not a substitute for


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advice on particular issues. Specific advicew should be sought


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before taking any action based on the information contained here.
WWW.FIRSTELEVENMAGAZINE.CO.UK SPRING 2010 FIRST ELEVEN 55
pp54-55FEAccountSMsub2.indd 55 28/1/10 18:23:01
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