James Ward answers a question in Moneywise on setting up a trust for grandchildren to avoid IHT

30 October 2019

James Ward, head of our private client team, writes in Moneywise, answering the question: How do I set up a trust for my grandchildren to avoid IHT?

The reader wanted to set up a bare trust for the benefit of his two grandchildren until they reach 18. They are currently aged seven and nine.  He would invest £50,000 for each child, with one of his daughters as trustee, and originally thought of an investment trust. However, he then thought he might consider a bare trust.

James comments that :

The bare trust you describe is an absolute gift to your grandchildren but, since they are both minors, the money must be held by trustees or a trustee until they reach the age of 18. A gift by a grandparent to a grandchild is good tax planning and can provide the grandchild with a useful lump sum for tuition fees or a deposit for their first home.

Bare trusts will often be set up using specifically drafted trust documents naming the trustees, the terms and the administrative provisions. This is likely to include investment provisions and may also specify that the money can be used before the children turn 18 for their education and maintenance."

James then warns of the importance of taking professional advice and to make sure that  investments are regularly reviewed to ascertain their suitability.

Further information

For more information on the issues raised and other inheritance planning  opportunities, please contact a member of our private client team.

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