Four years ago Junior ISAs were launched as a simple tax effective way for parents, grandparents or anyone else to save for a child’s future.
Excellent intentions so what is the problem?
Few people seem to realise that at 18 the young adult, with no financial experience, will gain total control of that money. Perhaps not a problem if it’s hundreds of pounds but what if it’s thousands?
You may have thought you were saving towards a house deposit but that could turn out to be far from the outcome. We all like to think our children will grow up to be thoughtful, responsible adults but they may not get there until their mid 20’s by which time the savings we have worked hard to build up could be long gone.
The decision which needs to be made is whether flexibility and control is more important than the apparent tax efficiency of the Junior ISA.
If you are not fully using your personal annual ISA allowance the most simple answer is to nominate, in your mind, some or all of those savings to build up a fund for your children/grandchildren. You then have total control over how those funds are used. Should a good reason arise prior to 18 you can even access funds then. If you totally fall out with your children you can either nominate your favourite charity or even have a really good holiday!
If you are using your ISA allowance elsewhere a Hargreaves Lansdown Fund & Share Account is nearly as good.
Finally if you are fortunate enough to have built up enough assets to make inheritance tax an issue for you then an Educational Trust may be the answer. Don’t be fooled by the title. The use of the funds are not limited to education although helping with university costs remains high on many parent’s list of priorities.
What should you do next? Just give me a ring on 07770 575122 and within a few minutes I should be able to give you some guidance on the best way ahead for you. Because every family is different I can’t just direct you to a website which will give the right answers for you.
As a parent and grandparent I know just how important it is to get this right. Much as you might love and trust your children isn’t it scary to hand them a big sum of money at 18 and say “off you go”?
You will not see these warnings on any Junior ISA literature but that doesn’t mean you shouldn’t be treating them seriously.
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