What would be the best way to save for my grandson?
21 July 2022
Question by Paula
What would be the best way to save for my grandson? I want to have control of the account until he becomes of age but the JISA needs parents to open it.
Answered by Boring Money
It's lovely to hear you want to do this.
You have a few options if you want to keep control.
1) As you've pointed out, you could get the parents to open a JISA, but then you can contribute to it once opened. The issue some grandparents have with JISAs is that the grandchild can control the account from age 16 and access the holdings from age 18.
2) Another option is to make contributions into a Stocks and Shares ISA in your own name, if you don't fully use your ISA allowance already. The upside to this is that any gains and income provided by an investment will be free of tax. The downside is that you can't transfer an ISA to another person, but it could move into a General Investment Account (GIA) in the grandchild's name when you're ready. The key to this is that you can control the timing of passing the money over, either as invested funds or sell down and give it as cash.
3) If you do use your ISA allowance already, you could simply do the same as above, but put contributions into a General Investment Account in your own name. If you do this, any gains are subject to Capital Gains Tax and any dividends or interest produced by the investment is subject to income tax.
With both approaches outlined above (GIA and ISA) the holdings are still within your estate. If you are now, or in future could be liable for Inheritance Tax, this is worth bearing in mind.
4) The last option is to put the money in trust.
I would only usually suggest this is worth doing if you have an Inheritance Tax issue and you are prepared to handle the administration burden that comes with setting up and maintaining a trust.
This usually isn't the easiest solution for the type of situation you've briefly outlined, but can work. It would allow you full control as a trustee, or as one of a number of trustees, to decide when to allocate the investments or cash to your grandson.
In terms of ease and suitability for most people, I would suggest the order goes as I've listed it, with 1 being easiest and 4 being more burdensome.
However, this is only based on what you've told me about your situation. If you'd like to chat about this further, I'd be happy to help.