Where should trustees invest inherited money for children until age 25?

My children have inherited an amount of money (not huge amounts but very kind all the same) which we could put in a JISA now, and another sum in the new tax year, and again a little left for the following year. Great, or so I thought. However, the will states they cannot access the money until they are 25 (sensible and time to save more).

But, and big but, where does one put this money? I have called three wealth managers and one building society, and no one has really given me an answer. Any insight would be greatly appreciated.

It sounds like the will has essentially established a trust for the children, which they can access as they each reach age 25. There will probably be trustees appointed in the will who have the responsibility to hold and then distribute the money.

There are a few options for how to invest money held in trust, and the best approach will depend on the specific circumstances — but in many cases, an investment bond held in trust is the most straightforward option.

What is an investment bond held in trust?

An investment bond is a single-premium life insurance-based investment wrapper. You invest a lump sum — typically a minimum of £10,000–£20,000 — and the money is held across a range of internal funds such as equities, bonds, property, and cash, selected based on the risk appetite and timeframe of the trust.

When a bond is held in trust, the trustees are the legal owners of the policy, but the children are the named beneficiaries who will ultimately benefit. The bond sits outside the trustees' own estates, and because the trust and its terms are already established by the will, much of the structural work has already been done.

How does it work in practice?

The trustees apply for the bond through a provider — most providers have their own standard trust documentation, which simplifies the setup considerably. From there, the trustees are responsible for managing the investment: selecting funds, making switches as circumstances change, and overseeing the bond until it's time to distribute.

One of the key advantages of an investment bond in this context is how it handles distribution. The bond is divided into individual segments, and when each child reaches age 25, their portion can be assigned directly to them. At that point, the decision about what to do with the money — leave it invested, make partial withdrawals, or cash in entirely — passes to the beneficiary themselves.

Tax and reporting

During the lifetime of the investment, there are minimal reporting requirements and no annual tax returns for the trustees to worry about in most cases. Investment bonds benefit from a 5% annual withdrawal allowance, meaning up to 5% of the original investment can be taken each year without triggering an immediate tax charge — useful if the trustees need to access funds before distribution.

When segments are eventually assigned to the beneficiaries, any tax liability is assessed against the individual beneficiary at that point, based on their own personal tax position. This can be advantageous if the children are basic rate taxpayers or have unused personal allowances. Advice should be taken at the point of distribution to make sure this is handled correctly.

A note on costs and advice

Investment bonds carry annual management and fund charges, and adviser fees will typically apply for setup and ongoing oversight. Given the combination of trust law and investment decisions involved, professional advice is strongly recommended — both at the point of investing and when the time comes to assign segments to the beneficiaries.