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Invest in the future today?

Investing wisely takes planning

Imagine what your life would be like now if your parents had decided to invest in any one of IBM, Coca Cola or American Express.That round-the-world trip you’ve always wanted wouldn’t seem too daunting.

Why don’t you do what you wish your parents had done for you and invest in the future today? If you go for shares in hand-picked companies, you need to look for good quality companies that you think may still be around and doing well in 30 or even 50 or 60 years’ time. There are various ways to do it effectively:

Bare trusts

Bare trusts help you invest for your child without putting any extra tax on you.

How does it work?

If you’re buying shares for your child, you buy them in your name.

Normally you add the child’s initials after yours to designate that the shares (or units), are held on your child’s behalf. This is what is known as a ‘bare trust’.

It’s easy to set up and needs no involvement from a lawyer.

As parents you act as bare trustees, looking after the investment on behalf of the child until they can be registered in the child’s name. This will be when he reaches 18 (16 in Scotland) and you, as trustees, have to hand over the assets of the trust.

The bare trust essentially separates all the investments in it from your own investments (for taxation purposes) but gives you complete control over them.

They offer the child no protection from bad parents (although if you are reading this then you could hardly be described as irresponsible, could you?) but is the best way for you to handle the investments without incurring tax yourself.

There’s no inheritance tax charged on it if you are unfortunate enough to die before the child turns 18.

Other trusts

Maybe you want to set up a trust for your child but don’t want them to get their hands on it until they’re at least 25 (understandable).

You can set up an ‘accumulation and maintenance’ trust where there are trustees who decide whether or not the child gets anything from it until they’re 25. However, be aware that the Chancellor has just hit new trusts with a 20% tax charge (on everything in them valued above the nil-rate band).