I wish to invest money for my grandchildren - with the following constrictions:?

Question

1. Maximum interest consistent with medium to high security

2. I want the investments to be in my grandchildren's names but retain control until they come of age. (Preferably without a formal trust - such as physically keeping the "passbooks")

3. I wish to be able to increase the amounts invested from time to time.

4. I wish to be able to vary the type of investment but not to withdraw the money before the recipients are 18.

5. I want any liability to tax to fall on the r ecipients - not myself.

Please advise if these restrictions can be met and, if not, what the closest solution would be in your view.

I am hoping that the funds will accumulate enough cash to meet higher education needs - at least.

Thanks in advance for your valued advice.
Please be as specific as possible with your answers.

Answer 1

UK ?

2) conflicts with 5)

Inland Revenue rules state tax is due from the 'Benificial Owner' (i.e. whoever has control) no matter who's name it is in.

You have no choice - you have to set up a Trust (this can be done yourself via many savings institutions == for sure no need for Solicitor or Financial Advisor) -- and you have to hope that 'good old Gordon' resists the temptation to change the rules on Trust's (again) ...

Have you considered setting up a Pension for them instead ?
= they can't touch it untill they Retire (most likely 70 +) and they will get 20% tax relief (even if they don't pay any Tax at all) on the contributions up to approx £2800 per year)

Answer 2

Your best bet is a 529 program. It in the kids' names, but you control it. You can add funds when you want. You can trade in holdings. The gains are tax free, but you get no deduction for the contributions. The 529 is intended for college. Other members of your family can contribute to the 529.

Second, distant choice is a trust holding an annuity to avoid the taxes. Fees will be much higher than a 529.

Third, if you have your own business, you can employ the kids, even as minors, and pay them with the salaries going to a Roth IRA. Roth assets can be used for higher education. You get the up front tax deduction since salaries are a business expense.