How to invest for a child in SIT
Scheme options
You can
invest for a child in SIT by opening up a designated plan or setting up a bare trust with SIT's STOCKPLAN: A Flying Start.
As STOCKPLAN: A Flying Start is not a CTF product, you can use it to invest for a child regardless of when they were born.
Designated plan
A designated plan remains under your control and allows you access to the funds. However, as it is not a bare trust, the investment remains part of the investor's estate for inheritance tax purposes.
Bare trust
If you want to demonstrate clearly that the money that you give is to be the child's property, then the simplest way to do this is through a bare trust.
The investment is held by trustees on behalf of the child. It is treated as the child's for tax purposes. You, as the investor, have no legal right to the money and the investment would no longer be part of your estate for inheritance tax purposes as long as either:
- you live for seven years after making the gift, or
- the contributions are below the annual exemption or fall within the gifts out of normal expenditure exemption.
You may be one of the trustees. The trustees have legal control over the investment until the child reaches the age of majority. Once set up, a bare trust is irrevocable and you, as the investor, cannot cancel or alter it.
Main differences between a designated plan and a bare trust
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Designated Plan
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Bare Trust
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Held in the investor's name with the child's name designated on the application form
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Held in the name(s) of the trustee(s) (which could include the investor) on behalf of the child
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The investor has control over the investment
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The trustees have control over the investment subject to the terms of the trust
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The investor has unfettered access to the investment
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The investor has no access to the investment subject to the terms of the trust
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The investor can withdraw funds or close the plan
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Cannot be revoked by the investor
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Will remain part of the investor's estate for inheritance tax purposes
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May not form part of the investor's estate for inheritance tax purposes
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Please note that inheritance tax, succession and trust laws are subject to change and their application depends on individual circumstances. The above information is provided for general guidance only and should not be regarded as consituting financial, legal or tax advice. If you are in any doubt, you should consult your legal or other qualified professional adviser.
Flexible investment