Trusts for Children

Parents or anyone else for that matter can set up a trust for a child. The aim is to transfer an asset to the child in a way which ensures the offspring actually gets the benefit and in a tax efficient way.

You could choose a 'bare trust' or a 'flexible trust'. With a 'bare trust', the asset is automatically transferred to the child when he/she reaches the age of 18.

With a 'flexible trust', the trustee decides when the child will benefit. the beneficiaries can be changed at any time to other children or to a named charity.

New anti tax-avoidance measures now make 'bare trusts' less attractive however. This is because any income arising out of investment held within the trust, such as dividends or interest, is treated for tax purposes as the parents' income.

See Also: Investment Centre Current Account Comparison Service Deposit Account Comparison Service Cash ISA Comparison Service

Last Updated: June 2006 © Moneyextra.com

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