Children's Unit Trust – Your Questions Answered
Helpful answers to the most frequently asked Children's Unit Trust questions.
* Please remember when reading the answers below that tax legislation is subject to change.
What is a bare trust?
The Children's Unit Trust is set up under a bare trust. By completing the 'Declaration of Trust' form enclosed with your application form, your investment will automatically be set up under a bare trust.
How can the Children's Unit Trust help with my inheritance tax planning?
Because of the bare trust, any money invested is considered 'gifted' to the child as soon as the investment is made. So provided you live for seven years after the gift has been made, there will be no inheritance tax to pay (although tax legislation is subject to change)*.
Are there any other tax benefits?
As the investment is beneficially owned by the child, any growth or income on the investment is regarded as the child's for tax purposes (please also refer to the questions below). So provided that the income does not exceed their personal tax allowance (along with any other taxable income the child may receive), there will be no tax to pay on any income generated. Likewise, any capital gains accumulated on encashment will also be regarded as the child's for tax purposes*.
How do the tax rules differ for parents and step-parents?
If the child's parent or step-parent contributes, any income up to £100 is treated as the child's for tax purposes. However, if the income is over £100, then the whole amount will be taxed as the parent's or step-parent's. Each parent or step-parent can contribute, each with a separate £100 allowance*.
Who can help me with a tax query?
The Key Features leaflet has further information on the tax rules for this investment. You may also wish to consult your tax adviser.
What's the difference between the Children's Unit Trust and a Child Trust Fund?
The Children's Unit Trust is available to any child regardless of their date of birth, allowing parents, grandparents, godparents and others to invest for the good of a specific child. It can be a tax-efficient* way to invest for a child (please see the questions above) and has no investment limit.
The Child Trust Fund (CTF) is a savings vehicle that can only be opened by a person with parental responsibility for a child born on or after 1st September 2002. It is also tax-efficient, as the proceeds are automatically free from income tax and capital gains tax. A maximum of £1,200 per year can be saved into a CTF account*.
What's the difference between the two funds available to me?
The Family Asset Trust invests mainly in UK companies. The Family Charities Ethical Trust avoids investing in certain companies that do not meet our ethical criteria.
What is the minimum period to invest?
The Children's Unit Trust has no fixed term or tie-ins of any kind so you can invest for as long as you want. However, you should consider it as a medium to long-term investment and plan to invest for at least five years.
Can I change the amount I save?
Yes. Once you've set up the plan you can pay into it with lump sum payments or regularly by Direct Debit – or both. You can make lump sum payments of any amount, provided they are of at least £50. You can also change the amount you pay by Direct Debit, provided the minimum monthly payment is at least £30.
Can I set up a Children's Unit Trust for more than one child?
Yes. You can open as many plans for as many children as you want. You can download the application form, key features and Declaration of Trust form here or call our customer service team on 0800 731 7433**
What if I change my mind?
From the date that we process any new application there is a 14-day period during which you can cancel the plan. To do this you simply have to write to us at Family Investments, 16-17 West Street, Brighton BN1 2RL. Please note that if you decide to cancel you may not get back a full refund of the amount invested if the unit price has fallen.
What happens when the child reaches 18?
Once the child reaches 18 years of age, legal ownership of the plan passes to them. Until that point, the money is held in trust for the child and as trustee you have control of the investment. Until the child is 18 you are able to withdraw money at any time, but the money must still be invested or held for the benefit of the child. This applies even if you decide to cancel.
What documents do I need to apply?
Along with the completed application and Declaration of Trust forms, you will also need to provide two certified forms of identification for money laundering purposes. The application form which is available to download on this site also includes the 'Money Laundering Identification Requirement' document which explains what is suitable and what a certified copy is.
If there's something you'd like to ask that's not been covered here, please call us on 0800 731 7433** or email us. (Please note that we cannot give financial advice on the suitability of our products)
**Open 9am – 5.30 pm weekdays and 9am – 12 noon Saturdays. Telephone calls may be recorded and monitored for training purposes.
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