Child Trust Fund (CTF)
– Mr & Mrs Semmence.
17/05/2009
In theory a child can own any asset, so how do you narrow down the options?
The Government sponsored Child Trust Fund (CTF) that was launched in 2005 will be the answer for many families who wish to invest on behalf of their children. A CTF gets over most of the potential problems of investing for minors, and benefits from a cash gift from the Government along with tax advantages and ease of management.
Some factors to be considered when choosing the best way to invest on behalf of children are:
- how long the money will be invested - if the money is being invested for only two or three years growth investments are unlikely to be appropriate, and cash accounts will be the best bet
- who will own the investment you or the child - the choice lies between "designated accounts" or a "bare trust" - there are pros and cons with both and the choice will govern when the child can access the funds
- the tax position - all children enjoy a personal allowance and the annual capital gains tax allowance. Careful planning will ensure that these are used to the best advantage and avoid a potential tax trap where the parent is providing the funds
- the cost of investing - this can be a significant factor over a long period, so it is important to keep costs to a minimum
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