Fundamentally, any money or savings in your children’s names belong to them and are not therefore owned by you or your spouse. However, if you are divorcing, you may need to inform the bank, building society or other organisation about any changes to your circumstances, particularly if you are the named trustee. This article looks at the different types of children’s savings and whether they are divided between parents on divorce.
Fundamentally, any money or savings in your children’s names belong to them and are not therefore owned by you or your spouse. However, if you are divorcing, you may need to inform the bank, building society or other organisation about any changes to your circumstances, particularly if you are the named trustee. This article looks at the different types of children’s savings and whether they are divided between parents on divorce.
If you feel you need the best representation for a family law matter, contact specialist family solicitor Mark Heptinstall of Slater Heelis Solicitors. He is recognised as a ‘Leading Individual’ in The Legal 500 and ranked in Chambers UK, and is described as having “the amazing ability to bring calm into troubled waters”.
Children’s accounts and money held in trust
When setting up savings accounts for young children, the account is typically opened and held in trust by an adult, usually their parent. And as stated above, money deposited in an account legally belongs to the child. However, the parent trustee can withdraw the funds at any time which can make it difficult to police.
There are circumstances when an individual may pay money into a child’s account without ever intending to pass it on to the child. And others may withdraw money from their child’s account for their own use. If you are concerned that your ex may withdraw money from your child’s account, you may be able to ask the organisation concerned to put a temporary freeze on the account.
If a parent has managed to unilaterally withdraw funds from an account, it is difficult to obtain any redress unless something is explicitly written into the divorce settlement recording how the children’s accounts and funds are to be used and managed. It may also be possible for the court to adjust the settlement in favour of the party who is out of pocket, and give them a larger share of the assets. This would then enable them to return any missing monies to the child’s account.
If you are separating or getting divorced, there are only extremely limited circumstances when children’s savings can be included in the matrimonial financial pot. For example, if your ex-spouse deliberately deposited their own money in your child’s account with a view to either preventing you accessing it or ring-fencing it from the assets to be divided.
Child Trust Funds
If your child was born between 1st September 2002 and 2nd January 2011, they may have a Child Trust Fund account. This is a long-term, tax free savings account, where the government gave all children born between the above dates, a voucher they could pay into their account. Although no new Child Trust Fund accounts were issued after 2nd January 2011, the registered contact, and other family and friends, can continue to deposit funds in the account until the child reaches 18.
The registered contact is the person who manages the account. For example, they can transfer it to another provider. Things can become problematic if one party has control of the account and the other has forgotten it even exists, which could lead to funds being hidden or withdrawn by the registered party.
Once the child turns 16, they can become their own registered contact simply by registering and taking over the account. And when they turn 18, they will automatically become the registered contact.
Junior ISAs
Junior ISAs replaced Child Trust Funds, and allow parents and family members to deposit up to £9,000 in each tax year (correct at the time of writing). While only parents can create and manage an account, gifts can be made by anyone. This means that, as with a Child Trust Fund, the registered contact can withdraw cash at will until the child is of sufficient age to manage the account themselves.
The child can only take control of their account when they are 16, but cannot withdraw anything from it until they reach 18.
Financial Gifts and Inheritance
Depending on where the financial gift or inheritance is placed, and who is a trustee of the account, largely dictates who can withdraw funds and manage the monies within it. As stated above, even though the money belongs to the child in question, the trustee can remove funds at will. If separation or divorce is on the cards, and you are a joint trustee, then thought should be given to freezing the account until the divorce is finalised. This will prevent the temptation to misappropriate funds by the other trustee.
Trust Planning
Trust planning enables someone to maintain control over their children’s inheritance, regardless of how old they are. And using discretionary trusts allows parents as trustees to dictate the underlying investments and when children can withdraw funds. Care should be taken when setting up a trust that only one parent, being named as trustee, is avoided. Think about adding in a trusted third party, such as a close family friend or family member, or an independent firm of solicitors. Obviously, they will charge for their services, so this should also be taken into account. But by having a third party as trustee, providing they must all agree and act together, as opposed to independently, it should safeguard the child’s money.
What can I do if I think my spouse is hiding money in the children’s account?
Both parties in a divorce have a duty to provide full and frank disclosure of their finances and assets. If the court believes that one party is hiding money anywhere, including a child’s bank or building society account, several remedies are available. For example, if your spouse is hiding money in another bank account, the court could make a court order based on a certain amount of money being available, despite the sum your spouse has revealed. The court can also order assets to be transferred back if they have already been moved elsewhere.
The penalty for hiding assets depends on what is deemed appropriate in each case. The court could order the person hiding assets to pay the legal costs of the other party, or they may receive a less favourable financial settlement than they would have otherwise been awarded. The ultimate penalty for hiding assets could result in the guilty party being sent to prison and a criminal record.
If the divorce and finances have been finalised, and the court later discovers that someone was hiding money, the case could be reopened, and the financial order set aside.
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