Child Trusts - Should child trusts be entered in a client case intended for the parents?

Q - Is it a good practice to enter child owned assets, specifically a child trust, into a client case that is really intended for the parents (or grandparents). 

A - There are good arguments for entering a child trust trust into the plan. Whether you do so or not depends on how you want to track the trust from the client's perspective. Allow me to provide you some details on how the software will treat the trust and you can judge whether this suits your purpose.

The trust could be entered into the plan as an investment or savings with a type of child trust or other trust. Please note that special rules apply to child trusts and the tax credits they may apply. Rules also control the age at which a child trust will become available to the child.

Whether you enter the trust as savings or an investment depends on how you want the funds held within the trust to be grown.

- Enter the trust on either the Savings or Investments screen if you intend to grow it using a fixed growth rate.

- If you would rather grow the trust using the software's market assumptions, enter it on the Investments screen, which will allow you to set a mixed asset portfolio for the trust, if one is needed. Market assumptions are applied when the use Asset Allocation option is ticked on the Investments screen's Growth & Yield panel.

- The Savings screen, by contrast, allows for only limited market assumption based growth calculations. As cash accounts, savings can only be grown using asset allocations of 100% cash, when the Use 100% Asset Allocation option is selected for account on the Savings screen's Growth panel.

Enter the trust into the plan if you want to track it along with your client's other assets. Note that unlike other liquid assets, trusts will not be subject to the automatic ad hoc withdrawals made by the software to top off income - i.e. in cases where income does not fully meet expenses. One would need to set a draw down from the trust in order to pull funds from it. That said, the trust will appear tracked in all of the assets charts.

Set the trust as being owned or co-owned by the child on the People panel. This can be important as you can set the trust to drop from consideration in the plan, together with all other assets owned by the child, by going to the Preferences screen > Plan Preferences (on the right side of the screen) > expand the Default Ages Panel and set the Child Owned Accounts Available in Plan Until setting to the Age at which these assets are to no longer be tracked in the plan.

Also, by entering the trust, you can show the parents making contributions to it.

Some additional notes on the rules we apply to child trusts.

Voyant models a government contribution of £250 at birth and age 7.  
If the previous year taxable income for the household does not exceed the child tax credit threshold, then an additional benefit of £250 is paid.

The following child tax credit household income threshold used
2009 = £16,040
2010 = £16,090
2011+ increase the value by 2% rounding to the nearest £5. 

Accounts can only be used to fulfill expenses after child has reached the age of 18, and may only be used for expenses the child designated as an owner or co-owner.