Transfering large sums of money

July 1, 2006 6:40 AM

I want to open a savings account here in the UK for my god-daughter who lives in Australia. What hidden taxes and other nasty surprises can I expect when I transfer it to her when she's 18... if its even possible.
posted by monkeyJuice to work & money (4 comments total)

Almost impossible to answer, as tax laws and loopholes change virtually every year.
Probably your best bet would be to invest in something that's managed by a professional, perhaps on a reducing balance of equities over the term (i.e. high growth, high risk early on, but reducing risk towards the later years) and - here's the crux - sticking it somewhere offshore, possibly owned by separate trustees. I'm not too hot with the UK tax situation (obviously, you'd be best off checking with an expert!) but generally this is the way things go.

Is the savings account a one-off lump sum, or regular money? As I understand it, you can gift away a certain propotion of your estate each year without incurring tax...

Doubt that this has helped much, but perhaps it will give you some food for thought, and perhaps some follow up questions.

(Oh, and for what it's worth, yes - this kind of thing happens all the time. I work for a large life insurance/savings company, and we've had several products in the past that were designed to give a minor the proceeds of the account when they reach majority.)
posted by Chunder at 11:13 AM on July 1, 2006

Depends how much your thinking about (I am not an expert), but if it's something like perhaps £250-500 per year. Could you send money to her parents on birthdays+christmas/quarterly/whatever and get them to open a savings account in OZ in her name. I assume a child won't be charged tax on the interest for one thing?

That would get around having to transfer a larger amount when she's 18 and dealing with whatever problems that could throw up.

One additional thing to consider is if you save in the UK (and transfer when she's 18) is exchange rates. Suppose the GB£ was worth 30% more or less in 18yrs time compared to the A$ (obviously great if more, not so great if less)
posted by selton at 3:58 PM on July 1, 2006

Thanks guys - some good points to get thinking on. Cheers :)
posted by monkeyJuice at 11:54 PM on July 1, 2006

The Australian bank will charge a transaction fee and deduct it from the amount you transfer. I know this because we had overseas client's (I'm in Australia) that would pay invoices via bank transfer and the amounts we received were always short.
posted by tellurian at 5:19 PM on July 2, 2006