why do I need to use a child trust account?

[raisinbran]

My mother left in her will, her house to my 2ds.

As they are still 10 and 7 we are renting out the house and the income is being sent to an ordinary bank account still in my name.

I have set up a trust account in the boys name with HSBC as I am the executor of the estate, however I haven't used it yet as the paper work came through saying they would have free banking only until July 2011.

This is great for now but why would they have to start paying charges as a business, also I heard they would be taxed as all trusts are at 40%.Their rental income is only just over 7k a year and costs would need to come out of that for any repairs/maintenace.

Am I allowed to just split the money into 2 kids savings accounts. Obviously it can't stay in my account name as its not my money and I would be taxed.

[kittycat68]

why just not open an ordinary savings account of some kind, surely they dont have to pay tax as they would be taxed on the income they each recive which would be below there yearly tax allowance each i would look further into this if i were you i think that someopne may have given you the wrong advice / on which account to open.

[Bramshott]

Sounds complicated to me - have you taken legal advice? Is it not easier to just sell your mother's house? Sorry for your loss.

[Lizcat]

All rental income is subject to tax regardless of the age of the owners. However, both your boys have tax allowances just like we adults do so splitting the income between the two of them will mean that it is below their tax allowances, but this is complicated to arrange.
I would suggest that it is probably worth getting the trust to pay for some one off advice from a specialist tax accountant to get it set up right at the start. They will also be able to explain how to claim repairs on the tax return so you get the right relief. Most large firms of accountants have tax specialists often people who previously worked for HMRC in tax.

[raisinbran]

Thanks everyone for reponses, i will get proper advice as I can see its going to save money in the long run.I tried to get some advice from HSBC but as they aren't going to make any money from it weren't that interested.