Child trust funds were a government initiative for children born between 1 September 2002 and 2 January 2011. Children born after that date couldn’t have a child trust fund but could open a junior ISA, or other types of account.
Opening a “trust account” on account on behalf of a child allows you to help pay for their education, or even give them the head start they need to put a deposit on a house. But what is a trust account, and what do you need to know before you open one?
What’s the difference between a trust account and a trust fund?
When some people hear the words “trust account” they immediately think of a trust “fund”, which is actually a completely different thing. A trust account is a bank account that you open for your child; however, rather than opening the account in your child’s name, you retain ownership of the account. A parent or grandparent can be the trustee for the child’s account, but once the child turns 18, control of the funds in the account will pass to them.
Meanwhile, a trust fund is a legal arrangement in which the ownership of a person’s assets (not just cash but shares, bonds, property and even antiques) is transferred to a family trust and managed by trustees for the benefit of others. Any person who receives cash, property or other assets from the trust is known as a beneficiary.
Family trusts are usually only considered as an option for managing a child’s future finances when you have substantial assets to invest. Once the child reaches a certain age, for example 18 or 21, they can access the assets in the trust fund.
Looking for a kids' bank account instead?
If you’re looking to give your children a good financial start, it might be worth looking into a children’s bank account. Take a look at our children’s banking guide to find out more.
What type of trust account?
When opening a trust account for a child, you could consider a savings account or a term deposit account. High-interest online savings accounts offer some of the best interest rates around, allowing you to grow your balance as quickly as possible. Some even let you earn bonus interest if you satisfy specific conditions, such as depositing a minimum amount into the account each month.
Meanwhile, fixed-rate bonds provide the security and consistency of guaranteed returns. These accounts let you lock in a fixed interest rate for a prearranged time period, for example one or two years. This means you won’t be affected by any interest rate drops that occur, but you won’t be able to enjoy the benefits of any rate rises being applied to your deposit. It also entails locking the funds away in the account (they can’t be accessed until the end of the fixed term).
How to open a trust account
Banks and building societies around the UK offer a variety of savings accounts that you can open in trust for your child. There are typically three ways you can apply to open an account in trust:
Online
Over the phone
In person at a branch
However, you’ll probably need to visit a branch to provide ID for your child (you won’t need to verify your identity if you’re an existing customer, but you will need ID if you’re opening an account with a new bank). You may need the child’s birth certificate or passport. The documentation requirements vary between banks, so it’s a good idea to phone ahead and confirm what paperwork you need to bring.
How and when do the funds transfer to my beneficiary?
If you open a bank account in trust for your child, you will need to pass control of the account to the child when they turn 18. This will be an automatic process, and your bank will outline the terms and conditions when you open the account.
Depending on the terms and conditions of the account, you may also be able to hand control over to your child before they reach 18 years of age. However, some bank accounts can only be held by people who are at least 18 years of age, so check these requirements with your bank. We have a separate guide on this.
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In most cases, children don’t need to pay taxes on the interest they earn on their savings accounts or from a fund in their name, because they don’t earn any money. However, taxes will apply if:
They earn more than their personal allowance, which for 2024/2025 is £12,570.
They earn more than £100 a year in interest from money given by their parents or legal guardians. The thinking behind this is to stop parents using their children as a tax-free extra allowance. This rule does not apply if the money is given by another relative or a friend.
If you’re at all confused about the taxation rules concerning trust accounts, ask your accountant or financial adviser for assistance.
Providing for a child or grandchild’s financial future is not the only reason why you might open a trust account. For example, if you and your family members join forces to buy an investment property through a trust, you’ll need to set up an account where the funds belonging to that trust can be held.
While this article deals with opening a trust account for a child or grandchild, keep in mind that different circumstances and features will apply to different types of trust accounts.
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Tim Falk is a freelance writer for Finder. Over the course of his 15-year writing career, he has reported on a wide range of personal finance topics. Whether you're investing in stocks and ETFs, comparing savings accounts or choosing a credit card, Tim wants to make it easier for you to understand. When he’s not staring at his computer, you can usually find him exploring the great outdoors. See full bio
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