My brother recently got divorced. He has two children. Every birthday and Christmas our mother – the children’s grandmother – has purchased £100 worth of Premium Bonds for the children in their names.
She also deposits cash into their bank accounts. After the divorce, my niece and nephew’s mother appeared to clean out the accounts. My brother became aware when statements continued to arrive.
The children’s mother denies this has happened. Something does not feel right about this and of course our mother is now rightly concerned that if this can happen she no longer wishes to give the Premium Bonds or gift cash to the children’s accounts.
Is this legal, and what action if any can be taken if at all? It’s the children missing out and our mother is so upset that the money is gone.
Cash gifts: What can you do if an ex withdraws money from accounts set up for children? (Stock image)
Tanya Jefferies, of This is Money, replies: It’s no wonder your mother is deeply distressed.
She made generous financial gifts over the years to her grandchildren, intending them to be for their benefit, and now their funds have vanished.
Even if, under a kind interpretation, the money might have been withdrawn and actually spent on or by the children, its disappearance without any explanation – amid denials, in fact – is bound to cause great upset.
Given the denials though, the possibility of fraud by an outsider should also be considered.
You don’t say whether the Premium Bonds have been touched as well the bank accounts, but this must be of concern too.
There are two important questions here. First, what action can you take about the missing money?
And second, what’s the best way for your mother to continue to make cash gifts and buy Premium Bonds for her grandchildren with confidence that only they will benefit in future?
As you mentioned, it would be a shame if children who have done nothing wrong lose out, should she be deterred from making these thoughtful gestures.
We asked a savings expert and a lawyer to comment on these issues. We also asked National Savings and Investments how Premium Bonds bought in children’s names work and the rules on accessing them.
What can you do about the missing money?
Anna Bowes, director at Savings Champion, replies: When setting up a savings account for a young child, the account will be opened in trust by an adult – normally a parent or guardian, although different providers will have different rules about the relationship that the child and the adult must have.
Anna Bowes: Children are allowed to manage accounts themselves from as young as seven years old
But any money deposited belongs to the child – not the trustee.
However, that trustee can withdraw the funds and although it should be for the benefit of the child, it’s hard to police this.
There will be an age at which the child is given permission to manage their account themselves – this can be from as young as seven years old.
So, is it possible that the children could have made any withdrawals?
Of course there is also the possibility that a fraud has occurred that has nothing to do with your ex-sister in law.
If she insists that she didn’t authorise the removal of these funds and the children themselves also deny this, then contact the bank as soon as possible. They should be able to help trace where the funds were sent to.
If your brother and your mother are still concerned, they could set up an account for the children, with your brother or your mother as the trustee (depending on whether the provider will allow your mother to do this).
That way your brother or mother will have control of any withdrawal of funds going forward.
What is the legal position?
Katie Spooner, partner at Winckworth Sherwood, replies: It really depends on who had control over the children’s bank accounts.
Katie Spooner: It is worth your brother checking his financial order from the divorce
What was the arrangement with the bank as to when and how money could be withdrawn?
Did it require the authorisation of two family members – such as your brother who also appears to receive statements for the accounts – or could the mother withdraw cash unilaterally?
It is worth speaking to the bank to check the terms and arrangements for the account in the first instance to ascertain whether there has been any breach.
Find out whether the money was withdrawn without the proper consent or authorisation as specified within the bank’s terms and conditions for the accounts.
If, however, the mother was able to unilaterally withdraw the funds from the children’s account, there is unlikely to be any recourse unless there was anything written into your brother’s divorce settlement that recorded how the children’s accounts and funds were to be used.
Was there any specific agreement between your brother and his ex about the children’s bank accounts? It is worth your brother checking his financial order.
If there has been a breach of any agreement or court order, your brother should speak to a solicitor about this and the possible recourses available to him to rectify the issue.
Going forward, in the circumstances, it would seem sensible for your brother and your mother to set up a separate account to deposit funds for the children which they have control of.
This way they will have sole responsibility for the bank accounts and children’s funds.
They can deposit and withdraw funds for the children as appropriate without any reference to, or interference from, the children’s mother.
What about the Premium Bonds?
An NS&I spokesperson said: When a grandparent purchases Premium Bonds for a child, the grandparent will receive acknowledgement of the investment, but the Bonds can only be managed by a responsible parent or guardian, who will need to be named on the application form.
We will send any paperwork, any prizes won, and payment for cashed in Premium Bonds to the parent or guardian.
STEVE WEBB ANSWERS YOUR PENSION QUESTIONS
Only the named parent or guardian can take action on the Bonds such as cashing in Premium Bonds.
After the point of investment, NS&I communicates with the nominated parent or guardian until the child is 16 when they then become responsible for the management of the account.
The grandparent who purchased the Bonds for the child would not be able to change the responsible parent once the account is set up, as they have no control over the management of the Bonds.
The current responsible parent would have to authorise the change to a new responsible parent.
It is not entirely impossible for a grandparent to change their mind, but they only have up to 14 days from when the purchase is confirmed to do so – that is the cancellation period.
After this period the sale is complete and authority has passed to the nominated person.
Only one parent or guardian can be named per application, but the grandparent can name a new responsible parent or guardian when buying Bonds for a child they have previously bought for.
This applies to both online and postal transactions
Each purchase that the grandparent makes will be treated as a new transaction.
The parent or guardian named on each application will have separate holders numbers and will only be able to manage the Bonds that are in their name.
Note that one child cannot have more than £50,000 invested in total, across all responsible persons.
All of these Bonds will be in the child’s name when they reach the age of 16, regardless of how many responsible persons there were.