Jacinle, this is not my personal area of expertise, and I'm trying to understand it from two perspectives:
- We've just welcomed juniorstache, so I'm trying to understand tax-efficient savings for him;
- We're in a fortunate situation where there is some IHT-protected investments for Mrs Londonstache, although no idea how much (and therefore, not part of our current planning).
I think the challenge is that you cannot achieve both ends - protecting it from inheritance tax, and receiving dividends for yourself for FIRE expense.
There is the opportunity to open a JISA (Junior ISA) where you can contribute to your children's ISA on their behalf each tax year. The money legally is theirs and becomes available for them to use at the age of 18. Juniorstache will have long and detailed conversations about this before he gets access to it however about prudent mustachian living. However, you cannot use dividends for any purpose apart from retaining in the ISA - as it is legally your childrens money, not yours.
For a larger amount you can open a trust fund, and the magic number is 7 years. Any gift made more than 7 years ago is not eligible for IHT deductions.
However again you have the same issue - it will not be possible to take dividends for FIRE daily expense as the children will be the legal trustees, even though you direct the investments.
Without knowing more I might point you in the direction of a JISA. If you want to be really forward-thinking, then you could also open a JSIPP (Junior Self-Invested Pension) on their behalf and benefit from 50+ years of compounding, but this is less attractive purely from the considerations that the big life expenses tend to be before the point you can access a pension pot.
Past this, I'm not too sure of the financial landscape myself.
