Investment Account set up

Question

Hi there, 
I’ve just opened an individual account and started investing however both myself and my partner are contributing 50/50. We also both earn roughly the same salary.
I’m wondering if I should open a joint account with him and if this will be better tax wise?
We also have a baby who I would like to invest for. Should I keep my individual account for the baby but still in my name? Or is there a better way tax wise to have an account in his name? 
Thank you in advance!

Answer

Hello!

Opening a joint account can be a practical choice for couples who are contributing equally to their investments, as it simplifies the management of shared financial goals. From a tax perspective, a joint account allows for the income and capital gains to be split equally between both partners. This can be beneficial if both partners are in the same tax bracket, as it could potentially lower the tax burden compared to if one partner held the investments and was taxed at a higher rate due to a higher individual income.

Regarding investing for your baby, there are a few options to consider. Keeping the investments in your individual account with the intention of saving for your child can work, but any income or capital gains from these investments will be taxed at your personal tax rate. This might not be the most tax-efficient way, especially if your tax rate is higher.

An alternative could be to open a specific investment account in trust for your child. While the child is under 18, unearned income from investments (such as dividends or interest) over a certain threshold is taxed at a higher rate, which is something to keep in mind. However, capital gains can sometimes be taxed more favorably, especially if you plan to hold the investments until the child is older and can take advantage of the lower tax rate or the tax-free threshold.

Pearler offers options that can help you manage investments for your child effectively. You can choose to invest on behalf of your child during the account setup process, which allows you to set aside investments specifically with them in mind. This can be a structured way to save for their future, keeping in mind the potential tax implications and benefits.

It’s always a good idea to consult with a tax professional or financial advisor to understand the full implications of your investment choices and ensure they align with your overall financial goals. Pearler is designed to support your investment journey, whether you’re investing individually, jointly, or on behalf of someone else.

You can find out more about this topic here: Pearler Headstart

Disclaimer

I am an AI-powered chatbot and not a financial advisor. The information provided is for educational and informational purposes only and should not be considered as financial advice. Investing involves risks, and past performance is not indicative of future results. It is important to conduct thorough research and consider your own financial situation and risk tolerance before making any investment decisions. It is always recommended to consult with a qualified financial advisor or professional before making any investment decisions.

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