Me too 
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To conclude my unasked question, just to know, does someone know who legally speaking owns the money if grandparents give money to parents with the wish to save it for the kids later on?
Another question, since some of you seem to have older kids and wonder who’s name the accounts should be in and how they might handle it: I overheard (again) of parents giving usufruct (if that’s the right translation, Nutzniessung in German) of shares to their young adult kids, and this way still keep some control, but have kids more involved, and gains off the parents’ tax returns.
I only encountered the topic of usufruct when it comes to property. Anyone got some insights to that?
In Switzerland, the legal ownership of money given by grandparents to parents with the intention of saving it for the children is not automatically determined by the grandparents’ wishes. Legally, the money belongs to the parents once it has been transferred to them.
Your translation of Nutzniessung as usufruct is correct. In Swiss law (Civil Code, Art. 745 ff.), usufruct is indeed a right that can be established not only on property but also on movable assets, including shares, rights, or an entire estate.
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Financial literacy includes having a few years of experience standing on your own feet. I still remember that phase when every time I thought I knew all expenses I’d have to cover as an adult, yet another thing popped up. This taught me a lot about saving, planning etc.
I believe even if you teach kids about finances (and you should!), they need to manage their own finances for at least 5 years before they are “ready” for a big sum of money.
If they go to university, that could mean waiting until they’re 30. I also believe they understand the effect of compounding much more if they knew what the portfolio was worth 5 years before they receive it when they’re 25 instead of 18.
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Thanks. Please don’t take offense, but it’s quite generic. I’m not a lawyer, but got some general understanding regarding ownership, it somehow sounds not right to me (could be me, of course).
As for the usefruct, do you have experience on how or when is is actually beneficial to set that up?
You can also try holding their hand and let them do small mistakes early on.
Have them have some skin in the game, but if it doesn’t work out it won’t rip off their face.
E.g., for a while (when investing his cash* in monthly tranches of $200) I each time let my son pick between three companies, all of them in principle fine, but maybe one of them somewhat speculative.
As an example, I let him pick between 3 then attractively valued companies with growth prospects after describing to him the business in a sentence or two. Here they are, in just a word or two:
- IIPR: weed REIT
- Amgen: Pharmaceutical
- Lockheed Martin: Defense
Two goals:
- so he would embrace the thinking that he was actually going to own part of a particular business/company, not some (from his POV) abstract financial instrument, i.e. an index.
- so he would see companies that he personally picked do well but also do not well, maybe because it was just not foreseeable, maybe because he picked the company out of some personal preference that maybe was not entirely rational at the time (in hindsight of a couple of years later)
You may take one guess what the maybe then 16 or 17 year old picked from the three choices above … 
Turns out IIPR is down about 20% since he chose to have it purchased. I’m confident IIPR will recover, maybe many years down the road, and it pays a nice dividend in the mean time. I’m hopeful through this example he’s made progress on both goals stated above.
In his defence, when I re-introduced Amgen and Lockheed Martin again as possible choices in later tranches, he picked them instead of some other bait alternative companies that I put on the menu (which will probably long term work as well, but not as surely as earnings growth champions like the more boring looking pharmaceutical or so).
* That he was given lump sum from grandparents.
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As mentioned, the default is a simple gift (einfache Schenkung, Art. 239 ff. Swiss Code of Obligations - OR) to the parents. The money legally becomes theirs. The grandparents’ wish is a moral instruction, not typically a legally binding one transferring ownership to the children unless explicitly structured otherwise.
Grandparents could make the gift conditional (Schenkung unter Auflage, Art. 246 OR). They could specify, ideally in writing (though legally not always required, highly recommended for proof), that the gift to the parents comes with the legally binding obligation (Auflage) to save it for the children.
When is Nutzniessung on shares typically advantageous?
- If the parents have a high marginal tax rate compared to the child.
- Parents want the child to receive the income generated, but not be able to sell the underlying asset.
- (Not in this case) It can be a tax-efficient way to provide regular financial support to a child for living expenses or education, directly linked to family assets.
When is it likely worthwhile?
- If the income tax difference between parents and child is small.
- If the dividends generated are minimal.
- If the parents are comfortable simply gifting shares directly to the child (ownership transfer).
- If the administrative complexity and potential legal/advisory costs outweigh the tax savings.
Right after the return at home we just have opened a joint account on IBKR and an automatic monthly investment of 200$ in VT
We wire 200CHF a month. And once a year I will manually convert the rest + dividends.
Money teaching to our kid is still far from away but I guess giving all at his 18y is most of the time a bad idea
You mean, on child’s and parent’s names?
I am pretty sure the gift is actually the children’s property. This is not a gift to the parents. Yes the parents manage their children assets and declare them with their own tax declaration, but it is still legally the childrens’ money.
It depends if it was a gift to the parents to be used for the children or if the grandparents intended to create a trust with the children as beneficiaries and with the parents acting as trustees.
Nope on parents name.
1st kid on the way and I’m thinking of a strategy to put 100.- a month on a standard bank account for the kid, and 100.- a month on a robo-advisor invested in a diversified portfolio. What do you think of this approach?
The goal would be that the future young adult can directly see the offset between money invested VS money not invested, and also with the bank account, have cash available, which can always be nice at that age.
I’d expect further down the line a question such as “Why not investing it all, the difference is huge!!”, and while I’m not too sure how I’d answer, the truth is that one goal is that they actually notice the difference and it triggers an early financial education.
I think best is to put all money in Robo advisor.
They can easily see the difference between keeping money in cash vs investing by looking at absolute returns in Robo advisor portfolio
Total value of portfolio Minus Amount deposited is the value of investing
You’re giving up 50% of the gains. Expensive lesson 
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I think it’s a great experiment and lesson.
Education is expensive, but the RoI is the highest possible (along with socialized healthcare). The child/young adult is unlikely to get the difference between “here’s some money I socked away on your behalf” and “here’s some money I invested on your behalf” unless they see it with their own eyes.
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You can put it in the Bank of Dad. He earns a small amount of interest, you invest it earning more. An additional lesson there that if your money isn’t working for you, it’s working for somebody else!
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“Son, remember when you issued a margin call when you were 9 months old?”
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“And Bank of Dad collapsed due to an ill-timed investment in IdiotCoin? Well the shareholders of the Bank managed to cash-out in time, but your deposits have to be bailed-in to rescue the bank. Yup, the rules suck, but I don’t make the rules (except when I contribute to politicians’ election funds), I just exploit them.”
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Yeah I’m thinking this as well. I can imagine myself, I’m 18 years old, a strong desire for discovering the world and spending money, my dad is telling me “so you know this money was invested and actually we only put 40k but now it’s worth almost double thanks to investing it”.
And I’m like “yadda yadda thx parents where’s the money? 70k, wow I can probably buy a nice sport car with that cya”.
Of course there’d be a feeling of a loss by seeing the static part smaller than the invested part, that’s the reaction to expect. And unfortunately I have a feeling that choosing another ratio than 50/50 wouldn’t achieve the same goal, kids won’t want to do math, but will always understand the 50/50 ratio.
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