Investing inheritance until age 25 - trust accounts?

Watermeadows · 16 November 2016 at 11:48AM

My son, currently a minor, has been left an inheritance, with the stipulation in the will that he cannot access it himself until the age of 25. The money can be accessed for his benefit prior to that.

My problem is the restriction that he cannot access it until the age of 25, rather than the more usual age of 18. This rules out a number of options. The solicitor told me that a bank or building society could set up a 'trust account', but I have made enquiries of several high street banks and building societies, with little success.

NatWest said I could open a current account for him, to be accessed by myself only until he was 25, but this account pays no interest. I am really looking for a savings account that pays interest.

Can anyone offer any advice? Many thanks

AnotherJoe · 16 November 2016 at 12:37PM

I've read in the deaths and probate section here (or whatever its called) that actually this is legally impossible to enforce, after 18 then unless its held in a trust of a certain sort, which it sounds like this is not, (eg the will says "I leave £500 for Master Watermead to be given to him when he is 25" this condition is not enforceable and he can take it at 18.

So, check that first.

You might just put it in a childs account, they offer decent interest (though probably on smaller sums) or you could just put it in a new separate account with higher interest, in your name but earmarked for him.

Also, how much is it? Makes a difference if its £250, or £250k for example ! And also how long is it for?

Finally, you say a "savings" account but why savings? Are you intending to add to it?

jdw2000 · 16 November 2016 at 12:55PM

Whatever you do, don't take my advice as I am new here.

But in my opinion money which has time to grow such as these funds (7 years +) should be invested in a property or a S&S ISA, or in a stock market Fund.

To have it in a piffy savings account getting 1%-3% interest is barely keeping the money worth what it was if you factor in inflation at 2%.

Buy a house in London today for £200K, and in 7 years it will be worth over £250K, in my opinion.

Watermeadows · 16 November 2016 at 1:08PM

The will is a discretionary will trust. It's £10K. My son is a teenager, but under 18.

He was a very small child when the will was made, so the restriction is no reflection on his ability to manage the money at 18, but rather a reflection of the testator's generalised concerns about young people and money. The testator and myself discussed the restriction at the time, and it was their wish that the money could be accessed before the age of 25 for his benefit, but that he could not have access until that age.

By 'savings account' I meant an account which paid interest, not a current account which pays no interest. It is unlikely that the money will be accessed for several years, so I was hoping it could earn interest in the meantime. I had no plans to add to it.

Thanks very much for your response.

jdw2000 · 16 November 2016 at 1:32PM

Watermeadows wrote: »

The will is a discretionary will trust. It's £10K. My son is a teenager, but under 18.

He was a very small child when the will was made, so the restriction is no reflection on his ability to manage the money at 18, but rather a reflection of the testator's generalised concerns about young people and money. The testator and myself discussed the restriction at the time, and it was their wish that the money could be accessed before the age of 25 for his benefit, but that he could not have access until that age.

By 'savings account' I meant an account which paid interest, not a current account which pays no interest. It is unlikely that the money will be accessed for several years, so I was hoping it could earn interest in the meantime. I had no plans to add to it.

Thanks very much for your response.

Very important you get some interest on that if it will be sat there for 7+ years.

Assuming inflation at 2%, my maths (which isn't very reliable, but anyway) tells me that the £10,000 will have the spending power of £8,500 in today's money if left with no interest for 7 years.

Assuming 2% inflation each year, you need a bank account that pays at least 2% interest just to keep the £10K at it's current spending power.

If you want the £10K to actually grow in the next 7 years, you need greater than 2% interest on it.

xylophone · 16 November 2016 at 2:10PM

I am not entirely sure that this is a discretionary trust.

See in particular http://www.prescient-financial.com/docs/Bare%20trust%20returns.pdf

http://www.plantagenetpartners.com/bare-trusts-and-discretionary-trusts/

What exactly does the will say?

From the information given, it would appear that the cash has been "indefeasibly vested" in your son and that the Trustee has no discretion as to if the money is to go to him or the time when it is to go to him?

https://www.gov.uk/trusts-taxes/overview

AnotherJoe · 16 November 2016 at 10:30PM

Watermeadows wrote: »

The will is a discretionary will trust. It's £10K. My son is a teenager, but under 18.

He was a very small child when the will was made, so the restriction is no reflection on his ability to manage the money at 18, but rather a reflection of the testator's generalised concerns about young people and money. The testator and myself discussed the restriction at the time, and it was their wish that the money could be accessed before the age of 25 for his benefit, but that he could not have access until that age.

By 'savings account' I meant an account which paid interest, not a current account which pays no interest. It is unlikely that the money will be accessed for several years, so I was hoping it could earn interest in the meantime. I had no plans to add to it.

Thanks very much for your response.

Many current accounts pay more interest than so called savings accounts, so this is a distinction that is not relevant these days.

The issue with trusts is that trustees are In a bind and can't win and generally have to act to the detriment of the recipient. Put the money where it should be for a length of time like this , around 10 years, which is a stock market fund, and if it falls, the trustees are blamed, put it in an interest paying account and you'll be lucky if it keeps pace with inflation. So the latter is what they will do even though the chance of a fall is low and it's much more likely to rise substantially.

And as said by another poster, it is also my understanding that if the trust has a named person as the payee, then the age limit above 18 is not legally enforceable. Of course if your son doesn't realise this you may get away with it.

Investing inheritance until age 25 - trust accounts?

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