Savings Rates for Trusts

StAlbans44

My father died nearly three years ago. His will created a trust which stated, that as I trustee, I should invest £20K equally for my nephew and niece until they reach 21 years old.

You would think it would be easy to make such an investment on their behalf but as non risk taking trustees we only want bank/ building scociety rates to preserve the capital.

I have found only a few institutions that will accept trust money and their rates are poor.

Anyone know of anything better ?

getmore4less

My sister is looking into this for her kids and I think santander do a 3.5% 2y fixed rate bond that might qualify but needs £25k min.

dunstonh

You would think it would be easy to make such an investment on their behalf but as non risk taking trustees we only want bank/ building scociety rates to preserve the capital.

If the Will stated that you should invest £20k then why are the trustees not investing it but looking at non investment options, like savings accounts?

Have the trustees taken professional advice in an attempt to protect themselves for action being taken against them later for not acting in the best interests of the beneficiaries?

What makes you think that using cash deposits is risk free? It may not have investment risk but it has provider risk, shortfall risk and inflation risk. If the children are young then you are potentially eroding the real terms value and not acting in their best interests.

StAlbans44

Thanks for your reply. As trustees we are happy with the decision made to invest in cash deposits as there are only 3- 5 years until they reach 21. As beneficiaries they will not be suing me but i understand your concerns.

The money is with Scot Wids - so all ok there - and it is only £20K - not above the £50 k ceiling

What do you mean by shortfall risk ?

dzug1

Sorry but unless the will dictates the investment policy the law requires you to take appropriate advice before investing trust funds - you cannot just decide you are happy and be 'safe'

And what makes you certain they won't sue you (the trustees) when they come to be 18 and are unhappy with your investment decisions? You've no idea what your relationship will be like then.

Reaper

I'm not so sure. If it only has a few years left to run then many investors would start to anyway gradually move money over to safer areas to prevent a last minute crash affecting the payout, so it could be at least partly justified.

On the flip side building society accounts offer very poor returns as you have found. I imagine you have discovered they will not even keep up with inflation so your plan will actually reduce the value of the funds you are looking after.

Perhaps a mixture would be best.

dunstonh

Scottish Widows tend to be up there more often than not with interest rates.

Short term does favour cash but as you move further away then investment options come into play. If the timescale was say 15 years away then going 100% cash could very easily be questioned as a failure of the trustees to act in best interests. However, at 3 years it couldnt be questioned.