Banks ripping off Trust funds

ReportInvestor · 7 October 2006 at 6:35PM

Well it looks like a way forward might be to take it out of HSBC's "tender care" and maybe switch it to an IFA who charges less and move the fund towards income - thereby increasing your mother's income both from the investments and from reduced charges.

There seems to have been a lot of misunderstanding about. Home improvements that locked away capital with no prospect of income may have been, with hindsight, an error.

It sounds to me that there may be scope for action v HSBC re this income error. Who made the growth/income decision on the investments? Your stepfather on his own / with HSBC or your mother with HSBC?

And finally. It's been invested for growth, has it achieved it? (Although poor investment performance is not grounds for mis-selling.) Touch wood, that could be one redeeming feature in this saga.

footles wrote:

my mother....now has to sell her home of 37 years to make ends meet.

You wouldn't wish this on any 82 year old, as it is a wrenching experience - and also quite costly, especially if she then has to move again, in a few years, for care reasons.

However, if it could be achieved in the same neighbourhood where she has family & friends, it is another way to free up capital for the income she needs.

My own mum is 80 and her house is too big for her and she has various health problems. Our family decided that she should stay in her home because she has such good neighbours anyway and that paying for cleaners / gardeners etc. was an expense but not as great an expense as moving & paying Gordon's Stamp Duty (especially if 3%).

Each decision is different & a combination of the financial & personal.

In your case I guess that shifting the management of the trust & increasing your mum's income may be a comfort to her, since she will not think that her partner made the "wrong decision", just that it wasn't quite done in the "right way" by your step dad for understandable health reasons.

footles · 7 October 2006 at 9:13PM

Hi again ReportInvestor and many thanks once again for your help. In answer to your question 'who made the growth/income decision?' unless my step-father left instructions - which we are not aware of, HSBC have taken the decision, totally against my mothers wishes. She has repeatedly stated that she needs the income and as she is not going to live for ever why go for growth? HSBC's response is that they must be seen by the IR to abide by the discretionary trust rules otherwise the IR will levy tax.

ReportInvestor · 7 October 2006 at 9:27PM

I assume that your mother must have been given a copy of documents setting up the trust, that included your step father's instructions.

You need to check these as a first step.

footles · 7 October 2006 at 9:46PM

Hi again. I have just spoken to my mother. She does not aware of having a copy of any documents setting up the trust. Is she entitled to these? My step father did not appoint any trustees other than the bank and the bank seem to have all the power they want to do just what they want.

ReportInvestor · 7 October 2006 at 9:50PM

Your mother must have the right to see the documents setting up the trust.

If she has mislaid them (an understandable possibility) she could still get a copy.

footles · 7 October 2006 at 9:53PM

Thanks, we will try to find them and failing that will request a copy from the bank. Mum says thanks

siren13577 · 7 October 2006 at 11:37PM

Hi Footles,

I think this is terrible and shocking, it sounds like mis-management to me but I don't know much about this, one thing is the refusal of HSBC to talk to anyone about it, maybe you could get your mum to make a trusted person who has knowledge of this a proxy, I was going to say power of attourney but I don't think that's it. There must be some way of getting someone to speak on your mum's behalf who the bank would talk to, maybe seeing a solicitor who specialises in this could help, all solicitors will give you half an hour of legal advice for free.

So it's not terribly useful but I hope you get this sorted soon

Good Luck

ReportInvestor · 8 October 2006 at 10:30AM

A further couple of thoughts from my limited experience of this matter.

I know of one lady, who was a second wife of a widower who had children (and is therefore their step-mum). The widower died and set up one of these discretionary will trusts to provide her with an income, while preserving the capital for his children to inherit.

I do know that it is possible for her income to be reviewed / increased by arrangement - but I don't know who is the trustee (bank or family members).

footles wrote:

HSBC's response is that they must be seen by the IR to abide by the discretionary trust rules otherwise the IR will levy tax.

[RI - You definitely need to get a copy of these rules]

However this lady's income review requires the agreement of all of the children who will be beneficiaries of the capital of the trust and this can be a delicate matter, open to possible dispute and potential ill-feeling - but nothing too serious to date, thankfully.

This suggests that it is helpful, possibly crucial, in these matters to have the unanimous agreement of all parties who have an interest in the trust for any change to take place. If you and your siblings are in full agreement, there must surely be a way forward.

Otherwise the bank, as trustee, is judge, jury, executioner - and could in theory charge whatever fees it wanted until the money ran dry

(unless there are limits written into the deeds of the trust.

dunstonh · 8 October 2006 at 11:05AM

Whilst there are many alternatives available, as the bank is the single trustee (a bad move) they are in control of the investments. If they are using their own service, when an IFA service is a lot cheaper you could argue that they are not doing their job of making sure they are doing what is best for the beneficiary. The lack of trustees though is problem. The bank should never have been appointed sole trustee.