Discretionary trust for mentally ill brother in mothers will

Steves_2

Hi,

In my mothers will she has split 66 2/3% to me and brother 'X',

The remaining 33 1/3% is to go to my mentally ill brother ' Y' and she has provided a discretionary settlement/trust which me and X as trustees will, I presume, be in control of to give money to Y.

Has anyone been in this situation? Is there extra paperwork which outlines the trust or just by stating she has provided a discretionary settlement in a covering letter (which we have) is all that's needed?

And what will actually happen if my mum dies? Do we set up a bank account? Who splits up any money and distributes it?

If we sell her house who sees that 33 1/3% goes into the trust?

Just trying to get this straight in my mind without paying a solicitor loads of money for asking questions.

Any help gratefully received.

McKneff

Most solicitors will give you a half hour free session so ring up and ask for one

Steves_2

Good idea McKneff - but it would be good to hear from people who have been through the same process. Solicitors can sometimes offer advice which ultimately means they have their own interests at heart - eg I'm currently dealing with my fathers death and Probate - if I hadn't checked here first I might have been landed with a huge bill for something that appears to be quite straightforward and I can do myself.

dzug1

The executors of your mother's estate will split and distribute the money.

You as trustees will yes have to set up a bank account to receive the funds and then invest them (having taken professional advice - the law doesn't really allow you to make the decisions entirely on your own). You are going to need to keep records of your decisions and the reasons for them, and to set up a relationship with the taxman for the trust (discretionary trusts have a rather unfavourable tax regime BTW)

Who is controlling your brother's finances at the moment? Does someone have Power of Attorney/Deputyship? If so (and I'm thinking aloud a bit without thinking it thoroughly through) maybe there is an alternative to a trust in leaving the money to him (the brother) with the attorney/deputy controlling it.

claretmatt

Steves wrote: »

Is there extra paperwork which outlines the trust or just by stating she has provided a discretionary settlement in a covering letter (which we have) is all that's needed?

I am sure that your mum has stated in her Will that 1/3rd should be held in trust for brother Y and my belief is that this is sufficient.

It would also be helpful if you mum provided a letter of wishes giving guidance to you as to how you would like them to exercise their powers. This is not binding but can confirm what she would like you to do with the trust fund.

Steves wrote: »

And what will actually happen if my mum dies? Do we set up a bank account? Who splits up any money and distributes it?

As a trustee you will have the responsibility of controlling the trust "property", taking care, keeping accounts, paying tax and considering suitable investments.

The tax situation is different for trust investments and therefore I would if the situation arose recommend you take independent financial advice to ensure you are using the most suitable investments.

Steves wrote: »

If we sell her house who sees that 33 1/3% goes into the trust?

Once again you would be responsible.

You can also use the trust to your advantage, so not to affect any benefits your brother may receive by paying monies directly into recreational hobbies he may enjoy as opposed to paying it directly to him.

Steves_2

dzug1 wrote: »

Who is controlling your brother's finances at the moment? Does someone have Power of Attorney/Deputyship? If so (and I'm thinking aloud a bit without thinking it thoroughly through) maybe there is an alternative to a trust in leaving the money to him (the brother) with the attorney/deputy controlling it.

He sorts his own finances at the moment. Wouldn't leaving the money with a Solicitor cost?

dzug1

Steves wrote: »

He sorts his own finances at the moment. Wouldn't leaving the money with a Solicitor cost?

I wasn't thinking of leaving it with a solicitor (yes it would cost) - but with him, with you controlling it under a Power of Attorney, etc. But I was assuming he was less capable than he is, so it's probably a non-starter.

Savvy_Sue

If you and X are the executors of the will, then you are jointly responsible for putting 1/3 of your mum's estate into the trust you think she's set up for Y.

If your mum is still alive (I'm guessing she is!) then this is something that it would be well worth her getting (and paying for!) qualified legal advice on. This is not a standard situation, and there are additional issues with trusts. I would suggest a STEP member, either solicitor or accountant.

We've had useful advice from a STEP accountant wrt the trust in my Dad's will, but that is a far simpler affair because all the beneficiaries are capable of managing their own affairs.

alm721

Apologies in advance if this seems rude. but if he manages his money now why does he need the trust? Could he not continue to manage it in the future?

Mojisola

alm721 wrote: »

Apologies in advance if this seems rude. but if he manages his money now why does he need the trust? Could he not continue to manage it in the future?

If the money he is managing is from means-tested benefits, then those would stop after he inherited money.

If it was tied up in a trust, he would probably be able to continue receiving benefits.

Steves_2

alm721 wrote: »

Apologies in advance if this seems rude. but if he manages his money now why does he need the trust? Could he not continue to manage it in the future?

Hi,

Well (apart from losing benefits) such is his illness that, although he can handle his finances now - and things are pretty simple for him at the moment - his mental state may become more unstable in the future.

I've discussed it with him and he doesn't seem to care much about it - but agrees its probably best in terms of not losing benefits.

I guess the point of a trust is he can ask for money whenever and we sort it for him - our job being to ensure it's not squandered away if he goes through a bad patch.

Actually I wonder why a trust is needed? Could me and my brother set up a joint account and simply set up a standing order to my ill brother?