Discretionary trust fund questions

community_chest

Evening,

A member of my family put money into a discretionary trust for me about 5 years ago. I was told this money was to be made available to me at the age of 40.
I turned 40 last week so went about enquiring about the trust value etc, it is worth approx 135k (nice amount I know).
I have asked the trustees to release the money to me to pay off my mortgage as this seemed a sensible choice to me.

135k mortgage over 15 years costs about 70k in interest, so if the cash is there, makes sense to secure my house and not pay interest to the bank anymore.

The trustees turned down my request on the grounds they do not feel releasing the money to me is in the best interest of the trust.

Do I have any rights? The trust is actually for 5 of us, although I am the eldest, we all have the same split, about 135k each, but I'm the only one to reach 40 so far.

I am a named benefitiary, but I have no paperwork or contracts etc as that is all with the family member (who also doesn't agree that it is in my best interest to release the money at the moment to pay my mortgage off!).

Anyone with any experience about this matter?

I could understand the decline if I wanted to go on a 3 month cruise or something, but securing my house seems the best use you could ever put money to?

cte1111

I think it's just the income from the trust that the beneficiaries receive, not the capital. So it sounds like the trustees are asking correctly. Here's a quote:

Once assets are put into the Trust they belong to the Trust not the person
intended to benefit. He or she may get gifts or even payments from the Trust but
they cannot be said to have any assets themselves.

The key points about a Discretionary Trust are:

Trustees have discretion as to how the assets are used – the Trustees are free to make all the decisions.

The person to benefit from the Trust must not have a right to the income or
capital.

The intended beneficiary must not be the only person named in the Trust i.e.
must not be the ‘sole’ beneficiary.

Chargem

community_chest wrote: »

Evening,

A member of my family put money into a discretionary trust for me about 5 years ago. I was told this money was to be made available to me at the age of 40.
I turned 40 last week so went about enquiring about the trust value etc, it is worth approx 135k (nice amount I know).
I have asked the trustees to release the money to me to pay off my mortgage as this seemed a sensible choice to me.

135k mortgage over 15 years costs about 70k in interest, so if the cash is there, makes sense to secure my house and not pay interest to the bank anymore.

The trustees turned down my request on the grounds they do not feel releasing the money to me is in the best interest of the trust.

Do I have any rights? The trust is actually for 5 of us, although I am the eldest, we all have the same split, about 135k each, but I'm the only one to reach 40 so far.

I am a named benefitiary, but I have no paperwork or contracts etc as that is all with the family member (who also doesn't agree that it is in my best interest to release the money at the moment to pay my mortgage off!).

Anyone with any experience about this matter?

I could understand the decline if I wanted to go on a 3 month cruise or something, but securing my house seems the best use you could ever put money to?

I am assuming there is one trust with five beneficiaries and a total value of approx. £675,000.

If my assumption is correct, the issue is there is not "135k for you", you are not entitled to one fifth of the trust because there are five beneficiaries.

I'm afraid you have no right to the money, any and all distributions are completely at the discretion of the trustee. These trusts are normally administered broadly in line with the wishes of the original settlor, although I'm not sure whether you would be entitled to see a letter of wishes (you could request a copy and see what their response is) and anyway these wishes are not legally binding.

You should also note that one fifth of the trust fund is not your entitlement, and if you were given 135k then you would still be a beneficiary and could potentially gain additional funds in the future - the trustee could potentially distribute the entire fund to a single beneficiary, if they felt they had good reason to do so.

I would suggest you request a much much smaller distribution in future, for example requesting £5k regularly every six months is much more likely to meet with success.

You don't say whether this is a corporate trustee or an individual, if it is an individual there may be room to negotiate what they would be happy to distribute to you and when?

xylophone

http://www.hmrc.gov.uk/trusts/types/discretionary-accum.htm
The Trust Deed is key.

community_chest

Thanks for the replies.

A bit more information, the trust was made by my father for his 5 kids.

The way it was told to me was that 100k had been put aside for each of us that we could have access to when we were 40.

That obviously appears to not be the case at all.

So even though I am named as a beneficiary of the trust, without asking to see the orignal paperwork, I have no idea what official conditions are attached to any of it.

It all seems very different to how we were told, I'm not sure he fully understood it either to be honest!

community_chest

The trustees are three individuals, his ex business partner, the ex business partners wife and a third party accountant.

xylophone

Is your father still alive? Does he have a copy of the deed?

Chargem

community_chest wrote: »

So even though I am named as a beneficiary of the trust, without asking to see the orignal paperwork, I have no idea what official conditions are attached to any of it.

It all seems very different to how we were told, I'm not sure he fully understood it either to be honest!

You are entitled to request the trust deed from the Trustees to try and work out the terms of the trust.

As you have no right to the money my suggestion would be to try and enter into a dialogue with the trustees and find out what their intentions are, how much they would be prepared to distribute to you (if anything) and when.

community_chest

Ok thanks all.

Big learning curve!