Death Grant Question

Feebs

I wonder if someone could offer me some advice. My sister died last November, she left a son who has spent the best part of his life (25 years) spent indoors with just his Mum for company. He has never worked and hasn't a clue about basic life skills i.e. if I asked him to set up a direct debit he would look as if I'd asked him to split the atom !!

In her will my sister made me trustee (and executor) and stipulated that I look after the residual estate until her son was 30, she knew how difficult it would be if all financial decisions were left to him and we discussed this before she died. The problem is her council death grant nomination, this is in her son's name, she would have nominated him before her cancer came back and probably never thought about it again. My dilemma is that I was hoping to have all the estate funds in one pot where I can look after things until her son is 30 as per her wishes. This death grant is a significant amount of money and despite me explaining in detail to the pension people what a mistake it will be just handing it straight over to her son, they refuse to budge and are just going to hand it over to him.

He still lives in my sisters apartment which is mortgage free but has an extortionate ground rent, there are all the other usual bills to pay and now the estate has been sorted, her bank account has been closed and all dd's have been stopped. I have to set all these up again as her son has to stay there until the apartment can be sold. I have no idea how I'm going to try and manage things if all the money has been handed over to my sister's son who quite frankly has never handled any money apart from his jobseekers allowance. I'm very keen to take financial advice on how best to invest this money for him for five years, but it does need to be used to pay all the bills in the meantime. This money will be landing in his bank account by the end of the week.

Many apologies for long post but it is a complicated story.

Many thanks as always for the valuable advice I've always been lucky enough to receive.

Debt_Free_Chick

Feebs wrote: »

This death grant is a significant amount of money and despite me explaining in detail to the pension people what a mistake it will be just handing it straight over to her son, they refuse to budge and are just going to hand it over to him.

They can't budge. They're doing exactly what they're supposed to do. Pension lump sums are always paid directly to individuals - unless there are good reasons for doing otherwise - for two reasons (a) they do not go through the Estate so they're not in the pot when it comes to work out inheritance tax (b) the money can be paid quickly to the beneficiaries, without waiting for probate to be sorted out.

In addition, your sister specifically nominated her son to receive this money. What she should have done was to make it clear that the money was to be paid to a trust, for her son.

Sorry if this sounds harsh - I'm just trying to be clear and succinct. But it rather sounds as though your sister might not have understood how the pension lump sum would be paid and/or didn't discuss her plans with the pension administrators or another professional adviser.

Nothing you do can I'm afraid, other than perhaps offer to help him to manage this lump sum?

Feebs

Thanks for the advice. They said that they weren't allowed to pay to anyone other than the individual when we both went to see them today, but all the documentation states quite clearly that the final decision on who the money is paid to is up to them (I didn't think to ask them that whilst I was there).

Debt_Free_Chick wrote: »

They can't budge. They're doing exactly what they're supposed to do. Pension lump sums are always paid directly to individuals - unless there are good reasons for doing otherwise - for two reasons (a) they do not go through the Estate so they're not in the pot when it comes to work out inheritance tax (b) the money can be paid quickly to the beneficiaries, without waiting for probate to be sorted out.

In addition, your sister specifically nominated her son to receive this money. What she should have done was to make it clear that the money was to be paid to a trust, for her son.

Sorry if this sounds harsh - I'm just trying to be clear and succinct. But it rather sounds as though your sister might not have understood how the pension lump sum would be paid and/or didn't discuss her plans with the pension administrators or another professional adviser.

Nothing you do can I'm afraid, other than perhaps offer to help him to manage this lump sum?

Shimrod

Feebs wrote: »

Thanks for the advice. They said that they weren't allowed to pay to anyone other than the individual when we both went to see them today, but all the documentation states quite clearly that the final decision on who the money is paid to is up to them (I didn't think to ask them that whilst I was there).

The nomination form your sister completed, so it is an expression of wish. While normally the trustees would follow this there are circumstances in which it can be disregarded.

Have you sent in copies of the will showing the wishes of your sister? This is the sort of supporting evidence that may persuade the trustees to review their decision. It would probably be best to do this in writing rather than a visit

pauletruth

does your nephew have any learning disabilities or mental health problems. maybe worth speaking to a learning disabled group some may know a course for basic life skills.

xylophone

I take it that the son is unsophisticated rather than mentally handicapped?
If this is the case then it seems unlikely that the Trustees would do other than follow your sister's expression of wishes though you could put your case to them again?

I am assuming that the flat and all other monies arising from the estate are now held in a Trustee bank account? Has the Trust been registered with HMRC? http://www.hmrc.gov.uk/trusts/iht/death.htm

If you are uncertain of how to proceed, try http://www.step.org/?

Take your nephew to see an IFA?

With regard to any benefits he is receiving, check his situation if he is to own a substantial amount of capital?

Is the Trust set up by the will Discretionary/ Bare? http://www.hmrc.gov.uk/trusts/types/

Feebs

Thanks to you all for your advice.

The word 'unsophisticated' sums him up perfectly.Unfortunately, my sister did him no favours in that she did everything for him, he did not have to deal with anything other than drawing his dole out.

I gave the pension people a copy of her will and also showed them the grant of representation showing me as the executor and trustee, but they still wouldn't budge. My sister's will named me as the trustee and her wish was for me to act as trustee for five years and this meant that the residual estate would be 'handed over' to him on his 30th birthday.

I'm just not sure how I can carry this role out successfully now. This huge amount of money will be paid into his bank account. It is a simple account and he does not have online banking. Closing her bank account and transferring the bank assets over to me was very straightforward, I went to see the bank, took all the legal documentation and it was done very quickly. My dilemma is that he is continuing to live in the apartment and will need to until it is sold (it's been on the market for 2 years), the direct debits will still need to be paid monthly and I have set them up to come out of the new account I have set up with the money contained in her bank account. After funeral bills etc have been paid, this won't last very long and this is why I wanted to have everything in the same pot, so I could look after his interests and pay his bills for the next five years until I have taught him how to do all this himself.

It's all very worrying, I live 15 miles away from him and have a full time job so I really wanted to try and get this all to work smoothly but I have no idea what to do now.

xylophone

I think that you might take him to see an IFA - or would he give you POA to deal with his financial affairs?

Do you need to lower the selling price of the flat?

If you are unsure about your responsibilities as Trustee you will need to see a solicitor with expertise in wills and trusts- see above?

jamesd

As executor and trustee you're responsible for things in the estate, not things outside it like death benefits, so it is no surprise that the trustees did not accept your request. If I was in his position it is almost certain that I would appeal to the regulator then if necessary take legal action against the trustees if they did not act in accord with the wishes she expressed to them for the portion of the money they are responsible for. It's a simple fact: she did not grant you any authority over this money. Best to accept that and move on to what to do to help him within the constraints of the authority she gave you.

Getting the help of an IFA seems sensible. If the amount of money really is huge (many hundreds of thousands) it may provide him with an ample income if properly managed. He could recon on getting 4-6% of the capital value for life under such proper management. Moderately cautiously, £4,000 a year per hundred thousand, less cautiously, £6,000, but with a likely gradual decline in capital value at that level. If the total amount is in the half million range it's entirely possible that she has effectively set him up for an ample lifetime income.

Moderately cautiously means a combination of corporate bond funds, equity income funds and some cash to act as a smoothing of the income payments, which will often be paid one to four times a year instead of monthly or weekly.

Such income could be arranged so that he gets a weekly allowance paid into his main bank account, so he'd have to do not much more than he does now with the dole, but perhaps at a higher income level.

Assuming the apartment is part of the estate it can be sold at auction for whatever price it fetches. Not selling for two years implies wrong pricing expectations. If it is a high cost place that sale may lower his living costs and if he benefits from money from the sale, that could increase his long term income. Depending on just how high his sustainable income from investments could be it may be highly desirable to buy a low cost and inexpensive place for him to live in. Such places are quite often available with some price-driven searching, particularly if places that need refurbishment are considered, and if low price is given a higher priority than location Not restricting to a city but allowing ten to twenty miles outside it, say.

He'd also need to understand the implications of deprivations of assets tests for benefits. If he was to blow a truly large amount of money he might then be refused benefits on the grounds that he has deliberately left himself without that money.