Family Trusts, any good?

Mcthecat

Hi all. As me and the missus get older ive finally decided to get my backside in gear and plan for the future. Basically, I own a house, have some savings (not enough for inheritance tax) have a pension as does my missus. We were planning a basic will but a company, a reputable one our Building Society recommended, visited us. They spoke of various ways to plan for the future. We have a grandson and want everything to go to him. Its a bit more complicated as we do not want anything to go to our son, its complicated, and all our savings, house everything to go to the little one. As no one knows how he will turn out, this Family Trust sounds great as if he turns out to be like his dad, the trustees will ensure he gets nowt or bits in small amounts. She spoke of Power of Attourney included, will, one of payment, everything in one nice neat bundle. Except it costs £3500. Gulp!. Still if it ensures the littleun has a nest egg and its free from the sons clutches with the protection for the littleun if he goes of the rails.


Anyone know of any disadvantages/advantages of such Trust Funds?

Mattygroves2

Trusts are complicated and you need to be sure you are being properly advised so please see either a STEP qualified accountant or solicitor before setting one up in your will. They are likely to charge but I doubt it will be as much as you are being quoted and it should be done properly (and if not you have professional bodies you can complain to).

It sounds like what they are suggesting is a discretionary will trust which can indeed be a good way of protecting your assets from undesirable family members but you need to be careful who you make trustees as they will have alot of discretion (how much depends on how you word the trust). You also need to be aware that taxation charges can be high (and complicated) and it doesn't stop inheritance tax being paid on your estate (if the value including house is enough). You also need to make sure the trust beneficiaries are wide enough to include future grandchildren and also potentially the issue (children) of your current grandchild as well as you don't know how long you will live or how long you might need the protection to carry on for. My late FIL had one in his will that covered his offspring, theirs and then the next generation (and on into the mists of time) and by the time he died he did indeed have several great grandchildren so it came in handy.

Power of Attorney is relatively easy to do your self and can be done for the specified fee alone. There are lots of guides (including one on this site) which enable you to do it yourself.

Personally I'd pay for the will and trust set up (too complex to DIY even with a bit of knowledge) but not for POA.

kidmugsy

One thing you'll have to decide is who the Trustees will be. For the trust set up in the will of the first of you to die it'll presumably be the surviving spouse.... and who? A sibling? A great friend?

Common advice is NOT to use a professional firm as trustees, as they are expensive, and you can't easily sack them. Better for family/friend trustees to pay for professional advice, using part of the capital or income of the trust. If, however, you think the duties would be too much for family and friends, or none of them is willing to take on the responsibility, then you probably will turn to professionals. I've been a trustee twice; as I get older, though, we'll have to think of younger people who we can ask to do it.

UPDATE I've just seen Matty's post: I agree wholeheartedly, especially with the first paragraph. I hope you find a better solicitor than we did.

mania112

A Trust is, simply, an agreement.

You, as a Settlor, want to setup an 'agreement' that when you're pushing up the daisies your assets are distributed as per your wishes.

This is all you need. You need words. These words need to include the Trustees (those responsible for the money, someone you trust, or a professional trustee), Property (what's going to be distributed) and Beneficiaries (your grandson in this case).

You can do this yourself, or you can pay for a solicitor to do it for you. I would expect a fee for this to be around £500-800.

Or you can even more simply and cheaply pay for someone to write a will for you (£150-250).

You can find an expert here: http://solicitors.lawsociety.org.uk/

What you've been quoted for, i think, is an investment vehicle which includes a trust. I'm not sure this is exactly what you want?

xylophone

The administration and taxation of Trusts can be complex and I would strongly suggest that you take professional advice.

http://www.step.org/online-directory

http://www.hmrc.gov.uk/trusts/types/

jamesd

A trust does seem like the right tool to use for your situation. Be sure that in addition to whatever the trust formally says you give lots of written guidance, not instruction, to the trustees so they have as much idea as possible about how you want them to act.

Your son is quite likely to challenge such an arrangement, so best to use a solicitor.

Dunnit

You can start paying £2880 into a youngster's pension. Filters money down to him but he cannot get his hands on it until he is at least 55 so less of the youthful ways of frittering away money and by which time you will be out of the equation.

System

On problem with starting a trust when you are getting on in life is that all the potential trustees will be of a similar age. You won't want geriatrics who might live only a few years longer than you, you want people fifty years younger.

So you will need to give the trustees powers to appoint new trustees, which is where a self-perpetuating family comes in. Which is a snag perhaps if the point of your trust is to protect some family members from others.

Your_Hero

mania112 wrote: »

A Trust is, simply, an agreement.

You, as a Settlor, want to setup an 'agreement' that when you're pushing up the daisies your assets are distributed as per your wishes.

This is all you need. You need words. These words need to include the Trustees (those responsible for the money, someone you trust, or a professional trustee), Property (what's going to be distributed) and Beneficiaries (your grandson in this case).

You can do this yourself, or you can pay for a solicitor to do it for you. I would expect a fee for this to be around £500-800.

Or you can even more simply and cheaply pay for someone to write a will for you (£150-250).

You can find an expert here: http://solicitors.lawsociety.org.uk/

What you've been quoted for, i think, is an investment vehicle which includes a trust. I'm not sure this is exactly what you want?

Whilst I agree that OP is faced with a large fee for the work, I think you may have given the wrong impression on the cost. A straightforward single person's will alone is normally £150 if you want it done professionally. If you need to write a discretionary will trust (not as simple as an extra page on the will, a lot more is involved), as well as the usual married couple's will, plus the LPoA, you'll find that the cost is probably fair. Many solicitors are actually charging more than this. I know some firms I used to deal with who were charging £4000+ for just the family trusts alone.

OP, you may wish to speak to another firm about your problem and tell them what you are after and see if it gets any cheaper. You may also wish to have a look on the government's website regarding LPoA, you can do this yourself free of charge, although the documents for both welfare and financial PoAs are very lengthy. The only cost you need to pay is £110 for each attorney you register.

What you've been quoted for, i think, is an investment vehicle which includes a trust. I'm not sure this is exactly what you want?

There would be no investment vehicle as yet because the trust is not even in force until their deaths. The trustees would need to seek specialist advice once the estate is wound up and placed into the trust to decide what investments they need in order to meet their objectives. They have a fiduciary duty bound by law to act prudently and to diversify the investments.

Forever_Forest

Can I just ask, what happens if a Trust fund has been set up and then I want to remove one of the Trustees?

Is this a case of I can do so because it's my Trust, or is it a little bit more complicated than that?

Thanks

Your_Hero

Forever_Forest wrote: »

Can I just ask, what happens if a Trust fund has been set up and then I want to remove one of the Trustees?

Is this a case of I can do so because it's my Trust, or is it a little bit more complicated than that?

Thanks

It's as simple as you've described it. If you set up a lifetime trust, (i.e. whilst you are still alive compared to a will trust when you're dead) you are the settlor and have full control over the trustees so you can add or remove them as you like. You can also be a trustee.