Discretionary Trust

blueglory1505

Hi there

I recently found out that my Grandparents have some money saved for all of their Grandchildren and now that I'm in a position to start looking to buy my first house they have offered to give me my share towards a deposit.

The money amounts to £25k and is held in discretionary trust where it has been for far more than 7 years.

What I would like to know is what the tax situation is with this money?

Can my Grandparents transfer the full amount to me, or is there tax or something to pay on it that will result in me not receiving the full amount?

I'm planning to see a mortgage advisor soon and will see a financial advisor before that if needed but I'm trying to get my finances straight and work out the net amount I have for a deposit. I also have £12k in ISAs of my own so I know that money is safe from the tax man but I need to know whether my total deposit totals £37k or if I will lose some of the trust money.

Any help and advice would be appreciated!

Thanks

xylophone

The money is held in a discretionary trust- your grandparents are the Trustees?

See http://www.hmrc.gov.uk/trusts/types/discretionary-accum.htm

blueglory1505

Yes that's right.

I saw that on HMRC but I don't understand it all to be honest!

I guess I need to talk to an advisor from HMRC or something.

bowlhead99

HMRC don't make a habit of advising people how to comply with the terms of their own trusts and what the implications of different scenarios would be from a legal and tax perspective. A solicitor with experience of family trusts is what you need.

Or perhaps, what your grandparents or parents need if they are the trustees - presumably the advice would have value not just for you but all the other grandchildren covered by the trust too? The advice will not be free but then nothing in life is. Better to have professional advice and certainty rather than no advice and then find a huge tax bill lurking down the road.

You could of course ask HMRC for some general comments if you don't understand something on their website but as they are not getting paid to help they are not going to fully review the status of your individual trust to give you or your grandparents the tailored personal financial and legal advice.Whereas a tax advisor or solicitor that you pay, is the sort of person who can help deal with things you can't understand. If you don't understand perhaps your grandparents or the trustees don't either and so a few hundred quid to an advisor would seem sensible.

xylophone

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

A solicitor will advise on the law relating to Trusts but might well require you to consult a tax accountant as well.

http://www.hmrc.gov.uk/trusts/intro/basics.htm

"Get professional help for your trust
Understanding trusts can be difficult so you may want to work with a solicitor or tax adviser. Remember though that the trustee is still legally responsible for the trust's tax affairs. You'll find some links below to professional organisations - although not all professionals are registered with them.
If you want HM Revenue & Customs (HMRC) to communicate with your agent or professional representative on Income Tax and Capital Gains Tax matters, you'll need to fill in form 64-8. Follow the link below to find out more about completing form 64-8.
If you want HMRC to communicate with your agent or professional representative on Inheritance Tax issues, you'll need to enter their details on form IHT100.
Find a solicitor on the Law Society of England and Wales website (Opens new window)
Find a solicitor on the Law Society of Northern Ireland website (Opens new window)
Find a solicitor on the Law Society of Scotland website (Opens new window)
Get help from the Society of Trust and Estate Practitioners - STEP website (Opens new window)
Find out more about completing form 64-8"