Investing money from a Will Trust - help

Tinkerbell637

My Mother died earlier this year and left some money in her Will in Trust for her 3 grandchildren until they reach the age of 25 when they can inherit. The grandchildren are aged 24, 17 and 11 respectively. My sister and I are co-trustees.
We are not keen on investing in the stock market at present and would prefer a savings account that is paying a bit more than the 0.5% which seems to be the going rate. However, there seem to be very few accounts, bonds etc which are open to Trusts (WHY??!)
It would make more sense for my sister and I to open a joint account somewhere but obviously the downside of that is that if we should die the money would be part of our estate. So - 2 questions
1) Anybody know a good place to save Trust Fund money?
2) Isn't there some sort of declaration we could make that would show that any money in a named account belonging to either or both of us is actually for the benefit of the grandchildren?
We're taking about a total saving pot of around £80k.

xylophone

It would make more sense for my sister and I to open a joint account somewhere but obviously the downside of that is that if we should die the money would be part of our estate.

As Trustees you cannot do this.

You need to establish the type of Trust this is for tax purposes - ask the solicitor who drew up the will - if he doesn't know then a member of the practice should - failing that

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

https://www.gov.uk/trusts-taxes/types-of-trust

Tinkerbell637

As Trustees you cannot do this.

Oh. I thought we could, or even should, invest the money "as if it was our own". Not that I want to do it like that, but it just seems so difficult to be able to save it in a Trust "wrapper". How can we maximise the return for the beneficiaries if there are so few decent accounts out there?
We have spoken to an IFA who suggested a Trustee Investment Bond, but this would appear to be "investing" in the stock-market and incur fees. My sister is very skeptical of the stock market and it certainly wouldn't be any good in the short term for the 24 year old. Just a decent savings account or fixed term bond would be nice..........

dunstonh

We are not keen on investing in the stock market at present and would prefer a savings account that is paying a bit more than the 0.5% which seems to be the going rate. However, there seem to be very few accounts, bonds etc which are open to Trusts (WHY??!)

Whilst you may not be keen on investments, you have to take your own hat off and put your trustee hat on and at least one of those grandchildren is suited to investing.

It would make more sense for my sister and I to open a joint account somewhere but obviously the downside of that is that if we should die the money would be part of our estate. So - 2 questions

It would also be fraud if you did that.

We have spoken to an IFA who suggested a Trustee Investment Bond, but this would appear to be "investing" in the stock-market and incur fees.

Savings accounts incur fees. They are just implicit compared to investments which are explicit.

My sister is very skeptical of the stock market and it certainly wouldn't be any good in the short term for the 24 year old.

stockmarket is one of the options for investing but not the only asset class. It wouldnt be suited to the 24 year old but would the 11 year old. Your sister needs to be more logical in her approach. Is her scepticism down to lack of knowledge? A trustee has a legal responsibility to do what is best for the beneficiary. Not what is best for themselves. So, the choice is to improve the knowledge or use an IFA.

Tinkerbell637

Thank you for all of the above comments. I have been trying to do some more research this evening, and everything I am reading tells me
a) that a Trust is not a legal entity,
b) One of our main duties is to secure the trust assets and "make sure the assets are now held in the names of the trustees".
c) Section 3(1) of The Trustee Act 2000 says: " Subject to the provisions of this Part, a trustee may make any kind of investment that he could make if he were absolutely entitled to the assets of the trust."

So there seems to be some contradiction here, on the one hand Forum members are telling me we can't put the money in our name and open a savings account and on the other it appears we're supposed to do exactly that. If, instead, as I presume you will tell me, we have to put assets in the names of the "Trustees of XYZ Will Trust", we are immediately precluded from a large proportion of savings vehicles that we would otherwise have access to.
I would greatly appreciate a quick summary of what is actually meant by "transferring assets into the names of the Trustees" and how these assets are distinguished (for Tax purposes) from our personal assets.

A trustee has a legal responsibility to do what is best for the beneficiary.

Agreed, but since there are also those health warnings that go something like "past performance is no guarantee of future returns, your investment value may go down as well as up", I don't think the beneficiaries would thank us if we lost them their shirt.

dunstonh

c) Section 3(1) of The Trustee Act 2000 says: " Subject to the provisions of this Part, a trustee may make any kind of investment that he could make if he were absolutely entitled to the assets of the trust."

If you read on it also says....
act in the best interest of all beneficiaries – The trustees must judge the suitability of investments having regard to the best interests of all beneficiaries, past and present
exercise reasonable care and skill – A trustee must pay regard to any specialist knowledge or experience that he holds
take proper advice – When considering any investments, or when carrying out a review of the investments of the trust, the trustees must obtain and consider proper advice

So there seems to be some contradiction here, on the one hand Forum members are telling me we can't put the money in our name and open a savings account

What you have posted doesnt say you can put it in your name. If you hold it in your name then it is viewed as your asset. However, it is an asset of the trust. So, the account name would be "The Will Trust of xyz".

Agreed, but since there are also those health warnings that go something like "past performance is no guarantee of future returns, your investment value may go down as well as up", I don't think the beneficiaries would thank us if we lost them their shirt.

Equally, I dont think they will thank you for 14 years in a deposit account paying less than inflation.

Risk is not on/off. It is a sliding scale. 100% stockmarket would be risk 10 on a typical 1-10 scale that includes mainstream options. Cash would be 1. So, you have covered 1 and 10. What about all the things in between?

xylophone

You can only hold it in your names as Trustees not in your individual names as private persons.

Even if you hold a bank account, the account should in the names of eg Mary Jones and Sarah Jones, Trustees of the Ann Smith Will Trust and this is what will appear on the cheque book.

See http://www.herrington-carmichael.com/documents/articles/b35aa71a-68fc-4e6c-936f-bd60525107f8.pdf

"Unless expressly authorised by the Trust instrument, trust funds must be invested to provide:-
Diversity of investments;

A balance between income and capital.

Following the introduction of the Trustee Act 2000, Trustees are able to make any sort of investment as if they owned the trust assets. They should, however, take account of the above standard criteria and also whether the trust is of income or capital.

Because of the situation with regard to taxation of any income arising on trust investments, it is essential to establish the type of trust created by the will.

See http://www.hmrc.gov.uk/manuals/tsemmanual/tsem1563.htm

https://www.gov.uk/trusts-taxes/trusts-and-income-tax

http://taxbar.com/documents/Bare_Trusts_Nicola_Shaw.pdf

You will understand from the above that you must have regard to the exact terms of the will.



As I said in my previous post, you can ask the solicitor who drafted the will what type of trust the will has created.

Tinkerbell637

If you hold it in your name then it is viewed as your asset. However, it is an asset of the trust. So, the account name would be "The Will Trust of xyz".

and

You can only hold it in your names as Trustees not in your individual names as private persons.

Thank you both for clarifying this. This is, in fact, the current situation, so we haven't done anything wrong yet. Just trying to work out where to go next.

As I said in my previous post, you can ask the solicitor who drafted the will what type of trust the will has created.

I think it is most probably a Discretionary Trust however, we do not have discretion over how much each beneficiary receives, this should be "in equal shares absolutely". - I think you're right, I need to go back and double check with the solicitor.

As for investments versus savings, I hear what you're saying dunstonh about inflation and I guess to some extent you have to speculate to accumulate - but it still makes us nervous! Contrary to what you may think, we'd probably be happier with the risk if it was our money we were speculating with and not that of our children.

Mojisola

Tinkerbell637 wrote: »

My Mother died earlier this year and left some money in her Will in Trust for her 3 grandchildren until they reach the age of 25 when they can inherit.

The grandchildren are aged 24, 17 and 11 respectively.

Won't you need three accounts? If you keep it in one account, how are you going to work out what's a fair payout to each child as they reach 25?

Tinkerbell637

Won't you need three accounts? If you keep it in one account, how are you going to work out what's a fair payout to each child as they reach 25?

Surely the 1st one gets a third of the pot. The second one gets half of whatever is in the pot (including interest accrued since the first payout) when they reach 25 and the third one gets the balance when they in turn reach 25. Theoretically if the investment ends up being a good one, the youngest child should do very well out of it.
Alternatively, because of their respective ages, we might have to separate off one third now for the eldest and put it in short term savings, and the other two thirds would go into a longer term investment for the other 2.

dunstonh

The Will Trusts I have dealt with have always had one per named beneficiary. i..e "the will trust of child 1 name", "the will trust of child 2 name". Mainly as it is three trusts. Not one.