Discretianary Trust questions

weezie7

My Dad died 4 years ago and his will said that his half of the house was to be put into a Discretionary Trust (DT). Dad was a great believer in saving tax as much as possible and we believe that that was his prime intention with setting up the Trust. The original Trustees were bank, solicitor, accountant and stepmum. The bank are not longer a Trustee (they don't do DT's anymore), and the solicitor has retired (who knew Dad well) and another younger (who did not know Dad) has been made a Trustee.
Question 1. Can solicitors just appoint who they want without consulting beneficiaries?


The beneficiaries of the DT are stepmum and all of my 6 siblings. Trustees originally paid out Dad's share of residue of his estate to all, not the house money. Small amount left in Trust. Stepmum started to want to sell house, but before she did, she had accident and ended up in hospital and chose to move to care home, where she still is - 2 years on. She is happy there, and does not want to be independent anymore. She is self funded. She was beneficiary to all of Dad's (considerable) investments and is financially independent of the Trust. POA has been given to two siblings, as she no longer wishes to manage her own affairs and says she has no interest in it and trusts them. She is also starting to forget things and does not have a grasp of costs now, (forgetting credit cards numbers etc).


House has been sold, and half money gone to stepmum and half to Dad's Trust. As beneficiaries we have asked for accounts re the Trust as we would like it paid out. The solicitor and accountant have seen the accounts for Dad's investments. The solicitor and accountant will be going to see stepmum and POA will be there too, as stepmum forgets what has been said to her and does not get things right.
Question 2 - can POA act as Trustees for Trust, as they have POA for stepmum? Solicitor indicates this is not the case! Question 3 - As beneficiaries can we insist that there is a family member as a Trustee? I have done a bit of research and understand that the Trustees must act in interest of all beneficiaries and that we can ask for new Trustees, if we wish - is this right? Thanks in anticipation

Yorkshireman99

weezie7 wrote: »

My Dad died 4 years ago and his will said that his half of the house was to be put into a Discretionary Trust (DT). Dad was a great believer in saving tax as much as possible and we believe that that was his prime intention with setting up the Trust. The original Trustees were bank, solicitor, accountant and stepmum. The bank are not longer a Trustee (they don't do DT's anymore), and the solicitor has retired (who knew Dad well) and another younger (who did not know Dad) has been made a Trustee.
Question 1. Can solicitors just appoint who they want without consulting beneficiaries?


The beneficiaries of the DT are stepmum and all of my 6 siblings. Trustees originally paid out Dad's share of residue of his estate to all, not the house money. Small amount left in Trust. Stepmum started to want to sell house, but before she did, she had accident and ended up in hospital and chose to move to care home, where she still is - 2 years on. She is happy there, and does not want to be independent anymore. She is self funded. She was beneficiary to all of Dad's (considerable) investments and is financially independent of the Trust. POA has been given to two siblings, as she no longer wishes to manage her own affairs and says she has no interest in it and trusts them. She is also starting to forget things and does not have a grasp of costs now, (forgetting credit cards numbers etc).


House has been sold, and half money gone to stepmum and half to Dad's Trust. As beneficiaries we have asked for accounts re the Trust as we would like it paid out. The solicitor and accountant have seen the accounts for Dad's investments. The solicitor and accountant will be going to see stepmum and POA will be there too, as stepmum forgets what has been said to her and does not get things right.
Question 2 - can POA act as Trustees for Trust, as they have POA for stepmum? Solicitor indicates this is not the case! Question 3 - As beneficiaries can we insist that there is a family member as a Trustee? I have done a bit of research and understand that the Trustees must act in interest of all beneficiaries and that we can ask for new Trustees, if we wish - is this right? Thanks in anticipation

You would need to look at the terms of the trust to get most of the answers. Are the Powers of attorney LPOAs? if the donor is losing, or has lost capacity, then these have to be registered before they can be used. LPOA's do not give the attorney(s) carte blanche over the donor's affairs and must only be used for the donor's benefit. AFAIK the attorney(s) do not have the authority to run a trust such as you describe.

Mojisola

weezie7 wrote: »

Dad was a great believer in saving tax as much as possible and we believe that that was his prime intention with setting up the Trust.

The original Trustees were bank, solicitor, accountant and stepmum.

Having three professionals as trustees and wanting to save money just doesn't go together.

weezie7

Thanks for the replies.
mojisola - what would you think his prime intention would be?


Yorkshireman99 - where would I find out the 'terms of the Trust'? I have Dad's will and that is all.
What do you mean by POA being LPOA's? Stepmum has signed all financial affairs over to two POA at present. POA for finances is registered.
What do you mean by AFAIK?


Q1 Can solicitors just appoint without consulting beneficiaries?
Q2 From what I understand POA cannot act for stepmum in Trust - why not if she has signed all financial affairs over?
Q3 Can beneficiaries insist/ask fort a family member is put on Trust board, if POA cannot act for stepmum and stepmum not capable of making decisions?
Q4 I understand Trustees must act in interest of ALL beneficiaries, can we ask for new Trustees, if we (all 7 beneficiaries) wish?

Mojisola

weezie7 wrote: »

Dad was a great believer in saving tax as much as possible and we believe that that was his prime intention with setting up the Trust.

weezie7 wrote: »

mojisola - what would you think his prime intention would be?

His intention probably was saving tax but paying to set up a trust and then paying three professionals to run it would have been very expensive. I wonder how much savings would have been made in the long run.

macca1974

A discretionary trust is just that, it is somewhere where money is placed and has a number "discretionary beneficiaries". none of the beneficiaries have any right to any money, they are just potential beneficiaries. Potential beneficiaries for a discretionary trust don't actually have any rights to do anything as far as I'm aware.

Generally with discretionary trusts, the person who sets it up provides a letter of wishes that can be used by the trustees to provide them with guidance as to what they want them to do, but the whole point is that it is at the trustees discretion who gets what and the trustees need to agree on this.

Yorkshireman99

weezie7 wrote: »

Thanks for the replies.
mojisola - what would you think his prime intention would be?


Yorkshireman99 - where would I find out the 'terms of the Trust'? I have Dad's will and that is all.
What do you mean by POA being LPOA's? Stepmum has signed all financial affairs over to two POA at present. POA for finances is registered.
What do you mean by AFAIK?


Q1 Can solicitors just appoint without consulting beneficiaries?
Q2 From what I understand POA cannot act for stepmum in Trust - why not if she has signed all financial affairs over?
Q3 Can beneficiaries insist/ask fort a family member is put on Trust board, if POA cannot act for stepmum and stepmum not capable of making decisions?
Q4 I understand Trustees must act in interest of ALL beneficiaries, can we ask for new Trustees, if we (all 7 beneficiaries) wish?

A trust will often have a trust deed setting out the terms of the trust. The Trustees should have that so you can ask to see it. AFAIK means As Far As I Know. A power of attorney can allow the attorney to do what the donor wishes. An LPOA is a special form form of POA that lasts after the donor has ceased to have the mental capacity to act for themselves. This is subject to very strict rules. Google LPOA for more details.

Q1. It depends on the terms of the trust.
Q2 . It depends on the kind of POA. LPOA cannot AFAIK.
Q3. It depends of the terms of the trust.
Q4.See Q1.

What kind of POA's are they? Does the step mum still have mental capacity?

getmore4less

If she does not want trust money probably time to close it down and distribute to the rest unless they want to keep it in trust for tax reasons.
(look at costs)

If the will says just set up a discretionary trust then default rules will apply.

weezie7

Thanks for all replies.


I will get the 'Trust deeds' asked for which, hopefully will enlighten us all.


No letter of wishes with the will indicating Dad's wishes, which mystifies us, that there are us 7 'potential' beneficiaries, and yet, it appears that the Trustees can do what they want with the money. I can't see the sense in that.


The POA are active, registered and managing all stepmums affairs. She is losing capacity, slowly, the home where she lives have confirmed this. So, if she is not competent to act as a Trustee, what do we do?


getmore4less - Don't know what tax implications there might be.

getmore4less

The reasons to keep the money in the trust is to avoid it falling into the estates of the benficiaries and the resulting future IHT issues if there is anough of it

Might be that there are other compelling reasons to distribute, like the benificiaries have a need for the money eg. pay down a mortgage fund their kids Uni etc.

As a benificiary is losing capacity it would probably be sensible to consider the option fairly promply for them to concent even if not absolutely necessary.

TBagpuss

Q1 Can solicitors just appoint without consulting beneficiaries?

Probably. It depends on the terms of the trust but it would be fairly common for a trust having professional trustees to provide for another professional from the same firm to take over in the event of the original trustee dying or retiring. Or for there to be provision for the remaining trustees (not beneficiaries) to appoint someone new. You would need to look at the terms of the trust deed itself to be sure, but it is unlikely that the solicitor would be acting unless they were confident that the terms of the trust permitted is, as otherwise they would not be able to get paid for their work!

Q2 From what I understand POA cannot act for stepmum in Trust - why not if she has signed all financial affairs over?

You would need to take advice, but as I understnad it, a PofA does not automatically entitled the attorney to act as trustee - I believe that there are additional requirements, and that the Donor has to explicitly delgate their responsibilities as trustee and also to serve notice on the other trustees. If the solicitor is saying that the Attorney's cannot act for step-mum then I presume that those steps have not been taken. If step-mum has capacity she might be able to delegate that authority now. However, it is possible that there is provision in the trust deed whichexplicitly excludes this or makes other provision for what should happen if a trustee becomes incapcitated.

Q3 Can beneficiaries insist/ask fort a family member is put on Trust board, if POA cannot act for stepmum and stepmum not capable of making decisions?

They can ask, they can't insist.

Q4 I understand Trustees must act in interest of ALL beneficiaries, can we ask for new Trustees, if we (all 7 beneficiaries) wish?

The trustees may be prepared to wind up the trust is all beneficiaries are adult and all agree, depending on the terms of the trust. However, if your step-mum is a beneficiary and there are any doubts as to her capacity then the trustees may be wary of doing anything which might potentially disadvantage her.

As beneficiaries you cannot dictate how the trustees do their job. However, if you feel that they are not doing their job correctly then you may be able to take action.