Bare Trust & Trustee Responsibilities

Beardie4

Hi all,

I have recently become a trustee for my kids who received a bare trust from a family relative who sadly passed away. As a newbie to all this I'm not sure what is involved with HMRC in terms of tax returns, any advice would be good.
Another question for any experts is, am I able to pay my mortgage off to benefit my kids and provide a better quality of life for them now from the trust fund?
Also, can I transfer the trust fund to their regular child savings account and do I need to declare this to the bank as a trust?

Thanks for any views!

xylophone

See post 6 https://forums.moneysavingexpert.com/discussion/comment/69469347#Comment_69469347

If the money is "indefeasibly vested" in your children, then the money belongs to them absolutely and the answer to

Another question for any experts is, am I able to pay my mortgage off to benefit my kids and provide a better quality of life for them now from the trust fund?

is no.

http://www.osborneclarke.com/connected-insights/publications/the-powers-and-duties-of-bare-trustees/

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

Beardie4

Thanks for your response, I had assumed as much. I am also assuming that it is a bare trust as the description is the most fitting. It just says in the will to be left in trust without any direction of what, why and when to invest or pay out (I.e. Trust deeds). I will peruse the links but think a trip to financial advisor may be better suited.

xylophone

It just says in the will to be left in trust

It is essential (for taxation purposes), that the type of trust is clarified - this will determine how any income is to be taxed.

You will also need to clarify what powers the Trustee has in choice of deposit/investment etc.

You can request the information above from the solicitor who drafted the will - once you have established the point then an Independent Financial Adviser could be consulted.

The solicitor may be in a position to suggest some IFAs that you could approach - otherwise you might try https://www.unbiased.co.uk/find-an-adviser

Reaper

Beardie4 wrote: »

I had assumed as much. I am also assuming that it is a bare trust as the description is the most fitting. It just says in the will to be left in trust without any direction of what, why and when to invest or pay out (I.e. Trust deeds)

Technically it's a "Will Trust" but as there are lots of varieties it does sound like it will take the form of a bare trust.

A trust is formed if the will specifies the word "trust" (as in your case) or the terms of the will mean one must be created to satisfy it.

I believe (but I am no expert) since they have failed to specify the age to hold it to you must assume it is until they are legally an adult. That's age 18 or 16 if you live in Scotland.

With no direction as to where to invest the money that will be up to you as trustee, remembering you have a legal duty to the best you can for the benefit of the child. Spending it paying off your own mortgage would make you liable to be sued by your child if they ever felt like it in the future, so I don't recommend that!

kidmugsy

Yup, you just have to save/invest it until they are old enough to buy motorbikes and such.

Beardie4

At the moment the funds are held in the solicitors bank account is it appropriate to transfer these to the children's savings account and what implications might this have? I don't want to end up losing them money through tax initially if it's better to open fresh accounts

coyrls

Beardie4 wrote: »

At the moment the funds are held in the solicitors bank account is it appropriate to transfer these to the children's savings account and what implications might this have? I don't want to end up losing them money through tax initially if it's better to open fresh accounts

Not sure you've got the idea of a trust. The money is held in trust (not by the children) until they reach a specified age. Any accounts prior to distribution would need to be held by the trust and couldn't be in the children's names.

Keep_pedalling

How much are we talking about each child getting? How old are the children.

xylophone

You have stated that the money has been left in trust - have you clarified what type of trust this is?

If a trust had not been mentioned in the will ( and this does not appear to be the case), and money had simply been left indefeasibly vested in minor children, then a "de facto" bare trust would have been created - the child could not give good receipt for the money, so the parent would open an account in his name but "for" or "as trustee of" XYZ child.

If this were in a basic child account, see example here

http://uk.virginmoney.com/virgin/savings/learn/childrens-accounts/

the financial institution would normally transfer the account into the child's sole name at age 16 - however, in England and Wales a child does not reach his majority until age 18- you will note that Virgin specifically say that they must be advised if the account is to keep its Trust status.

"The Virgin Young Saver account will be automatically transferred into an appropriate adult savings account on 5th April, following the child’s 16th birthday.

We’ll ask you whether you want the account to retain the trustee status."

However, as far as I can gather, some financial institutions do not permit these child accounts to continue beyond age 16.

It is possible to open other accounts as trustee for a child.

If the children have CTF/JISA, ( and the money is infeasibly vested and there is a basic situation as above), it might be possible to fully subscribe to these accounts as the child cannot access the money until age 18.

BUT - consult the solicitor who drafted the will!

Beardie4

Keep_pedalling wrote: »

How much are we talking about each child getting? How old are the children.

Each child (2) is currently due 115k each however only 86k is releasable at this time in cash. There is approx 6 yrs left in trust. Doubt this will make any difference to our situation. Wishful thinking was that we could provide a better quality of life now by freeing up the mortgage so whatever money we earn could be used to give them the things that we can't afford now and at the same time ensure there is always a roof over their heads. Just trying to make sure my kids have the things I didn't when I was younger. I'm all for protecting their investment both short and long term.