Setting up a Trust for minors

SevenOfNine

Think this might not be the correct forum, if not maybe someone can point me in the right direction. Any comments/opinion/suggestions on our intentions would be welcome though.

Saw a STEP solicitor yesterday, carefully chosen as an expert in Trusts & tax but I thought he was a nitwit, so not off to a good start. We need to be absolutely clear about what we want/intend or I think we'll be coughing up £xxx for an 'off the shelf' package with details inserted in the blank spaces of a pro-forma document!

Intestacy law means we have inherited £100k we want to transfer to our 2 young grandsons. We have personal reasons why we do not want to keep it, so it is going where we definitely think the deceased would want it to go.

1) Taking earlier advice from here, to ensure there is no HMRC 'suspicion' that this money hasn't been genuinely transferred it seems a Deed of Variation over 'gifting' is the best option.

2) Deleted - decision made.

3) We will be Trustees & want to be able to pay out from the Trust for the benefit of one or both of the beneficiaries as & when the need arises, but not to the detriment of either of them (£50k each, so if we 'nibble' at some for Uni fees for child 1, it will be from HIS 50k, we'll still be keeping the other 50k intact for the child 2).

4) Completely unsure as to whether we should (or must) have an age for wrapping up the Trust, when each child reaches 25 or something? Seems logical to leave it open ended & assume that as responsible Trustees we'll most likely have handed the cash over as appropriate by then anyway (unless either child turns out to be a drunken junkie).

5) Deleted - answered.

We have small savings accounts for both of them which can be accessed when they are 16 for 'incidentals', so we aren't trying to control everything. Just making sure the body of the money isn't squirted up the wall by irresponsible spending as we've paid a very high price for it's existence.

It seems that we probably want a Discretionary Trust, yes?

The STEP solicitor said "well, I can make it one if you like" but suggested just having an age when the Trust would be wound up (18, 21 or 25), with ad-hoc payments made to either child along the way if we chose to make them, because "who would really complain about you doing that". Seems very odd to be allocating funds from the Trust on an unofficial basis, leaving us open to criticism (or worse) if 'someone' didn't agree with us doing that.

Thanks for any help anyone can give.

Yorkshireman99

SevenOfNine wrote: »

Think this might not be the correct forum, if not maybe someone can point me in the right direction. Any comments/opinion/suggestions on our intentions would be welcome though.

Saw a STEP solicitor yesterday, carefully chosen as an expert in Trusts & tax but I thought he was a nitwit, so not off to a good start. We need to be absolutely clear about what we want/intend or I think we'll be coughing up £xxx for an 'off the shelf' package with details inserted in the blank spaces of a pro-forma document!

Intestacy law means we have inherited £100k we want to transfer to our 2 young grandsons. We have personal reasons why we do not want to keep it, so it is going where we definitely think the deceased would want it to go.

1) Taking earlier advice from here, to ensure there is no HMRC 'suspicion' that this money hasn't been genuinely transferred it seems a Deed of Variation over 'gifting' is the best option.

2) We want ONLY the 2 existing grandsons (age 6 & 8) to be beneficiaries & understand there is a chance there could be more born, we get that at first sight this may seem unfair.

3) We will be Trustees & want to be able to pay out from the Trust for the benefit of one or both of the beneficiaries as & when the need arises, but not to the detriment of either of them (£50k each, so if we 'nibble' at some for Uni fees for child 1, it will be from HIS 50k, we'll still be keeping the other 50k intact for the child 2).

4) Completely unsure as to whether we should (or must) have an age for wrapping up the Trust, when each child reaches 25 or something? Seems logical to leave it open ended & assume that as responsible Trustees we'll most likely have handed the cash over as appropriate by then anyway (unless either child turns out to be a drunken junkie).

5) Annual tax returns, am I right in thinking the tax on any interest would be 20% but only if it exceeds 5k pa?

We have small savings accounts for both of them which can be accessed when they are 16 for 'incidentals', so we aren't trying to control everything. Just making sure the body of the money isn't squirted up the wall by irresponsible spending as we've paid a very high price for it's existence.

It seems that we probably want a Discretionary Trust, yes?

The STEP solicitor said "well, I can make it one if you like" but suggested just having an age when the Trust would be wound up (18, 21 or 25), with ad-hoc payments made to either child along the way if we chose to make them, because "who would really complain about you doing that". Seems very odd to be allocating funds from the Trust on an unofficial basis, leaving us open to criticism (or worse) if 'someone' didn't agree with us doing that.

Thanks for any help anyone can give.

Why don't you consider a discretionary trust and each year transfer the maximum amount into a junior ISA? By the time they are 18 they would have nearly all the fund in a tax free account.

SevenOfNine

Yorkshireman99 wrote: »

Why don't you consider a discretionary trust and each year transfer the maximum amount into a junior ISA? By the time they are 18 they would have nearly all the fund in a tax free account.

Thanks YM but parents are using the annual allowance. Does sound like we do want a discretionary trust though, not sure why the solicitor seemed a bit resistant to it.

Yorkshireman99

Noted. Lucky grandchildren. I can only suggest you try another STEP member.

getmore4less

Tax on trusts is not that simple they don't get a personal allowance.

you would benefit from a good read of HMRC manual on trusts to get familiar with the basics you have a chance of understanding what any pro is talking about and can ask questions about their reasoning.

https://www.gov.uk/trusts-taxes/overview



You also need to consider events that mean the situation changes.
Deaths, does it all go to the other what if both die. what if they have children.

SevenOfNine

Thanks GMFL, I've removed the tax query I had as your link has answered the question. An Accumulation Trust also looks feasible - I wonder if that is what the solicitor was leaning towards - he was a bit vague.

We're not considering any of the other trust options, but your comments regarding who gets what if a tragedy happens needs thought. The solicitor did mention if one died it would all go to the other, maybe he meant he'd write that into the Trust, we'd thought it would follow an intestate pathway in the absence of any specific instructions.

Don't know if it pays to try to do the right thing with inheritance money, would be simpler to blow it on a first class world cruise, if we felt like going on one!

jackyann

My thoughts:

If you have inherited this money through intestacy laws, can you do a deed of variation? I thought that was only for wills.

Yes, it makes sense to write in what should happen if either of the children die (as I think intestacy would mean it would pass o their parents)
You also need to consider who will be Trustees should either of you die.

My understanding is that you do need to wrap this up by a certain age.

Given all of your conditions, it sounds as if you need to see someone else, who you get on with rather better. I have in the past dealt with solicitors and financial advisors who couldn't understand my perspective. I have told them what I want and asked them to point out the flaws in my thinking.
One time I just carried on and insisted they do what I wanted, another I changed advisors.

getmore4less

DOV can be used by beneficiaries of intestate estates.

Setting up a trust up to go past 18 will need careful thought and conflicts with some of the OP specified requirements.

SevenOfNine

We can use the DoV for intestate as long as it is done within 2 years, the same as if we wanted to change a Will.

The point of the Trust was to ensure finances couldn't be accessed by the beneficiaries at 18, not without a responsible adult overseeing the spending up to a better point in their lives! They have a separate (MUCH smaller) 'pot' which we will have no say over once they reach 16 - or 18 if I decide to stick it in a 2 year 'fixed term' a/c before then.

I do think we need to have some sort of 'line of inheritance', written in (just in case), so really appreciate the prods to think about that.

I asked him about naming alternative trustees & he said 1 could act alone & it wasn't difficult to appoint other/s if required.