Help - Nil Rate Discretionary Trust

securityguy

The lessons for those contemplating these sorts of schemes are that:

1. running a trust requires time and expertise on the part of the trustees, and being clever-clever in your lifetime relies on there being people who survive you who can continue your cunning scheme;
   
2. "mirror wills" can be changed by the survivor without reference to anything agreed at the time (here are exceptions, in the form of wills that cannot be changed other than in respect of assets acquired subsequent to the first death, but they are exotic and not what is usually meant by "mirror wills");
   
3. the same applies to powers of attorney, which can be rescinded and re-issued provided you retain capacity, and which in any event do not permit an attorney to act as a trustee on behalf of the donor;
   
4. resolving problems with trusts can, or more probably will, be messy and expensive, and if you don't have the money to defend your or the trust's interests, someone who is behaving badly can and will get away with it;
   
5. people setting up trusts need to think what would happen if one trustee started to behave irrationally;
   
6. there are worse things than paying IHT.

SevenOfNine

securityguy wrote: »

[*]there are worse things than paying IHT.
[/LIST]

........and those who comment negatively about them remember, they are not ALL about tax & care home fee avoidance!

OP - Unfortunately, I don't doubt one reason your dad set up the discretionary trust was to actually protect some of what he'd worked so hard to get for you.

It's a definite possibility that he wanted your mum to live comfortably but did not want to leave it ALL directly to her on his death.

1) She may have married again & not protected her assets so they'd pass to you, in which case the stuff your dad worked hard for that she got would have dropped into the new husband's lap (assuming he outlived her).

2) She could, and possibly has, fallen prey to some ne'er-do-well/conman who'll happily strip a vulnerable person of their assets.

3) She could merrily squander the lot - leaving you nothing.

He may not have actually wanted to bequeath a sum directly to you on his passing, depriving your mum of being able to access everything he'd had (& perhaps she helped him build it up) in case she needed it for care home fees etc.

The discretionary trust was a sound idea, he just failed to ensure you both understood some of what securityguy has listed in relation to one, and that you were capable of dealing with it appropriately.

Sadly, that's the bit he did wrong, the rest was not his fault.

securityguy

SevenOfNine wrote: »

.just failed to ensure you both understood some of what securityguy has listed in relation to one, and that you were capable of dealing with it appropriately.

If the intention is to protect assets for your adult children against the depredations of your spouse, then appointing just your spouse and one child as trustees is pretty unwise, though. It places on the adult child the responsibility to say "No!" to their parent, and for a lot of children, even in adulthood, that is hard. In this case it appears that the trust ended up stripped by naiveite, but you don't have to spent a lot of time on reddit support forums and the like to see that a lot of adult children are simply not in a position to tell their mother, particularly their widowed elderly mother, that they can't do something. The dynamic in which parents claim financial skill they don't have and use it to tell their adult children what to do is hardly unusual.

The interactions of capability and powers of attorney are complex, and it is perfectly possible for someone to be making very bad decisions about their money but still not be a state where that power can be removed from them without a fight. And even if that point arrives, adult children may be extremely reluctant to remove their widowed parent's financial independence, for the same reasons as they won't stop elderly relatives from driving. Even if they do go to the court of protection to do that, the relative can do substantial financial damage while the issue is resolved.

As I've said in the past, elderly people on average had a lot less money, lived closer and more entwined with their children, dealt in cash and cheques and lived in a world in which it was much easier to deal with declining capacity informally. Here we have a situation where a woman who, from context, left the finances to her husband finds herself widowed, in control or partial control of the thick end of half a million quid, and the only help their (by the sounds of it) young, busy and equally naive daughter. That's a recipe for disaster, and I don't think you can absolve the people who set that situation up of responsibility for it. At the point the trusts were mooted in the drafting of wills, everyone involved should have been made very aware of the responsibility of what they were taking on.