Locking it away until she is 24

Malthusian

cloud_dog wrote: »

Is there any reason not to place the monies in to a 5 year fixed deal prior to 18.

Yes - the failure of the trustee to consider the needs of the beneficiary, and the fact that the OP would have to cough up £10,000 of their own cash if the beneficiary asked for their money.

Same applies to putting the money in a pension, only even worse.

Flobberchops wrote:

Obviously this is a thorny subject and it seems there is a real gap in the market for a children's investment vehicle that doesn't grant access at 18.

There is no gap in the market as "people who want to violate their legal duties as trustees" is not a profitable target market.

"When you were little your auntie gave you some money on the understanding it would be yours to spend when you're 24. Now, according to the law the control of this money transfers from me to you when you turn 18, so we need to talk about what would be the best way to keep the money safe and earning interest until it's ready to use. You could go against your aunt's wishes and spend it before then but I hope you understand that this is a lot of money and that you should take her wishes seriously. Here, let's read about ISAs..."?

This is extremely sensible advice. This conversation should have taken place at least two years ago. But no time like the present.

cloud_dog

Malthusian wrote: »

Yes - the failure of the trustee to consider the needs of the beneficiary, and the fact that the OP would have to cough up £10,000 of their own cash if the beneficiary asked for their money.

I will accept I am no legal expert but (having said that)... Are we not confusing 'ownership' of the money with access to the money.

In my scenario (again I'm looking at it from a practical rather than a black and white legal perspective), the child still 'owns' the money and has the right to the money but in line with the original wishes the money is not accessible until 22 (in my scenario)? Or, has the act of placing the monies in to the bare trust negated whatever other 'financial responsibilities' (age 24) may have been associated with access to the money (not ownership thereof)?

cloud_dog

So the act of placing the money in to the bare trust has, in essence, negated any other sort of trust instructions.

Malthusian

cloud_dog wrote: »

So the act of placing the money in to the bare trust has, in essence, negated any other sort of trust instructions.

Any trust instruction along the lines of "to be held in trust for my niece until she is 24" means the money is the niece's at 18. "For my niece" means it is her money and the last part is irrelevant.

cloud_dog

Malthusian wrote: »

Any trust instruction along the lines of "to be held in trust for my niece until she is 24" means the money is the niece's at 18. "For my niece" means it is her money and the last part is irrelevant.

Interesting. I wonder if this may cause a lot of bequeaths to fall fowl of the 'law'?

My mother has bequeathed some money to her grandchildren but I requested that she alter it so that the grandchildren receive some money from the will/at age 18, and the other component, £x of it, is given to the parents (myself / brother) for the benefit of GC1, GC2, etc, with any remaining monies to become the grandchild's at age 25.

Malthusian

cloud_dog wrote: »

Interesting. I wonder if this may cause a lot of bequeaths to fall fowl of the 'law'?

It does indeed. This is a perennial topic on the Deaths, Funerals and Probate board.

My mother has bequeathed some money to her grandchildren but I requested that she alter it so that the grandchildren receive some money from the will/at age 18, and the other component, £x of it, is given to the parents (myself / brother) for the benefit of GC1, GC2, etc, with any remaining monies to become the grandchild's at age 25.

The first part is the grandchildren's at 18. The second and final part may also be the grandchildren's at 18. It depends precisely on how the Trusts are set up by the Will and whether the grandchildren have an absolute entitlement to the capital or not. You need to talk it through with a solicitor who knows what they are doing.

cloud_dog

The wording on the will states:

I GIVE the sum of XXXXX pounds (£xxxx) to my said granddaughter GC1 on her 18th birthday with a further YYYYY pounds (£YYYY) to be held on trust for her by her father ME until she attains the age of 25 years or if he in his absolute discretion thinks it appropriate to give her the benefit of the money at an earlier date.

This is repeated for the other grandchildren.

This was drafted by a solicitor so hopefully we are covered?

xylophone

further YYYYY pounds (£YYYY) to be held on trust for her by her father ME until she attains the age of 25 years

It seems to me ( no expert) that the money to be held in trust by the father has "indefeasibly vested".

http://www.completesuccession.com.au/page%2006.0.25.html


and see
https://www.gov.uk/hmrc-internal-manuals/trusts-settlements-and-estates-manual/tsem1563

http://www.prescient-financial.com/docs/Bare%20trust%20returns.pdf

The terms of the will do not say "if" she attains the age of 25 but when she attains the age of 25. That is to say, the money becomes hers under the terms of the will when it comes into effect? In the tragic circumstance that she were to die before reaching the age of 25, the money would fall to be treated as part of her estate rather than as the property of a Trust?

xylophone

That's a discretionary trust, not a bare trust. It's different, and it will achieve its objective.

I'm not so sure - if the money has "indefeasibly vested" (see links in my previous), then the Trust is bare?

It seems to me that the wording makes an absolute gift to the daughter as soon as the will comes into effect.


The father has no discretion as to whether the daughter receives the money therefore the gift "indefeasibly vests" in the daughter?

Any income arising on the gift belongs to (and will be taxed on) the daughter?

According to HMRC https://www.gov.uk/hmrc-internal-manuals/trusts-settlements-and-estates-manual/tsem1563

It is up to the trustees to establish whether a trust is bare. If the trustees have access to legal advice they should ask their legal adviser whether the trust funds have indefeasibly vested in the beneficiaries. If they have then the trust will be a bare trust.

xylophone

See also

https://www.lawteacher.net/free-law-essays/property-trusts/trust-property-trustee.php

Under a discretionary trust, the trustee may have a discretion as to the precise value of the beneficiaries' entitlement, or as to whether certain beneficiaries receive anything at all. An example of a trust term that would grant this dispositive discretion to the trustee is where a trust is established for a group of beneficiaries in such portions as the trustee shall in their absolute discretion see fit.

The father does not have any such discretion as the daughter's entitlement is fixed?