Setting up a child's trust from inheritance

Cpt_Kenrow

Hi,

My stepfather died recently leaving a fair amount of money to be divided between my kids. On my suggestion they won't be entitled to the money until they are 23.

The money will need to be held in trust, but I'm not sure what this means in practical terms.

Is a trust an actual legal entity, i.e. some sort of formal account / wrapper or does it merely exist in the presence of a declared trustee (myself)?

If there are legal requirements, what would I be looking at? Plus are there any tax friendly options, given the kids will be over 18 when the money is given to them.

Any help would be gratefully received. Thanks.

kidmugsy

If your stepfather's will set up a trust then I'd expect it to have said what sort of trust it was to be (e.g. a discretionary trust) and to have named at least two trustees.

If he didn't do that, and if your children are all minors, he may have set up - either implicitly or explicitly - bare trusts for each of them. He should have named trustees, unless perhaps he implied that you were to be a trustee. (I have no experience of bare trusts - maybe its's allowed to have only a single trustee: you could easily google this point.)

I have the impression that the age 23 restriction won't wash - that the money becomes theirs at age 18.

Anyway, if the world of trusts is unfamiliar to you you should perhaps lash out and get some advice from a suitably qualified solicitor.

A local member of STEP would probably be what you want.
https://www.step.org/step-directory

Cpt_Kenrow

OK, might not try and wing this one! I will consult the professionals once the probate is in...

xylophone

Has the money "indefeasibly vested" in your minor children?

What exactly does the will say?

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

If so, then it will need to be held in "bare trust" for each child who will have the absolute right to access and control at the age of 18.

Cpt_Kenrow

xylophone wrote: »

Has the money "indefeasibly vested" in your minor children?

What exactly does the will say?

The will which was written by solicitors is surprisingly brief. The only relevant wording is:
"...to be held upon trust for them until each has attained the age of twenty-three (23) years"

Except for declaring me as a trustee and executor of the estate at the beginning of the will no further mention of trusts / trustees is made.

Imelda

How old are your children now?
Is a solicitor dealing with the estate? Were the STEP provisions incorporated into the Will? Are there others named as executor/ trustee?

Cpt_Kenrow

Imelda wrote: »

How old are your children now?
Is a solicitor dealing with the estate? Were the STEP provisions incorporated into the Will? Are there others named as executor/ trustee?

Kids are now 10 and 12.

No solicitor as of yet. I have done probate myself before, but it is the distribution of this estate that seems the most challenging.

Thanks for pointing me to the STEP provisions - yes these have been incorporated. It also says minus paragraph 5 and "Section 11 of the Trusts of Land and Appointment of Trustees Act 1996 (consultation with beneficiaries) shall not apply"

And yes, there is a co-executor / trustee, also with children and the same stipulations regarding their age.

xylophone

"...to be held upon trust for them until each has attained the age of twenty-three (23) years"

The will named your existing children specifically and by name?

If so, looking at the HMRC guidance (but obviously you will consult a solicitor expert in wills and trusts), it seems to me that this money has indefeasibly vested in the children.

See the link in my previous and

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

See also

https://www.rhw.co.uk/newsandguides/trusts-for-children-some-options/

Cpt_Kenrow

xylophone wrote: »

The will named your existing children specifically and by name?

Children are not named. It just stipulates equal share between children of myself and my wife (who is named).

Am struggling a little with the interpretation of "indefeasibly".

Iit looks like I will be enrolling the services of a solicitor at some point. However, does any of this effect the inheritance tax and probate side of things - or is it solely concerned with the distribution of the estate post probate? I.e. can I proceed as planned up to this point?

xylophone

"Indefeasibly" means that the bequest cannot be revoked because
the legatees have become beneficially and absolutely entitled to the money.

You say that the will simply said "the children of John and Mary Kenrow" not "the children of John and Mary Kenrow who are alive at the time of my death"?

I think that you will need to discuss this with a STEP solicitor so as to determine the precise nature of the Trust.

As far as I can see, there is no impediment to the executors seeking probate - once granted, they will realise the assets of the deceased and hold the money in the executors' account pending a decision on how to proceed.

xylophone

See also for notes on types of trust and their taxation.

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