What to do with Inherited Money for Kids

lijabrty

Hi lovelies, I just need a bit of advice.

I am executor to a will in which my children have inherited around £20,000 each. According to the will this was be put into a trust until they are 21 but as my children are already 18 and 16 I don't really want to pay the fees for this.

Does anybody have any advice as to what I should do with it as I am confused about tax payments, different types of trusts etc etc.

Thanks in advance.

jimjames

If that's what the will stipulates then I'm not sure how you can avoid doing it unless you can get a variation of the will. Someone else may know if that is possible.

Malthusian

lijabrty wrote: »

Hi lovelies, I just need a bit of advice.

I am executor to a will in which my children have inherited around £20,000 each. According to the will this was be put into a trust until they are 21 but as my children are already 18 and 16 I don't really want to pay the fees for this.

Unless the Will was worded very carefully, your 18 year old is entitled to request the full inheritance now, and your 16 year old will be able to when they turn 18. The rest of this post assumes they each have an absolute entitlement to their share.

For the 18-year-old's share, ask them what they want to do with it. Even if they don't want to spend the money, it probably makes more sense for them to save it in their own name rather than complicate both your affairs by holding it in trust.

There is a two-year timescale until the 16-year-old can demand their share so I would first ask them what they think they will want to do with it when they turn 18. Then put the money in National Savings & Investments or another bare trust cash account assuming that a longer-term timescale isn't appropriate. There is no need to pay fees, a simple bare trust arrangement will suffice.

jimjames wrote:

If that's what the will stipulates then I'm not sure how you can avoid doing it unless you can get a variation of the will.

Non-starter in the case of the £10,000 left to the 16-year-old, as they don't have capacity to agree to a Deed of Variation. The 18-year-old could give their share up but the OP hasn't given any reason they might want to.

xylophone

I am executor to a will in which my children have inherited around £20,000 each.

Has the money "indefeasibly vested" in your children? See below and ask the solicitor.

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

You do need to establish what type of trust will be created.

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

If the money has "indefeasibly vested" in the children then each of them is the beneficial owner of the cash. as the trust is "bare".

This means that any income arising on the deposit/investment of the cash belongs absolutely to the beneficiary and is taxed as his.

The problem lies in what to do about the "age 21" direction if the trusts are bare.

It may be possible for you to open a three year bond with NS&I "in trust" for the 18 year old.

https://www.nsandi.com/guaranteed-income-bonds

You might enquire of Paragon Bank whether they would be willing to open a five year account in trust.

If the solicitor considers that the bare trust provision overrides the age of payment direction, then presumably the cash could be released to the 18 year old.

With regard to the sixteen year old, if there is a CTF

https://www.skintedmintedmum.co.uk/minted-blog/how-to-transfer-a-child-trust-fund-ctf-to-jisa-with-a-double-scoop-of-tax-allowance.html

could be worth a look - you would be able to get around three quarters of the bequest into the Coventry JISA by say the second week in April - the balance could be held in say Kent Reliance?

https://www.moneysavingexpert.com/savings/child-savings-tax-free/

Malthusian

xylophone wrote: »

It may be possible for you to open a three year bond with NS&I "in trust" for the 18 year old.

https://www.nsandi.com/guaranteed-income-bonds

You might enquire of Paragon Bank whether they would be willing to open a five year account in trust.

If the Will has not been drawn up in such a way that avoids the children having an absolute interest, then this would be an extremely bad idea as the 18 year old is entitled to the money on demand and a fixed term deposit is unsuitable.

If they actually want a three-year or five-year bond they can take the money and open one themselves.

xylophone

If the Will has not been drawn up in such a way that avoids the children having an absolute interest, then this would be an extremely bad idea as the 18 year old is entitled to the money on demand and a fixed term deposit is unsuitable.

I have noted the various considerations in my post above,including

If the solicitor considers that the bare trust provision overrides the age of payment direction, then presumably the cash could be released to the 18 year old.

Keep_pedalling

Malthusian wrote: »

Unless the Will was worded very carefully, your 18 year old is entitled to request the full inheritance now, and your 16 year old will be able to when they turn 18. The rest of this post assumes they each have an absolute entitlement to their share.

For the 18-year-old's share, ask them what they want to do with it. Even if they don't want to spend the money, it probably makes more sense for them to save it in their own name rather than complicate both your affairs by holding it in trust.

There is a two-year timescale until the 16-year-old can demand their share so I would first ask them what they think they will want to do with it when they turn 18. Then put the money in National Savings & Investments or another bare trust cash account assuming that a longer-term timescale isn't appropriate. There is no need to pay fees, a simple bare trust arrangement will suffice.



Non-starter in the case of the £10,000 left to the 16-year-old, as they don't have capacity to agree to a Deed of Variation. The 18-year-old could give their share up but the OP hasn't given any reason they might want to.

This assumes we are not talking about Scotland where the 16 year old is also fully entitled to their inheritance now.

xylophone

This assumes we are not talking about Scotland where the 16 year old is also fully entitled to their inheritance now.

Covered in second link in my post 4 above.

lijabrty

Thanks for all of this information I really appreciate it and will look into all of the links. With regards to the will it was really vague and literally just said "I leave my entire estate to my cousins grandchildren, Boy 1 and Boy 2, in a trust until they turn 21 years of age.

xylophone

As the will states "until" and not "if" it seems to me that the money has indeed indefeasibly vested in your children so a bare trust for each.

lijabrty

Hi guys,

It turns out that the wording is completely different to what I thought it said. The part about a Trust relates to another part of the will where it states that the standard provision of the Society of Trust applies the will. The actual wording about the kids money is as follows:

I give my entire estate to such of the following as shall survive me and if more than one in equal shares upon attaining the age of 21 years absolutlely namely:-
Boy1
Boy2

Sorry for the confusion.