Investment for will beneficiaries who are minors

squishy2019

I am an executor for a will that includes bequests for 3 grandchildren (whose mother predeceased the writer of the will), the will states that the grandchildren should not get the money until they are 25, the children are currently 10, 12 and 16. I suspect that the wording of the will means that a trust will be required.

I am looking for advice on sensible investments that would be suitable for this situation, In the current financial climate, I am only expecting small amounts of growth to be possible, but an investment that does not erode the value would be nice.

In addition, I do not want to spend most of the money on legal advice, (although I will if it is required) has anyone done anything like this without expensive legal oversight and if so how? Also if there are simpler ways of handling this situation, for example, could I ignore the point about them having to be 25 and simply hand the money over to them or their guardian at an earlier date (e.g when they are 18)

SonOf

Some platforms will allow UT/OEICs held under a Will Trust.

xylophone

You need to look to the exact wording of the will.

Have these funds "indefeasibly vested" in the beneficiaries?

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

If so, then the will has created a bare trust for each child and each child will have the right to access and control at the age of 18.

If the bequests have not indefeasibly vested, then the Trust is not bare.

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

Re taxation of a bare trust

https://www.taxinsider.co.uk/763-The_Bare_Essentials_Bare_Trusts.html

Taxation of contingent trust

https://www.gov.uk/government/publications/trusts-and-capital-gains-tax-hs294-self-assessment-helpsheet/vdsv

If there are substantial sums involved, it would be as well to seek the advice of an IFA.

https://adviserbook.co.uk/

squishy2019

Hi xylophone, thanks for that info, I have read through the info from those links and they are useful however I am still confused about what wording in the will would show if the funds are indefeasibly vested or not. The will is fairly simple and the bit relating to this bequest says:

"Twenty five percent to the children of my deceased daughter in equal shares on attaining the age of 25 years but if this gift fails it shall be divided among the remaining sub-clauses of clause 6 that do not fail according to their weighting" the will also states ..... The standard provisions and all of the special provisions of the Society of Trust and Estate Practitioners (2nd Edition) shall apply to this will.


Any ideas this is indefeasibly vested?

AnotherJoe

Interesting wording.

Logically I'd say (IANAL) that should mean you'd have to wait until the youngest was 25 before dividing it up amongst all of them so the eldest will have to wait until aged 31.

Either that or at age 25 eldest gets their share and if any die between then and becoming 25 the remaining share gets apportioned appropriately.

soulseeker

These are really nice tips. Thanks!

xylophone

I think that you are going to need to ask a STEP qualified solicitor to interpret the clause.

https://www.step.org/step-directory

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

which comments on the HMRC guidance and also

https://www.redmayne.co.uk/RedmayneBentley/media/Redmayne-Bentley/Forms%20and%20Brochures/Fact-Sheet-Bare-Trusts-FS030.pdf?ext=.pdf

xylophone

STEP qualified solicitor to interpret the clause.

because you still need to know whether for purposes of taxation the trust is treated as bare.

bowlhead99

squishy2019 wrote: »

"Twenty five percent to the children of my deceased daughter in equal shares on attaining the age of 25 years but if this gift fails it shall be divided among the remaining sub-clauses of clause 6 that do not fail according to their weighting" the will also states ..... The standard provisions and all of the special provisions of the Society of Trust and Estate Practitioners (2nd Edition) shall apply to this will.


Any ideas this is indefeasibly vested?

it's not indefeasibly vested because you don't know which, if any, of the grandchildren will be entitled to a payout from the trust - because, bluntly, you don't know who will live or die. A condition for them to get something involves 'attaining' age 25.

So, you couldn't treat it as a bare trust and say now that it absolutely belongs to those children. The potential vesting to them equally, could easily be defeated by none of them getting to 25 (the gift fails and it goes elsewhere, to other subclauses that don't fail) or by only one of them getting there (e.g. child A gets there and is definitely entitled to at least a third of it, but child B dies before getting there, B's third won't go to B or B's estate and A will end up with more than they'd have got if B had also made it to 25).

xylophone

A condition for them to get something involves 'attaining' age 25.

But is it? See comments in prescient link above and HMRC's guidance.

A matter of interpretation? Were I the Trustee, and particularly if there were substantial sums involved, I would want the "comfort" of advice from a suitably qualified solicitor.

bowlhead99

xylophone wrote: »

But is it? See comments in prescient link above and HMRC's guidance.

A matter of interpretation? Were I the Trustee, and particularly if there were substantial sums involved, I would want the "comfort" of advice from a suitably qualified solicitor.

What Prescient's link highlights based on the HMRC guidance is that if it is a simple case of, e.g., 'these three people who are alive when I die are entitled to this money, and they can have it when they are 21', it is simply a delayed payment mechanism.

However where the potential beneficiaries have conditions to meet which they may fail to meet which would affect who gets what (e.g., 'whichever of my grandchildren attain 21 years), it can't be a bare trust for specific beneficiaries.

In the OP's case, it is clear that the will recognises that the potential gift may fail, and directs that if it fails the 25% which might have gone to the 3 grandkids will instead follow a different weighted application method among beneficiaries as outlined in other clauses.

If a will is saying we would like to give the 25% of the estate's assets to the kids in a three way equal split, *but* that might fail and if it fails we will go and do something different instead... it does not seem that the money is definitely going to go to the kids in an equal split. So it should not be possible to say that the 25% represents a bare trust for the kids equally as if it were definitely their money with a delayed payment mechanism.

We haven't seen the other sub-clauses of part 6, across which the failed kids' 25% would go according to their respective weighting, so can't offer further insight. But if for example those clauses describe that the husband gets 50%, sister gets 10%, son gets 10%, cat's home gets 5% and the daughters kids get 25% between them... in a situation where the daughters kids bit fails it will be reallocated to the husband, sister, son, cat's home according to their weighting. And as such would be clear that the daughter's kids should not now be given the 25% in bare trust as if were unequivocally theirs as of today, because some of it might go to the cat's home

I am not saying the OP should not take further advice but - without seeing the rest of part 6 - it's difficult to argue that something is a bare trust if it says 'it's going to go to these people on reaching 25 and if that doesn't happen it will go some other way'.

If the amount is significant, pay a suitably qualified solicitor to advise. Interpreting the will is a cost of the executor so comes out of the estate as a whole. After receiving the advice you might decide to not use that same solicitor to take further actions, if the outcome of the advice is something that can be DIY'd.