Inheritance left to my (underage) son from my grandmother - To be held in Trust

VikingVixer

My late Grand Mother left my son an £10,000 in her will and stated that it is "to be held in trust until age 21".
At present, the current trustee and executor of the will is the solicitors where she lodged the will and they have advised that the following.

It is not our usual practice to continue as trustees for inheritance left in trust for underage beneficiaries and especially in this case where the sum held would get swallowed up very quickly in our fees for acting as a trustee over the next 10 years until your son reaches 21. Therefore it would be our usual policy to retire as trustees in this context and appoint new trustees for young beneficiaries, usually their parents, if appropriate.  
 
If [parents] are willing to take on the role as trustees for your son’s inheritance, we will need to produce a Deed of Retirement as trustees for us and a Deed of Appointment of new trustees for you. You will also need to set up a Trustee account for your son. The Bank or Building Society you open the account with will need to see a copy of the Will (which I am assuming you have), a copy of the Grant of Probate (which we can provide) and the above signed Deeds. We can then pay the Trustee account directly when the time comes to distribute this estate

Obviously we want the best for our son and I have no idea what I need to be looking for, or what my legal obligations would be in "administering" the trust account.
As a footnote, we had an inclination that our son would receive an inheritance and had it just been a straight up distribution of cash, we would have invested this into Premium Bonds ... I assume this isn't possible given the requirement that it be held in trust [for the next 10 years]
Thanks...

AnotherJoe

Well, just to make it worse, in general its very difficult to prevent son gaining access once they are 18.

And, you say you'd put it in PB's, for ten years, with respect, that a terrible idea, it would lose value and "should" be invested.

My grandkids inherited as essentially aged between infants - 5 years old, and I've put all their money (via their parents) in JISAs so they can access it age 18

But I suspect you have no knowledge of investing, think kid would lose all their money so dont want to do that either.

Tough one. Try reading Monevator about index funds vs savings/

p.s How much money are we talking about?

MovingForwards

@AnotherJoe it says £10k

xylophone

I take it that the bequest has "indefeasibly vested" in your son?
https://www.gov.uk/hmrc-internal-manuals/trusts-settlements-and-estates-manual/tsem1563

If so, the Trust is bare  and the capital and any income arising belong to your child absolutely.

If this is a bare trust, then notwithstanding the direction about age 21, the child would be  within his legal rights to call for access at age 18.

https://www.bathbuildingsociety.co.uk/savings/personal-savings/Junior%20Saver
You might initially open an account such as the above to receive the money.

Does your child have a CTF? If so, (and assuming that you have made no contributions in his CTF year, it would be possible to use £9000 from the Trust account to contribute to the CTF, then arrange for the transfer of the CTF to JISA and then to use the balance to contribute to the JISA in the current tax year.
You will note that the interest rate on the Bath BS account is only 1.75% - NS&I are currently paying 3.25% on their JISA.

VikingVixer

xylophone said:

I take it that the bequest has "indefeasibly vested" in your son?
https://www.gov.uk/hmrc-internal-manuals/trusts-settlements-and-estates-manual/tsem1563

If so, the Trust is bare  and the capital and any income arising belong to your child absolutely.

If this is a bare trust, then notwithstanding the direction about age 21, the child would be  within his legal rights to call for access at age 18.

https://www.bathbuildingsociety.co.uk/savings/personal-savings/Junior%20Saver
You might initially open an account such as the above to receive the money.

Does your child have a CTF? If so, (and assuming that you have made no contributions in his CTF year, it would be possible to use £9000 from the Trust account to contribute to the CTF, then arrange for the transfer of the CTF to JISA and then to use the balance to contribute to the JISA in the current tax year.
You will note that the interest rate on the Bath BS account is only 1.75% - NS&I are currently paying 3.25% on their JISA.

That' a good point ... he does actually have one of the governments £250 Child Trust Fund provided by OneFamily... and this has just been left unattended since inception ... Perhaps that would be a good starting point ... 

steampowered

I think the solicitors are correct to suggest that you should act as trustees, rather than pay them to do it. It's not worth paying a solicitor to look after £10k.

Once you have the money, you need to decide what to do it with it. Assuming the will does not state how the money is to be kept, the options are (1) to keep it in a separate bank account, (2) put it into a stocks & shares investment such as a JISA.

Over a 10 year time scale, I think you could go either way. Personally I think it is more sensible to put it into a stocks & shares based investment. The risk of making a loss over a 10 year investment period is very low; whereas there is a risk that inflation will eat into the value of a cash account or premium bonds.

VikingVixer

steampowered said:

I think the solicitors are correct to suggest that you should act as trustees, rather than pay them to do it. It's not worth paying a solicitor to look after £10k.

Once you have the money, you need to decide what to do it with it. Assuming the will does not state how the money is to be kept, the options are (1) to keep it in a separate bank account, (2) put it into a stocks & shares investment such as a JISA.

Over a 10 year time scale, I think you could go either way. Personally I think it is more sensible to put it into a stocks & shares based investment. The risk of making a loss over a 10 year investment period is very low; whereas there is a risk that inflation will eat into the value of a cash account or premium bonds.

Thing is ... as Trustee, I don't know what my legal obligations are .. but as you and xylophone above have suggested, going with a JISA / CTF is looking the way forward ... Just waiting for some response from the CTF provider.

MovingForwards

The obligations are to do everything for the kids interest.

In this case try and make sure there is some growth in the money until of age, a safe bet is the CTF.
If it was a year until the kid could have the money then a normal bank account would be sufficient.

You are overcomplicating it in your head, stop panicking and breathe!

dunstonh

As a footnote, we had an inclination that our son would receive an inheritance and had it just been a straight up distribution of cash, we would have invested this into Premium Bonds ... I assume this isn't possible given the requirement that it be held in trust [for the next 10 years]

That would be a dreadful idea. 

Trustees have to do what is in the best interest.   Using premium bonds for 10 years would not meet that definition.

DiggerUK

dunstonh said:

As a footnote, we had an inclination that our son would receive an inheritance and had it just been a straight up distribution of cash, we would have invested this into Premium Bonds ... I assume this isn't possible given the requirement that it be held in trust [for the next 10 years]

That would be a dreadful idea. Trustees have to do what is in the best interest.   Using premium bonds for 10 years would not meet that definition.

That is just plain wrong. Mrs.D and her cousin are deputies for their aunty who is in permanent care. You should stop misleading posters.

They have carried out these responsibilities for many years now, submitting annual accounts to the Office of the Public Guardian. Those accounts have never been questioned and her money is in a current account, a savings account, Premium Bonds and physical gold. There have never been any questions raised beyond checking that the gold was in a safe and adequately insured..._

AnotherJoe

There's abig difference between someone with a limited life span who needs the money to pay for care, and for whom it doesnt matter if it declines due to inflation, and a 11 year old.

And sorry to OP I missed the £10k being mentioned, doh !