Trust Account for an 11 y/o to be held until age 21

VikingVixer

Does anyone have any (good!) advice on opening a Trust Account to receive a £10,000 legacy from a grand parent to an 11 year old (my son), with the Will stating that it has to be held until age 21.

VikingVixer

From what I have read, Bare trusts can be accessed by my son when he would reach age 18, so as the will explicitly states "at age 21" so what sort of trust account would be needed.

xylophone

so as the will explicitly states "at age 21"

What exactly does the will say? Check with the solicitor who drafted the will.

"If he reaches the age of 21" or "When he reaches the age of 21" 

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

 If "when", then it would seem that the legacy has "indefeasibly vested" in your son. If so, the trust must be  bare and if so, he would have the right to call for access and control at the age of 18.

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

Bare trusts

Assets in a bare trust are held in the name of a trustee. However, the beneficiary has the right to all of the capital and income of the trust at any time if they’re 18 or over (in England and Wales), or 16 or over (in Scotland). This means the assets set aside by the settlor will always go directly to the intended beneficiary.

Bare trusts are often used to pass assets to young people - the trustees look after them until the beneficiary is old enough.

It is not impossible for an account to be held in bare trust for a person of any age - of course from the time the beneficiary becomes responsible for his own tax affairs, he  needs to be aware of the amount of income arising.

Does your child have a CTF or JISA?

VikingVixer

xylophone said:

so as the will explicitly states "at age 21"

What exactly does the will say? Check with the solicitor who drafted the will.

"If he reaches the age of 21" or "When he reaches the age of 21" 

"To be held on trust by the trusteesuntil he attains the age of 21 years"

The solicitors are not being very helpful at all.. they are expecting his parents (me) to become trustees and "retire" as trustees... and they also want nearly £700 to do so too.

VikingVixer

xylophone said:

Does your child have a CTF or JISA?

Yes ... a CTF

xylophone

Grandfather has left his grandson a sum of money - it seems from what you say that the legacy has "indefeasibly vested" in your son, in which case the money would need to be held in bare trust. 

If it is a bare trust, then see my above post concerning  age of access and control.

Does your child have a CTF/JISA?

VikingVixer

xylophone said:

Grandfather has left his grandson a sum of money - it seems from what you say that the legacy has "indefeasibly vested" in your son, in which case the money would need to be held in bare trust. 

If it is a bare trust, then see my above post concerning  age of access and control.

Does your child have a CTF/JISA?

Yes he has a CTF but solicitors have advised that this is not a suitable account due to age of access / control

jsmith9

just to say your 10k is likely to.be seriously eroded by inflation if you pop it into an 'account' for 10 years..

Malthusian

VikingVixer said:

xylophone said:

Grandfather has left his grandson a sum of money - it seems from what you say that the legacy has "indefeasibly vested" in your son, in which case the money would need to be held in bare trust. 

If it is a bare trust, then see my above post concerning  age of access and control.

Does your child have a CTF/JISA?

Yes he has a CTF but solicitors have advised that this is not a suitable account due to age of access / control

They are correct - with CTFs and JISAs the child gains control of the account at 16 (although they can't withdraw until 18). If English / Welsh law applies, CTFs are unsuitable as the trustees aren't legally allowed to delegate their responsibilities to a minor at 16. (This means that if the trustees put the money in a CTF and the child turned 16 and lost all the money in penny shares, the trustees would be liable - as a Trustee you can't dump your responsibilities on a 16-year-old minor.) If Scots law applies, CTFs are also unsuitable due to the inability of the adult to exercise their absolute right to withdraw their money at 16.

Unless the child is loaded it is unlikely that a CTF / JISA would offer any tax advantage.

Most investment platforms will offer bare trust accounts. A standard investment account in the Trustees' names with an irrevocable designation (usually the child's initials) is often all that is needed.

Assuming that the money is indefeasibly invested in your son (which seems likely), the bit in the Will about "until he attains the age of 21 years" is legally meaningless, like any other opinion on what a grown adult should do with his own money.

As there are at least 7 years (5 if this is in Scotland) until your son can spend the money, it needs to be prudently invested with that timeframe in mind. It would be a good idea to start involving him in the conversation of how to invest it now - at 11 he doesn't have any responsibility (and may have no interest) but only he can decide whether he's going to blow the lot at 18 or use it to fund education / travel / house purchase potentially many years later.