Discretionary trust beneficiary tax etc

platnotwork

2 years ago my mother died leaving a will. In the will she leaves a terraced house in trust to my niece. She receives this on her 25th birthday, she is currently 14. The will does not state what happens to the trust until she reaches the age of 25. I believe this to be a discretionary trust The will makes both myself and my brother trustees. My niece lives with me and my family and has done since my mother passed away. As the property was vacant and passes to my niece at 25 we decided to rent the property out. We have just allowed the rent to build up in an ISA in my name. The property went to probate and HMRC made enquires, which have only recently been resolved. The tax for the year 19-20 is now due. We have released that we should have registered the trust with HMRC. The rent for the property is £400. Discretionary trusts are taxed at 45%, but if the beneficiary is a minor, how would she claim the tax back. We have also considered using the trust to contribute to her upbringing, but would this be considered as the trustee benefitting? How do we proceed? Any advice appreciated>

xylophone

 I believe this to be a discretionary trust 

Belief is not good enough - you need to know exactly what kind of Trust this is as it makes a difference to the tax treatment.

We have just allowed the rent to build up in an ISA in my name. 

This is not correct procedure - any money in an ISA should belong to you personally - this money does not.

An account should have been opened in the name of the Trust.

I would suggest that you make an appointment with a solicitor expert in wills and trusts

https://content.step.org/step-directory to establish the position.

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

Keep_pedalling

Are you sure the will set up a discretionary trust? What is the exact wording (names redacted) with regard to this bequest? When it is held as a discretionary trust or otherwise the income should not be held in an account in your name. Who is the house now registered to?

Marcon

platnotwork said:

2 years ago my mother died leaving a will. In the will she leaves a terraced house in trust to my niece. She receives this on her 25th birthday, she is currently 14. The will does not state what happens to the trust until she reaches the age of 25. I believe this to be a discretionary trust The will makes both myself and my brother trustees. My niece lives with me and my family and has done since my mother passed away. As the property was vacant and passes to my niece at 25 we decided to rent the property out. We have just allowed the rent to build up in an ISA in my name. The property went to probate and HMRC made enquires, which have only recently been resolved. The tax for the year 19-20 is now due. We have released that we should have registered the trust with HMRC. The rent for the property is £400. Discretionary trusts are taxed at 45%, but if the beneficiary is a minor, how would she claim the tax back. We have also considered using the trust to contribute to her upbringing, but would this be considered as the trustee benefitting? How do we proceed? Any advice appreciated>

Sounds as if you were both entirely well meaning but possibly not too clued up. You proceed by seeing a solicitor who will help you sort out the mess - no real point posting anything further here.