Help with Discretionary Will Trust

evsue

I am one of 3 adult children.  Our elderly mother set up a discretionary trust in her will for the benefit of my brother, and his wife on the event of his death.   My brother is bi polar and has long term mental health issues.  They have no children.   This will was re-checked by her solicitor 4 years ago on the death of my father.  My other brother and myself are to inherit a third of the estate each and are both named as Discretionary Trust Trustees for the remaining third.  We are really worried about administering the trust as we’ve heard they are complicated.  The total value of my mother’s estate would be approximately £500k mainly incorporating the property she lives in valued at approx £475k.  She will have my father’s nil rate band for IHT as this wasn’t used on his death with his entire estate going to her.  Will the Trust have to be registered with HMRC?
How difficult will this be to administer in terms of taxation, sourcing trustee bank account etc. and is it necessary to consult a solicitor, accountant or financial advisor?  Many thanks for any help.

xylophone

Does he qualify as  a "vulnerable person"?

https://www.gov.uk/trusts-taxes/trusts-for-vulnerable-people

Re registration (or not), taxation etc see https://www.gov.uk/trusts-taxes

You may well need a current account for the Trust - Natwest and Metrobank have been mentioned on the forum in this connection.

 As far as I know, Skipton BS allow trust accounts - you can ring and enquire.

https://www.skipton.co.uk/

It is possible to register a stocks and shares account in the name of a Trust.
You might try II or Hargreaves Lansdown (when they are fully operational again after Covid).

Marcon

evsue said:

I am one of 3 adult children.  Our elderly mother set up a discretionary trust in her will for the benefit of my brother, and his wife on the event of his death.   My brother is bi polar and has long term mental health issues.  They have no children.   This will was re-checked by her solicitor 4 years ago on the death of my father.  My other brother and myself are to inherit a third of the estate each and are both named as Discretionary Trust Trustees for the remaining third.  We are really worried about administering the trust as we’ve heard they are complicated.  The total value of my mother’s estate would be approximately £500k mainly incorporating the property she lives in valued at approx £475k.  She will have my father’s nil rate band for IHT as this wasn’t used on his death with his entire estate going to her.  Will the Trust have to be registered with HMRC?
How difficult will this be to administer in terms of taxation, sourcing trustee bank account etc. and is it necessary to consult a solicitor, accountant or financial advisor?  Many thanks for any help.

It needn't be as difficult as you fear, provided you get some proper professional help at the outset to ensure you understand what needs to be done and when. Starting point is probably the solicitor who drew up the will, assuming they are still around when the time comes for the will to be enacted. I wouldn't get too excited about doing a load of reading up and confusing yourself further.

getmore4less

Our elderly mother set up a discretionary trust in her will for the benefit of my brother, and his wife on the event of his death.   My brother is bi polar and has long term mental health issues.  They have no children.

The intension appears to be son and his wife to benefit from these funds with the trust being there to protect the son from himself.

If the will allows the nomination of other trustees or replacements it might make sense for the wife  to be doing the work with the other trustees overseeing the discretion to stop the wife running off with the money.  

if for example they have a house with a mortgage it may even be possible to eliminate the administration almost  completely  as with no income there is reduced need for tax returns 

Marcon

getmore4less said:

Our elderly mother set up a discretionary trust in her will for the benefit of my brother, and his wife on the event of his death.   My brother is bi polar and has long term mental health issues.  They have no children.

The intension appears to be son and his wife to benefit from these funds with the trust being there to protect the son from himself.

If the will allows the nomination of other trustees or replacements it might make sense for the wife  to be doing the work with the other trustees overseeing the discretion to stop the wife running off with the money.  

if for example they have a house with a mortgage it may even be possible to eliminate the administration almost  completely  as with no income there is reduced need for tax returns 

The idea is perfectly sound, but in practice rarely works out. The trust is, as you say, there to protect the son from himself. Can you imagine the pressure he might bring to bear on his wife to 'persuade' the other trustees to agree to something...? Administrative simplicity could well come at the cost of family harmony.

james.wardle

I have just been through a very similar process, and my view is that in the end it's not hard but the information is hard to come by and many solicitors are not specialists in this area. things I would think about. / suggest are
1, Do you need to claim the Nill Rate residence band to save paying inheritance tax?   In which case it might be worth asking the solicitor for a deed of assignment to transfer £150k worth of the house out of the trust to direct ownership.
2, If you can avoid the trust having any income you dont need to submit a tax return each year which makes things easy.  as you only have £25k in the trust I would put it in a non-interest bearing account and use it to fund maintenance of the house.
3, Barclays were only slightly painful to set up a trust account with. (both trustees need to go into the branch together with ID and the will)
4, After going through several clueless solicitors I found renaissance legal in Brighton who are specialists in trusts for vulnerable people.   I paid a few hundred pounds for a  one-off review of the trust deed and my plans and they were incredibly helpful.

Newly_retired

 My mother left the part of her estate intended for my sister, who is a vulnerable person, to trustees. They used a specialist financial advisor to set up the trust, which really runs itself, with a certain amount to be drawn each year by my niece who has Power of Attorney for her mum. There are no tax issues and does not affect her benefits. The capital is invested with Standard Life.

evsue

Thank you everyone for your advice