Trust for grandchildren

kensiko

Hello all

We have unfortunately recently lost my partners mother and are now dealing with the estate with a will.

As per discussions when she was alive the estate was intended for her 5 grandchildren bypassing her 2 children who said this would be their wishes also.

The estate is one property worth approximately £300,000.  It has not yet been decided if this will be sold or rented.

The exact wording of the will is:


As one of the executors and trustees I am looking more into this now.  The grandchildren ages are 19,14,12,10 and 6.

I have been looking into bare trusts and discretionary trusts.  Both parents of the beneficiaries would prefer the monies to be available at 21, even though the will does state 18.

Question One:  Can this be changed by the trustees or is the 19 year old entitled to rent or their portion of the sale value immediately? 

The bare trust we don't like the sound of as it's very similar to a JISA where the money is the 18 year olds immediately.

The discretionary trust sounds better but the tax implications seem high if my initial thoughts are correct.

Question Two: With the will stating 18 is a discretionary trust even possible does it have to be a bare trust?

Finally, am I looking into this correctly?  Is there anyone that has been in a similar position before as this does seem like it would happen quite often, that can offer any other advice?  Maybe a trust I have not seen?

Thank you all

elsien

If the will says 18 then that’s when they get the money. Whatever the parents may prefer.

Keep_pedalling

What the parents want is irrelevant, the grand children have been left an equal share of the estate absolutely they are entitled to receive it once they are 18 (16 for a Scottish estate). The house should to be sold with the 19 year old getting their share once all funds have been received, and the other children having their share held in a bare trust ( one for each child). Renting out the house is not really a goer, far too many complications and tax issues.

jimbo6977

If the currently-19-yo had already passed his 18th bday at the time of death isn't it now impossible for him to inherit "upon... attaining 18 years of age"? 

Keep_pedalling

jimbo6977 said:

If the currently-19-yo had already passed his 18th bday at the time of death isn't it now impossible for him to inherit "upon... attaining 18 years of age"? 

As he has already passed that milestone he inherits his share now, it does not mean he can’t inherit.

tetrarch

This sounds like an exercise in persuasion rather than enforcement.

I don't quite agree with the "house should be sold" comment. There is a £300K property with 5 new owners, only one of whom is an adult. Any decision about any "sale" should be with their parents so they can do whatever they deem best.

In theory, in 6 years time once the 12 y-o becomes 18 does this become challengable by way of quorum from the collective beneficiaries.. In practice, this should be a fabulous opportunity for financial education and how to plan for the future for the 5 children by their parents. In my opinion this should also include the "trust" income but (and I am no tax expert) is there not an opportunity for non-taxpayers to accrue some tax-free income into a vehicle for their future?

Regards

Tet

Keep_pedalling

tetrarch said:

This sounds like an exercise in persuasion rather than enforcement.

I don't quite agree with the "house should be sold" comment. There is a £300K property with 5 new owners, only one of whom is an adult. Any decision about any "sale" should be with their parents so they can do whatever they deem best.

In theory, in 6 years time once the 12 y-o becomes 18 does this become challengable by way of quorum from the collective beneficiaries.. In practice, this should be a fabulous opportunity for financial education and how to plan for the future for the 5 children by their parents. In my opinion this should also include the "trust" income but (and I am no tax expert) is there not an opportunity for non-taxpayers to accrue some tax-free income into a vehicle for their future?

Regards

Tet

There are several reasons it would be far wiser to sell the house. The first being all of the children will loose their first time buyer status (5 of them before they are adults) and if any of them purchased a house while they own a share of the house they will also get hit with 3% additional stamp duty.

Secondly managing liquid assets is far easier for the trustees than having to also take on the quite onerous responsibility of being a landlord. 

Thirdly what happens when one of the beneficiaries reaches 18 and insists (as is their right) to be given their inheritance? By the time the 6 year old is 18 the 19 year old will be 31 and I doubt they want to wait that long to get their hands on the cash.

Marcon

kensiko said:

Hello all

We have unfortunately recently lost my partners mother and are now dealing with the estate with a will.

As per discussions when she was alive the estate was intended for her 5 grandchildren bypassing her 2 children who said this would be their wishes also.

The estate is one property worth approximately £300,000.  It has not yet been decided if this will be sold or rented.

The exact wording of the will is:

There's a bit missing - the part which comes after the colon in c)

Please could you add this? It could be important.

kensiko

Marcon said:

There's a bit missing - the part which comes after the colon in c)

Please could you add this? It could be important.

This is just a list of the names and addresses of the 5 grandchildren.

tetrarch

Keep_pedalling said:

tetrarch said:

This sounds like an exercise in persuasion rather than enforcement.

I don't quite agree with the "house should be sold" comment. There is a £300K property with 5 new owners, only one of whom is an adult. Any decision about any "sale" should be with their parents so they can do whatever they deem best.

In theory, in 6 years time once the 12 y-o becomes 18 does this become challengable by way of quorum from the collective beneficiaries.. In practice, this should be a fabulous opportunity for financial education and how to plan for the future for the 5 children by their parents. In my opinion this should also include the "trust" income but (and I am no tax expert) is there not an opportunity for non-taxpayers to accrue some tax-free income into a vehicle for their future?

Regards

Tet

There are several reasons it would be far wiser to sell the house. The first being all of the children will loose their first time buyer status (5 of them before they are adults) and if any of them purchased a house while they own a share of the house they will also get hit with 3% additional stamp duty.

Great point : I had completely forgotten the FTB implication

Regards

Tet

Malthusian

tetrarch said:

I don't quite agree with the "house should be sold" comment. There is a £300K property with 5 new owners, only one of whom is an adult. Any decision about any "sale" should be with their parents so they can do whatever they deem best.

The trustees have a statutory duty to invest the trust's capital as a prudent person of business would, in the beneficiaries' interests.
A prudent person of business would not tie 5 beneficiaries' money up in a single random residential property, with all the unnecessary risk, hassle and tax-inefficiency that involves. Nor is it in the interests of the beneficiaries to have their money tied up in an illiquid asset, given the different ages at which they become eligible to withdraw (with one already eligible).