Bare Trust guidance for holding cash/shares until minor beneficiaries are 21yr

Charlie-Otter

All guidance / suggestions / links to HMRC rules etc gratefully received in relation to holding cash and shares in Trust until beneficiaries turn 21yr (mix of 3-12yrs away).

Happy to give more info, but in a nutshell we employed a solicitor who has gone from uncommunicative to silent, and as an Executor I have a dozen minors who are relying on me to get it all sorted out, but I am struggling to find information online on the mechanics of what I need to do. 

It is my first Probate experience - I've got a good grasp on most of the paperwork, but don't understand the Trust aspects. There is a share portfolio and lump sum to be divided between a dozen minors, held until they are 21yr. Not millions, but roughly £10k in shares and the same in cash each. My initial thought was to open Bare Trust Accounts with the company who hold the shares (HL - Vantage Account), and then we apportion the shares accordingly and transfer to the name of the beneficiaries, with any surplus shares sold and proceeds divided too. This would then be held alongside their share of monies until they reach 21yr. However, after further investigation, I am concerned that this type of account might automatically pass to control of the minor when they turn 18yr, thus against the wishes of the deceased?

In case it is relevant, there is no separate Trust document, just the Will, and the actual wording is "to be divided between xxx when they attain the age of 21 years". So, with the minimum of solicitor involvement and cost to the estate, how do we set up x12 accounts that can both hold stocks/shares and cash until the beneficiary turns 21yr?

Thank you for reading and all expertise welcomed - it has been a steep learning curve, and I'm keen to avoid potentially costly errors.

RAS

The first point is that it's unlikely that you can delay giving the inheritance to the beneficiaries until they are 21 years old. In England and Wales they are entitled to it at age 18, in Scotland it's 16 years old.

Secondly, even for the younger ones, holding illiquid shares as part of their small inheritance is not appropriate and divvying them up even less so as the dealing costs make up a proportionately ever greater cost as the sum held reduces. And if you allocate middling company A to children 1,2,3 and company B to children 7-12, and company B bombs, guess who is going to be unhappy.

Much better to sell the shares as they peak and ask the relevant parents to set up Junior ISAs into which the executors pay each child's share as they liquidate them. They can access these aged 18 but it protects it from frittering meanwhile.

Charlie-Otter

RAS said:

The first point is that it's unlikely that you can delay giving the inheritance to the beneficiaries until they are 21 years old. In England and Wales they are entitled to it at age 18, in Scotland it's 16 years old.

Secondly, even for the younger ones, holding illiquid shares as part of their small inheritance is not appropriate and divvying them up even less so as the dealing costs make up a proportionately ever greater cost as the sum held reduces. And if you allocate middling company A to children 1,2,3 and company B to children 7-12, and company B bombs, guess who is going to be unhappy.

Much better to sell the shares as they peak and ask the relevant parents to set up Junior ISAs into which the executors pay each child's share as they liquidate them. They can access these aged 18 but it protects it from frittering meanwhile.

Thanks for this - I had suspected that was the case on the age, from what I have read, but am confused as to why solicitors continue to put this into Wills if it is not actually legally enforceable? Is this the SAUNDERS v VAUTIER case I have seen referenced elsewhere?

As far as the shares go, they are already worth considerably less now we have Grant of Probate, than they were at time of death, and definitely less than they were a couple of years ago. The deceased would have been appalled at the idea of them being sold in the middle of an economic downturn, so my thought was we divide them absolutely equally, so everyone has the same quantity of the same shares, ie no uneven gains/losses? Rather than individual stocks, they are mostly lower risk funds eg CT European Small Companies is one, so the actual "risk" is lower. We were considering asking for input from parents now, to keep their child's share in stocks/shares, or to sell before we hit the 1yr anniversary so they can at least get the IHT valuation recalculated on the new value (IHT35?)? For my kids I would choose to keep them, as know this is what the deceased would have wanted for them - for the kids to have an active interest in following them, and understanding how the markets work. In terms of trading costs it is £12'ish per fund, so would take instructions from all and then sell/divide all at the same time, obviously any trading costs once split would then fall to the individual beneficiary at a later date, but hopefully they would have gained in value sufficiently to more than cover the £120 fee to sell them all?

It is the mechanics of setting it up that is eluding me ie is there definitely no way to set up a "Fund" that can absolutely hold cash/shares until 21yr? I'm happy to see an IFA or similar, but don't want to be charged £100s by a solicitor to set up a "Trust Deed" that then turns out not to be any more legally enforceable than opening the Bare Trust accounts ourselves.

Marcon

Charlie-Otter said:

RAS said:

The first point is that it's unlikely that you can delay giving the inheritance to the beneficiaries until they are 21 years old. In England and Wales they are entitled to it at age 18, in Scotland it's 16 years old.

Secondly, even for the younger ones, holding illiquid shares as part of their small inheritance is not appropriate and divvying them up even less so as the dealing costs make up a proportionately ever greater cost as the sum held reduces. And if you allocate middling company A to children 1,2,3 and company B to children 7-12, and company B bombs, guess who is going to be unhappy.

Much better to sell the shares as they peak and ask the relevant parents to set up Junior ISAs into which the executors pay each child's share as they liquidate them. They can access these aged 18 but it protects it from frittering meanwhile.

Thanks for this - I had suspected that was the case on the age, from what I have read, but am confused as to why solicitors continue to put this into Wills if it is not actually legally enforceable? Is this the SAUNDERS v VAUTIER case I have seen referenced elsewhere?

It is the mechanics of setting it up that is eluding me ie is there definitely no way to set up a "Fund" that can absolutely hold cash/shares until 21yr? I'm happy to see an IFA or similar, but don't want to be charged £100s by a solicitor to set up a "Trust Deed" that then turns out not to be any more legally enforceable than opening the Bare Trust accounts ourselves.

Bare trusts don't work in terms of setting 'higher age limits'. Discretionary trusts can do the trick (ditto 'secret' trusts, because the beneficiaries quite simply don't know about them and the trustees are generally under no obligation to tell them until they reach the age specified in the trust), but you can't set them up after the death of the testator. So sadly, no, there's no way to change things now in terms of upping the age.

Solicitors often put them in wills because clients insist on it(!), fondly believing that either the solicitor is wrong, or that the executors/beneficiaries won't have made Saunders their bedtime reading and just won't know.

Charlie-Otter

Marcon said:

Charlie-Otter said:

RAS said:

The first point is that it's unlikely that you can delay giving the inheritance to the beneficiaries until they are 21 years old. In England and Wales they are entitled to it at age 18, in Scotland it's 16 years old.

Secondly, even for the younger ones, holding illiquid shares as part of their small inheritance is not appropriate and divvying them up even less so as the dealing costs make up a proportionately ever greater cost as the sum held reduces. And if you allocate middling company A to children 1,2,3 and company B to children 7-12, and company B bombs, guess who is going to be unhappy.

Much better to sell the shares as they peak and ask the relevant parents to set up Junior ISAs into which the executors pay each child's share as they liquidate them. They can access these aged 18 but it protects it from frittering meanwhile.

Thanks for this - I had suspected that was the case on the age, from what I have read, but am confused as to why solicitors continue to put this into Wills if it is not actually legally enforceable? Is this the SAUNDERS v VAUTIER case I have seen referenced elsewhere?

It is the mechanics of setting it up that is eluding me ie is there definitely no way to set up a "Fund" that can absolutely hold cash/shares until 21yr? I'm happy to see an IFA or similar, but don't want to be charged £100s by a solicitor to set up a "Trust Deed" that then turns out not to be any more legally enforceable than opening the Bare Trust accounts ourselves.

Bare trusts don't work in terms of setting 'higher age limits'. Discretionary trusts can do the trick (ditto 'secret' trusts, because the beneficiaries quite simply don't know about them and the trustees are generally under no obligation to tell them until they reach the age specified in the trust), but you can't set them up after the death of the testator. So sadly, no, there's no way to change things now in terms of upping the age.

Solicitors often put them in wills because clients insist on it(!), fondly believing that either the solicitor is wrong, or that the executors/beneficiaries won't have made Saunders their bedtime reading and just won't know.

Does this mean I am right in my interpretation, that in the UK there is no means of holding/locking away this money until beneficiaries turn 21yr? Why am I unable to find clear guidance anywhere that clarifies this? 

All the kids involved are actually very sensible, so would be unlikely to fritter it away recklessly at 18yr...but I feel a duty to the deceased to try to respect their wishes?

Spendless

Something that was said to me on here when my Mum was struggling with role of executor amid  personal concerns re a beneficiary was that she was to take emotion out of her legal obligation in role of executor and concentrate on the job in hand  . That very much helped. I think you should do the same. If the deceased did not set up the correct trust at the time to ensure that beneficiaries couldn't receive until 21 for whatever reason, either wasn't told or chose to ignore the advice then there's nothing you can do. You looked into whether the money could be held back until 21 and discovered it couldn't be so you have to let them inherit at 18 (or 16 if any in Scotland)  because your role is to distribute the estate accordingly.

Charlie-Otter

Spendless said:

Something that was said to me on here when my Mum was struggling with role of executor amid  personal concerns re a beneficiary was that she was to take emotion out of her legal obligation in role of executor and concentrate on the job in hand  . That very much helped. I think you should do the same. If the deceased did not set up the correct trust at the time to ensure that beneficiaries couldn't receive until 21 for whatever reason, either wasn't told or chose to ignore the advice then there's nothing you can do. You looked into whether the money could be held back until 21 and discovered it couldn't be so you have to let them inherit at 18 (or 16 if any in Scotland)  because your role is to distribute the estate accordingly.

Thanks for this...it is very definitely a thankless task! I think it's not made easier by the rules being very hazy...I have done a lot of reading of HMRC guidance notes; Probate websites and forums; Probate articles in publications like The FT, and it is very hard to find a definitive answer on some points. 

I am more than happy to pay to consult an expert, but am also struggling to identify who that expert would be, as we already paid a hefty sum of money for a probate solicitor, who has yet to provide any guidance! 

Marcon

Charlie-Otter said:

Spendless said:

Something that was said to me on here when my Mum was struggling with role of executor amid  personal concerns re a beneficiary was that she was to take emotion out of her legal obligation in role of executor and concentrate on the job in hand  . That very much helped. I think you should do the same. If the deceased did not set up the correct trust at the time to ensure that beneficiaries couldn't receive until 21 for whatever reason, either wasn't told or chose to ignore the advice then there's nothing you can do. You looked into whether the money could be held back until 21 and discovered it couldn't be so you have to let them inherit at 18 (or 16 if any in Scotland)  because your role is to distribute the estate accordingly.

Thanks for this...it is very definitely a thankless task! I think it's not made easier by the rules being very hazy...I have done a lot of reading of HMRC guidance notes; Probate websites and forums; Probate articles in publications like The FT, and it is very hard to find a definitive answer on some points. 

I am more than happy to pay to consult an expert, but am also struggling to identify who that expert would be, as we already paid a hefty sum of money for a probate solicitor, who has yet to provide any guidance! 

Hard to understand why they couldn't tell you immediately what the position is in respect of bare trusts. There's nothing 'hazy' about the legal position.

Charlie-Otter said:

Marcon said:

Charlie-Otter said:

Does this mean I am right in my interpretation, that in the UK there is no means of holding/locking away this money until beneficiaries turn 21yr? Why am I unable to find clear guidance anywhere that clarifies this? 

All the kids involved are actually very sensible, so would be unlikely to fritter it away recklessly at 18yr...but I feel a duty to the deceased to try to respect their wishes?

Yes, you are right, in the circumstances you describe.

Not sure what you've been looking at, but I googled 'bare trusts' a minute ago and got the following, which is very clear: https://www.investopedia.com/terms/b/bare-trust.asp  That of course assumes an innocent searcher knows that 'bare trust' is the search term to use, otherwise I can see exactly why you'd have been going round in circles!

It was up to the deceased to ensure that their will/arrangements made before their death would accomplish what they wanted to achieve. As an executor, you've done your best to respect their wishes, but the law isn't going to come to your rescue, I'm afraid.

Jowwie

Our approach was to tell the inheritees the wording of the Will and the intention of their beloved relative for them. That the wording of the Will is not enforceable when they are over 18. They should consider for themselves why the relative left them the money and worded the Will in such a way for them. Also, what the Will does not say, what happens to any interest that they might earn during the interim period. They could spend all the interest during the interim and still be respecting the beloved wishes.

Keep_pedalling

Jowwie said:

Our approach was to tell the inheritees the wording of the Will and the intention of their beloved relative for them. That the wording of the Will is not enforceable when they are over 18. They should consider for themselves why the relative left them the money and worded the Will in such a way for them. Also, what the Will does not say, what happens to any interest that they might earn during the interim period. They could spend all the interest during the interim and still be respecting the beloved wishes.

If the amount is on the largest size the need to be careful about spending all the income as they are responsible for any tax due on income, This becomes more important as the beneficiary starts earning for themselves.

Spendless

Charlie-Otter said:

All guidance / suggestions / links to HMRC rules etc gratefully received in relation to holding cash and shares in Trust until beneficiaries turn 21yr (mix of 3-12yrs away).

Happy to give more info, but in a nutshell we employed a solicitor who has gone from uncommunicative to silent, and as an Executor I have a dozen minors who are relying on me to get it all sorted out, but I am struggling to find information online on the mechanics of what I need to do. 

It is my first Probate experience - I've got a good grasp on most of the paperwork, but don't understand the Trust aspects. There is a share portfolio and lump sum to be divided between a dozen minors, held until they are 21yr. Not millions, but roughly £10k in shares and the same in cash each. My initial thought was to open Bare Trust Accounts with the company who hold the shares (HL - Vantage Account), and then we apportion the shares accordingly and transfer to the name of the beneficiaries, with any surplus shares sold and proceeds divided too. This would then be held alongside their share of monies until they reach 21yr. However, after further investigation, I am concerned that this type of account might automatically pass to control of the minor when they turn 18yr, thus against the wishes of the deceased?

In case it is relevant, there is no separate Trust document, just the Will, and the actual wording is "to be divided between xxx when they attain the age of 21 years". So, with the minimum of solicitor involvement and cost to the estate, how do we set up x12 accounts that can both hold stocks/shares and cash until the beneficiary turns 21yr?

Thank you for reading and all expertise welcomed - it has been a steep learning curve, and I'm keen to avoid potentially costly errors.

I've gone back and re-read your first post and highlighted the relevant bit to you. With that wording it is just an expression of wishes as there was no trust set up to ensure that distribution didn't happen until 21.

There's nothing you can do. Distribute the money to the one/s already 18+ and then make a decision about how/where you're going to put the under 18s inheritance. It's costing you too much in mental energy to try and find another solution which ultimately isn't available to you.