Will Trustees and Creditworthiness

rs_at_home

A father has passed away and left an immediate post death interest in possession Trust (mirrored with the surviving spouse who is the life beneficiary).

There are three children who are identified in the Will as Executors, Trustees and Beneficiaries in equal share.

Two of the three trustees are concerned about the other’s credit record and general financial standing.

I understand that Trustees will have their credit linked. This is one reason the two Trustees are reluctant to have the third involved.

But I have spoken to a few banks about applying for accounts, and gained the impression that the Trustees must have good credit standing or the bank will not allow the Trust account. The solicitors I've spoken with have been reluctant to offer an opinion. 

Is this true, and if so, could the one Trustee with a poor credit record stop the implementation of the Trust account and Trust itself?

Keep_pedalling

I think your understanding is wrong, becoming a trustee does not financially tie you to other trustees. Is it just the house that goes into the immediate post death trust?

bobster2

rs_at_home said:

But I have spoken to a few banks about applying for accounts, and gained the impression that the Trustees must have good credit standing or the bank will not allow the Trust account. The solicitors I've spoken with have been reluctant to offer an opinion. 

Is this true, and if so, could the one Trustee with a poor credit record stop the implementation of the Trust account and Trust itself?

So you need to open a trustee savings account to hold a significant sum of money in trust?

First - very few high street banks and building societies are offering these right now. And they often require a sizable sum as a minimum deposit. What sort of ballpark figure are you looking at? Skipton, Bath and Metrobank offer them.

When you refer to "poor credit record" what exactly do you mean? Do you mean CCJs?

My impression of most trustee account application forms was that they asked questions to confirm the identity of the trustees - but nothing about credit history.

rs_at_home

The Trust is small, less than 300K.  It includes cash, securities and part ownership of a tenants-in-common property.

The banks that I have contacted have told me that as a part of the process the credit records (Experian etc) will be linked.  Effectively it would be treated like a joint account between the three trustees.

The third trustee has no assets, no employment and has a history of bad debts with payday loans etc. He is on benefits I believe.

rs_at_home

The problem with many of the banks that still offer Trustee accounts is that they only offer cash accounts. There are securities also and it is important that this facility is available.  Typically Trust investments are treated differently depending upon whether they are done for Capital gains or income production. Capital stays in the Trust whereas income must flow to the Life Beneficiary. 

bobster2

rs_at_home said:

The Trust is small, less than 300K.  It includes cash, securities and part ownership of a tenants-in-common property.

The banks that I have contacted have told me that as a part of the process the credit records (Experian etc) will be linked.  Effectively it would be treated like a joint account between the three trustees.

The third trustee has no assets, no employment and has a history of bad debts with payday loans etc. He is on benefits I believe.

It's only the cash that's going to be relevant for the trustee savings account. Many providers have a minimum deposit of £75,000 or more. But I don't think Bath do.

I've been through the process of talking to a few banks/building societies - and opening a trustee savings account - and nobody mentioned even credit checking the trusteees, let alone linking them.

Which banks said this?

Marcon

rs_at_home said:

The Trust is small, less than 300K.  It includes cash, securities and part ownership of a tenants-in-common property.

The banks that I have contacted have told me that as a part of the process the credit records (Experian etc) will be linked.  Effectively it would be treated like a joint account between the three trustees.

The third trustee has no assets, no employment and has a history of bad debts with payday loans etc. He is on benefits I believe.

It would only cause a problem if the third trustee creates some sort of issue with this particular account - and that can be avoided by requiring all transactions to have at least two signatories (bit messy), or simply having an account for the three of you but only two have signing rights.

bobster2

rs_at_home said:

The problem with many of the banks that still offer Trustee accounts is that they only offer cash accounts. There are securities also and it is important that this facility is available.  Typically Trust investments are treated differently depending upon whether they are done for Capital gains or income production. Capital stays in the Trust whereas income must flow to the Life Beneficiary. 

Well the cash and securities may have to be held with different financial institutions. As trust can own various things in various places.

rs_at_home

From memory Lloyds and Cater Allen said that the credit records would be linked.  I recently set up a similar estate account, just myself and one other, at Lloyd's and the scrutiny was unbelievable. 

Marcon said:

rs_at_home said:

The Trust is small, less than 300K.  It includes cash, securities and part ownership of a tenants-in-common property.

The banks that I have contacted have told me that as a part of the process the credit records (Experian etc) will be linked.  Effectively it would be treated like a joint account between the three trustees.

The third trustee has no assets, no employment and has a history of bad debts with payday loans etc. He is on benefits I believe.

It would only cause a problem if the third trustee creates some sort of issue with this particular account - and that can be avoided by requiring all transactions to have at least two signatories (bit messy), or simply having an account for the three of you but only two have signing rights.

The third Trustee (as Executor), immediately after the date of death, concealed the existence of an Estate account, drew cash out with a cash card over one month to lower the balance, then quickly cashed out the remaining amount to his personal name.  The other Trustees (and Executors) stumbled across this account some months later when going through some very old records. 

I think that there is an argument also for the third Trustee being unfit.   

 

Keep_pedalling

These sort of trusts are great for the family home but I would not want to be lumbered with one for liquid assets especially small ones. In your shoes I would be looking to undo that bit with a deed of variation in favour of your mother. 

Savvy_Sue

Keep_pedalling said:

These sort of trusts are great for the family home but I would not want to be lumbered with one for liquid assets especially small ones. In your shoes I would be looking to undo that bit with a deed of variation in favour of your mother. 

Just what I was thinking: at the very least taking advice on what you can do to limit damage being done by No. 3.