Advice needed on creating a trust in will

MutleysMother

That's one option but my child could be vulnerable to coercion from a less than scrupulous family member

SiliconChip

MutleysMother said:

That's one option but my child could be vulnerable to coercion from a less than scrupulous family member

And why do you think they'll be any less vulnerable at 25 than at 18?

MutleysMother

That's a good question but I suppose there is a realistic limit to how long I can try and protect them.

Savvy_Sue

MutleysMother said:

That's a good question but I suppose there is a realistic limit to how long I can try and protect them.

There is indeed, and to me that's definitely an argument for starting their financial education young, including the need to be aware of coercion and control. How you do it without speaking ill of the person you want them to be particularly aware of, I do not know. There are some teaching resources for children you might find helpful, IDK ... 

poseidon1

MutleysMother said:

Following up on my question regarding setting up a trust. I've spoken to a couple of solicitors ( apparently experienced with trusts)  and have come away feeling that I could be leaving a bigger and more expensive mess for my soon-to-be 18-year-old. 

It was explained that monies left in a trust would be invested on behalf of my child until they are 25. The problems I see with this are:

1) I can't get any quote/idea of how much the solicitors would charge.
2) It relies on the competency or otherwise of said solicitor.

In all honesty, I haven't come away from either meeting feeling reassured.

Would it be possible to liquidate any assets and place the funds in an NS&I account until my child's 25th birthday?

Has anyone had experience with this kind of situation?

Any advice would be very welcome. Thank you.

When originally responding to your post my assumption was you would have trusted friends or relatives who would take on the day to day responsibility of running the trust, with professional help to deal with year end tax and accounting matters as needed,  from a STEP qualified accountancy firm ( this is more their skillset).

I anticipated a STEP qualified lawyer firm to do no more than draw up the relevant will trust document ( for which a fixed fee can be easily quoted).

However, if on your visits to the law  firms, you gave the impression they would be taking the lead role in actually running the trusts in due course and even going as far as assuming trusteeship, then it would be impossible for them  to give you ball park numbers . They charge hourly rates that can only escalate in future due to inflation and a diminishing pool of expertise in this area.

In any event now  I understand your estate is currently just below the nil rate band in value which  is too small to be cost effectively administered by law firms, and even STEP qualified accountancy firms ( at lower average hourly charge rates) may prove overly expensive for such a small trust if the trust fund is invested in conventional income producing assets.

My preference, for trust funds this small, would be for trustees ( when the time comes )  to invest in largely non income producing assets such as life company investment bonds,   (and/or) very low income producing securities such as low coupon government gilts. 

These type of assets  in producing little or no income or taxable capital gains,  minimise or even eliminate the need for complex annual accounts and tax returns.

However, assuming you do have friends or relatives prepared to assume the trustee role, I suspect they may not have any meaningful  knowledge or experience of investment matters and so would be reliant on appropriate professional advice.

The professional entities that would be better equipped to advise trustees on utilising investment bonds and low coupon gilts to achieve lower annual trust running costs for modest sized trust funds, are more likely to be wealth managers  authorised  to make gilt edge securities acquisitions, rather than Independent Financial Advisers ( IFAs).

One of the wealth management firms trustees could consider with reasonable UK coverage , is Killick and co.

However, given what I said above, you may now be of the view that amongst friends/relatives you could call upon to act as trustee,  many may be put off by the extent of the potential complexities involved especially if they have little or no personal investment knowledge of their own.

That being the case,  it would of course be possible  ( as you suggest ) for the trust fund to be wholly comprised of NSI savings products ( for simplicity). However as previously advised, in an 18 to 25  trust the interest would be taxable at 45% each year and an annual trust tax return required.

On the plus side, if your daughter is a zero rate or lower rate tax payer, than distributing the net income annually, she can recover some  or all of the 45% tax paid by the trustees. Not the most tax efficient of arrangements, but does have the advantage of greater simplicity and maybe a far more appropriate arrangement to manage for relatively unsophisticated trustees.

Before you return to either of the law firms to draw up a suitable will, important to first establish who amongst the chosen friends/relatives prepared to act as trustees and discuss these matters with them to gauge willingness to act in this capacity. As indicated  above , the potential trust fund in this instance really is not large enough to warrant professional trustees.

I appreciate for you this is an entirely precautionary measure, which you can rip up once your daughter attains age 25, at which point you will have hopefully instilled in her a degree of resilience to resist any potential approaches from the predatory parent in future. Only so much you can do in that regard.