Bequest in the will to a minor - trusts or other options?

chipfork

My partner is a joint executor for a will that has left £10k to the deceased's granddaughter.
She is only a minor so we'd like to put the money into a trust or savings account for when she reaches the age of 18.

We have had a brief look at the options available and would welcome recommendations or experience in handling a similar need.

Discretionary trusts seem a little complex. A bare trust sounds like a much simpler approach but we have no idea how we would set one up. Then there's simply opening a savings account and any complexities that it would entail. Would that be in the executor's names or the beneficiary and if the latter, how do the trustees retain control until she reaches 18? What if anything happens to the trustees, how can we ensure the beneficiary receives the monies.

Keep_pedalling

One option would be a JISA. If she already has one then it could be topped up by £9000 provided no other money has gone in this financial year, with the remainder going in the new financial year. If she doesn’t have one then one of her parents could open one.

How old is she?

poseidon1

chipfork said:

My partner is a joint executor for a will that has left £10k to the deceased's granddaughter.
She is only a minor so we'd like to put the money into a trust or savings account for when she reaches the age of 18.

We have had a brief look at the options available and would welcome recommendations or experience in handling a similar need.

Discretionary trusts seem a little complex. A bare trust sounds like a much simpler approach but we have no idea how we would set one up. Then there's simply opening a savings account and any complexities that it would entail. Would that be in the executor's names or the beneficiary and if the latter, how do the trustees retain control until she reaches 18? What if anything happens to the trustees, how can we ensure the beneficiary receives the monies.

You have not explained the exact wording in the will regarding bequest to granddaughter to determine if trusts should be a consideration. If for an example there is contingency attached to the bequest ( for instance ' to my granddaughter contingent on attaining age 25' ), there may already be in place a statutory trust by reason of the contingency. Hopefully, given the sum involved this is not case.

You also don't mention the age of the child. If there are many years before age 18, have to consider whether placing the entire amount in  pure savings accounts at a time when interest rates seem to be in  decline , would be considered appropriate ( albeit it would safe, subject to any uptick in inflation).

chipfork

She is aged 12 and the will was very simply worded in that the sum of £10k would be left to her, no conditions on when or how were specified.

My partner suggested leaving the money in "trust" until she is 21. However, I understand that 18 is considered a legal definition of maturity unless the executors can justify otherwise.

We want to ensure that she's only able to access the money at 18 or 21 (if practical) without any potential external pressures to release the money. We also want to make sure that it's earning the best interest so that she has a reasonable pot for whatever she wishes to use it for. We'd also like to ensure that if anything happens to us as trustees, the account and funds are simply transferred to her, if not in her name.

Keep_pedalling

She will be entitled to her inheritance once she becomes 18 but with a little financial education she will hopefully keep at least some of it for the long term.

The problem with a bare trust is that you will have limited choices about where to keep the money and those that offer such accounts don’t tend to have the best interest rates. A trust also has to be registered with HMRC. Although you can only put £9k into one each financial year a JISA may be a simpler option.

The other question to consider is cash or equities. For a very young child I would go with the later for one close to reaching 18 the former, but a 12 year old it is a bit more tricky decision. 

poseidon1

Keep_pedalling said:

She will be entitled to her inheritance once she becomes 18 but with a little financial education she will hopefully keep at least some of it for the long term.

The problem with a bare trust is that you will have limited choices about where to keep the money and those that offer such accounts don’t tend to have the best interest rates. A trust also has to be registered with HMRC. Although you can only put £9k into one each financial year a JISA may be a simpler option.

The other question to consider is cash or equities. For a very young child I would go with the later for one close to reaching 18 the former, but a 12 year old it is a bit more tricky decision. 

Have to agree. With just 6 years to age 18, equities might be tricky unless the granddaughter was prepared ( and educated enough ), to retain the investment once it vested in her favour.

It would seem the size of the bequest and the child's age points to cash or lower risk junior isas. MSE have a run down of junior  cash ISA providers, mostly building societies currently paying variable rates between 4.6% to 4.8%. None of the societies offer online application just post or branch.  Alternatively NSI apparently offer a junior cash isa isa paying 4% variable.

chipfork

Thanks everyone, the junior ISA certainly seems the best approach. Only a parent or legal guardian can open and manage the account but from I have read, that provides very limited control. She can take control at 16 and wouldn't be able to withdraw the money until she's 18. Plus it is in her name which is ideal, so the executors would have no concerns should anything happen to them in the meantime.

The cash or equities question is one to consider and carry out a little more research on. At least there's provision to change that during the lifetime of the ISA. It may also prove useful as a means to saving should there be any other cash gifts over coming years.