Investment of lump sum from a will for child up to age 21

Soxon_Hornet

My 12 year old daughter is due to receive the amount of £20,000 upon reaching the age of 21 under the terms of my mother's will. My mother recently passed away. Please can someone recommend the best investment alternatives to negate the effects of future inflation. The executor of the will is precluding any investment in stocks and shares and is only considering fixed term investments in which the capital sum remains guaranteed. Is it permissible to place the money in a unit trust based on stocks and shares without a fixed term? What is the most economical way of creating a trust to ensure that my daughter cannot access the funds until she reaches the age of 21? 

Keep_pedalling

What does the will actually say with regard to her inheritance? Unless it specifies that it has to be held in a discretionary trust or names an alternative beneficiary if she dies before she reaches 21, then the clause is just a wish and your daughter is entitled to to her inheritance on her 18th birthday (16th in Scotland) and it needs to be held in a blind trust until that point.

Few wills actually contain enforceable age restrictions because things like discresionary trusts are expensive to manage and are subject to high levels of taxation.

If she is entitled to the money at the age of 18 (or 16) then 6 years is probable too short a period to think about equities rather than cash savings.

dunstonh

The executor of the will is precluding any investment in stocks and shares and is only considering fixed term investments in which the capital sum remains guaranteed. 

The executor is not allowed to impose any of their personal preferences onto this.    It also sounds like their knowledge is weak and woefully out of date (unless the Will is so badly written that it has those requirements specified).

Fixed term investments haven't been around for a long time.  They are open ended nowadays.   And capital guarantees are rare to non-existent (due to historic issues over guarantees not actually working when the time came)

Is it permissible to place the money in a unit trust based on stocks and shares without a fixed term?

Yes.  That is the normal way.    

A will Trust is commonly used (discretionary trust).    However, trusts are very inconvenient to use and it may be worth checking to see if the Will was explicit on specificing and age to benefit as a decently written will would normally allow more discretion.  A poorly written Will (or older Will) may not have that flexibility.

xylophone

What EXACTLY did the will say?

https://forums.moneysavingexpert.com/discussion/comment/80426472/#Comment_80426472

Soxon_Hornet

Thank you to all those who have responded so far. Your advice is really appreciated. The will specifies that the sum of £20,000 should be paid to each of the grandchildren free of tax absolutely upon reaching the age of 21. That's all.

xylophone

The will specifies that the sum of £20,000 should be paid to each of the grandchildren free of tax absolutely upon reaching the age of 21

Looks to me ( but you can check with the solicitor who drafted the will) like "indefeasibly vested" ("when"  NOT "if") - see thread linked in my previous.

If so, then the child is already the beneficial owner of the money and it should be held in bare trust.

The beneficiary of a bare trust is entitled to access and control at the age of 18.

Holding it in a cash deposit account simplifies matters from the Trust Registration point of view. 

https://www.gov.uk/hmrc-internal-manuals/trust-registration-service-manual/trsm23160

Does the child have a JISA?

If so, it seems to me that the Trustee may choose to make a deposit of up to £9000 into the JISA in the current tax year.

The balance could be held in trust in another child account and dripped into the JISA as required in subsequent tax years.

https://www.thisismoney.co.uk/money/saving/article-1583863/Best-savings-rates-Junior-Isas-children-s-accounts.html

Albermarle

Soxon_Hornet said:

Thank you to all those who have responded so far. Your advice is really appreciated. The will specifies that the sum of £20,000 should be paid to each of the grandchildren free of tax absolutely upon reaching the age of 21. That's all.

I am not a legal person but the problem is that as I understand it a simple statement like this is not legally binding.
Maybe the will was not drawn up by a solicitor ?

dunstonh

Soxon_Hornet said:

Thank you to all those who have responded so far. Your advice is really appreciated. The will specifies that the sum of £20,000 should be paid to each of the grandchildren free of tax absolutely upon reaching the age of 21. That's all.

Those are things that should not appear in a Will as they may not be possible or may contradict.     

Is the executor linked in some way to the person who wrote the Will in the first place?

IanManc

Albermarle said:

Soxon_Hornet said:

Thank you to all those who have responded so far. Your advice is really appreciated. The will specifies that the sum of £20,000 should be paid to each of the grandchildren free of tax absolutely upon reaching the age of 21. That's all.

I am not a legal person but the problem is that as I understand it a simple statement like this is not legally binding.
Maybe the will was not drawn up by a solicitor ?

If that is exactly how the will is phrased then I sincerely hope it wasn't written by a solicitor. 

Soxon_Hornet

The will was logged with a solicitor and had their details on the front but aside from that I can't say what their involvement was. My older brother is the sole executor. In my opinion he is being deliberately vindictive as we have recently fallen out over other crass actions that he was intending to take in relation to my mother's estate. His view is that as sole executor he can do whatever he likes.
Going through the expense of setting up a discretionary trust would clearly not be in the best interests of either my daughter or any of the other beneficiaries who would presumably have to meet the costs of setting up the trust. I also have a 19 year old daughter entitled to exactly the same benefit upon reaching age 21. It just seems non-sensical to set up a trust solely to prevent her from accessing her inheritance over the next 22 months particularly given that she currently has no intention of doing so. 

xylophone

If the bequests have "indefeasibly vested" in your daughters then there is no question of a discretionary trust.

Your daughters are the beneficial owners of the money.

The twelve year old's money should be held in bare trust.

If held in cash in a deposit account (example

https://www.skipton.co.uk/savings/childrens/childrens-trust-saver)

then it appears that there is no need to register the trust  ( see  links in previous).

There is no need to register a JISA.

Had your elder daughter been under 18 then her bequest would have been held in bare trust,

The beneficiary of a bare trust has the absolute right to access and control at the age of 18 so if the bequest has indeed indefeasibly

vested then she has the right to call for access and control now.

Check the links in my previous and check with the solicitor who drafted the will.