Registering Trust - Deceased Beneficiary

henryhallsdanceband

I’m registering three trusts for my mother-in-law - she did not know she had to do this and is unable to do it herself.  My brother-in-law is a named beneficiary of each of the trusts…unfortunately he died recently.  Do I register him as a beneficiary.  It seems daft registering him but there is no guidance given in the notes provided that I can find and we will not be removing him as a beneficiary of each of the trusts as they are set up to accommodate death of a beneficiary before the trust sponsor (my MiL).

Two of the trusts are discretionary and one is a bare trust.  

TIA

Keep_pedalling

Discretionary trusts can be a nightmare to administer it might be wise to take professional advice on those. 

Are any of the beneficiaries of the bare trust minors? 

poseidon1

henryhallsdanceband said:

I’m registering three trusts for my mother-in-law - she did not know she had to do this and is unable to do it herself.  My brother-in-law is a named beneficiary of each of the trusts…unfortunately he died recently.  Do I register him as a beneficiary.  It seems daft registering him but there is no guidance given in the notes provided that I can find and we will not be removing him as a beneficiary of each of the trusts as they are set up to accommodate death of a beneficiary before the trust sponsor (my MiL).

Two of the trusts are discretionary and one is a bare trust.  

TIA

Assuming two of the trusts really are discretionary, then depending on the assets in each trust you may be  facing complex income tax/CGT/IHT compliance as well annual accounting with associated record keeping. Furthermore, unless you have any familiarity with the law related to investment of trust funds, you may also need a suitably qualified investment advisor.

 Since you are already struggling at the 1st hurdle ( registering the trusts), strongly suggest  you seek the advice of a STEP ( Society of Trust and Estate Practitioners) qualified accountant who can assist in most of these areas.

RAS

Since your brother in law died intestate according to your other thread, MIL will be the beneficiary of the trusts she's setting up? 

Looks like she needs some proper STEP advice to clear up the situation? 

henryhallsdanceband

Apologies all…I got my trust types wrong - all three are express trusts…I have found the original finance planner reports that advised on setting up the trusts.

poseidon1

henryhallsdanceband said:

Apologies all…I got my trust types wrong - all three are express trusts…I have found the original finance planner reports that advised on setting up the trusts.

All trusts created by a trust deed or Will are colloquially known as 'express' trusts the word express does not in any way describe the category of trust created  - life interest, discretionary, 18 to 25 , charitable,  these are all examples of express trusts. 

You really do need to obtain advice from a STEP qualified legal practitioner as to the nature of trust entities created, you really are struggling to comprehend what you are dealing with.

henryhallsdanceband

Just a quick update on my ongoing 'project' sorting out my MiLs Trusts (of which my wife and my now deceased BiL are the named beneficiaries) .  I've now got all three trusts registered with the HMRC TRS.   Next we are 'retiring' my MiL and her (now deceased) sister as the trustees of the trusts, and appointing my wife and myself in their place (Halifax have OK'd this)  I'm going on the basis that my wife is the assigned replacement for my MiL and I am the assigned replacement for my MiL's sister (though deceased she's still a named Trustee).  

Been speaking a lot with Halifax/Scottish Widows on the matter - the trusts were set up on the basis of advice given by Halifax Financial Advisors in financial reviews my MiL had with the Halifax (as she had existing investments with them) and then set up by Halifax/Scottish Widows.  The reviews were some 20-25 yrs ago and a few years apart.  It frustrates me (more than a little) that the Halifax seems unable to tell me the precise nature of the trusts that they set up for my MiL - given they were set them up by Halifax FAs.

Anyway.  Once we've got that sorted out I'll prob get STEP advice on understanding the status of the trusts and what can be done with the funds sitting in the investments - either prior to my MiL deciding to go fly with the angels or after.  At least one of the trusts is definitely a Bare Trust - and it would be good to know if my wife could request of the trustees for some funds to be released out of the investment held in it sooner rather than later...to help her with some current 'life stuff' an additional bit of income would go a long way to helping with.

Thanks to all for advice so far provided.

poseidon1

henryhallsdanceband said:

Just a quick update on my ongoing 'project' sorting out my MiLs Trusts (of which my wife and my now deceased BiL are the named beneficiaries) .  I've now got all three trusts registered with the HMRC TRS.   Next we are 'retiring' my MiL and her (now deceased) sister as the trustees of the trusts, and appointing my wife and myself in their place (Halifax have OK'd this)  I'm going on the basis that my wife is the assigned replacement for my MiL and I am the assigned replacement for my MiL's sister (though deceased she's still a named Trustee).  

Been speaking a lot with Halifax/Scottish Widows on the matter - the trusts were set up on the basis of advice given by Halifax Financial Advisors in financial reviews my MiL had with the Halifax (as she had existing investments with them) and then set up by Halifax/Scottish Widows.  The reviews were some 20-25 yrs ago and a few years apart.  It frustrates me (more than a little) that the Halifax seems unable to tell me the precise nature of the trusts that they set up for my MiL - given they were set them up by Halifax FAs.

Anyway.  Once we've got that sorted out I'll prob get STEP advice on understanding the status of the trusts and what can be done with the funds sitting in the investments - either prior to my MiL deciding to go fly with the angels or after.  At least one of the trusts is definitely a Bare Trust - and it would be good to know if my wife could request of the trustees for some funds to be released out of the investment held in it sooner rather than later...to help her with some current 'life stuff' an additional bit of income would go a long way to helping with.

Thanks to all for advice so far provided.

Sounds like progress ( of sorts).

Having mentioned Halifax/Scottish Widows as involved with the original trusts, it's a very strong liklihood that the underlying trust investments in each case are Scottish Widows life company investment bonds.

Not overly surprised that the present Halifax financial  services team are not particularly helpful in providing the guidance your family now requires. Neither Halifax, Bank of Scotland or Lloyds ( all part of the same banking group ) sell IHT mitigation schemes anymore.

Such services are now handled by Schroder Personal Wealth who have partnered with Lloyds to provide this type of 'sophisticated' planning for the banking group customers. Understandably Schroders would not be interested in picking through the detritus of Halifax/Scottish Widows legacy trust schemes.

At this point you now need to turn to a STEP qualified trust specialist, to pick through each trust deed to determine what powers you have to advance trust capital, and the best way to achieve this objective.

 If I am correct about the nature of the trust investments,  the one thing you should not be doing is blindly encashing the investment bonds whilst owned by the trustees. Depending on the investment appreciation over the years, the tax consequences ( on at least two of trusts ) could be significant.

 As for the bare trust (if indeed it is a bare trust), any tax consequences of encashing investment in that structure will be directly  bourne by the underlying beneficiaries, on a 'look through' basis.

The trust specialist, will no doubt advise in greater detail.

henryhallsdanceband

poseidon1 said:

henryhallsdanceband said:

Just a quick update on my ongoing 'project' sorting out my MiLs Trusts (of which my wife and my now deceased BiL are the named beneficiaries) .  I've now got all three trusts registered with the HMRC TRS.   Next we are 'retiring' my MiL and her (now deceased) sister as the trustees of the trusts, and appointing my wife and myself in their place (Halifax have OK'd this)  I'm going on the basis that my wife is the assigned replacement for my MiL and I am the assigned replacement for my MiL's sister (though deceased she's still a named Trustee).  

Been speaking a lot with Halifax/Scottish Widows on the matter - the trusts were set up on the basis of advice given by Halifax Financial Advisors in financial reviews my MiL had with the Halifax (as she had existing investments with them) and then set up by Halifax/Scottish Widows.  The reviews were some 20-25 yrs ago and a few years apart.  It frustrates me (more than a little) that the Halifax seems unable to tell me the precise nature of the trusts that they set up for my MiL - given they were set them up by Halifax FAs.

Anyway.  Once we've got that sorted out I'll prob get STEP advice on understanding the status of the trusts and what can be done with the funds sitting in the investments - either prior to my MiL deciding to go fly with the angels or after.  At least one of the trusts is definitely a Bare Trust - and it would be good to know if my wife could request of the trustees for some funds to be released out of the investment held in it sooner rather than later...to help her with some current 'life stuff' an additional bit of income would go a long way to helping with.

Thanks to all for advice so far provided.

Sounds like progress ( of sorts).

Having mentioned Halifax/Scottish Widows as involved with the original trusts, it's a very strong liklihood that the underlying trust investments in each case are Scottish Widows life company investment bonds.

Not overly surprised that the present Halifax financial  services team are not particularly helpful in providing the guidance your family now requires. Neither Halifax, Bank of Scotland or Lloyds ( all part of the same banking group ) sell IHT mitigation schemes anymore.

Such services are now handled by Schroder Personal Wealth who have partnered with Lloyds to provide this type of 'sophisticated' planning for the banking group customers. Understandably Schroders would not be interested in picking through the detritus of Halifax/Scottish Widows legacy trust schemes.

At this point you now need to turn to a STEP qualified trust specialist, to pick through each trust deed to determine what powers you have to advance trust capital, and the best way to achieve this objective.

 If I am correct about the nature of the trust investments,  the one thing you should not be doing is blindly encashing the investment bonds whilst owned by the trustees. Depending on the investment appreciation over the years, the tax consequences ( on at least two of trusts ) could be significant.

 As for the bare trust (if indeed it is a bare trust), any tax consequences of encashing investment in that structure will be directly  bourne by the underlying beneficiaries, on a 'look through' basis.

The trust specialist, will no doubt advise in greater detail.

Each Trust holds a Personal Investment Plan (Bond); the policies being Joint Life - payable on 2nd death.  Goodness knows what that refers to as the beneficiaries of the investments held by the Trusts are my wife and her brother - and they are identified in the Investments as the lives covered.  We will go to our FA and see if he can engage with a STEP specialist if he is unable to deal with it himself.  

We have some financial pressures at the moment and if my wife could draw on the investments in trust over 2-3 years without her incurring big tax hits that would be good.  But given my MiL is now 94 and frail we have to take into account potential IHT and also understand whether any money coming out of any of the trust funds before she decides to go 'fly with the angels' would be considered 'deprivation of assets' (or whatever the equivalent in IHT terms) in respect of the 7yr rule. I don't know whether the funds in the investments held in trust are considered to be my MiLs or whether they are the beneficiaries.

Of Trusts and Investments held in trust I know some things; however of them many things I know not.

Savvy_Sue

The concept of deprivation of assets is limited to assessment of your means to pay for care / claim benefits etc. For IHT it's more nuanced - obviously if you buy a superyacht the week before you die, its value is included within your estate, so the taxman will want to know about it. And excessive generosity to your nearest and dearest makes life complicated, because you either have to survive for 7 years after each gift, or the value remains within your estate on a sliding scale. 

On the other hand, if you've spent vast quantities on cigarettes, whiskey and wild wild women the taxman is unable to touch that money, because it's not there any more. 

Some IFAs and accountants may have STEP qualifications, you can search for one here: https://www.step.org/about-step/public But that is definitely what you need!

poseidon1

henryhallsdanceband said:

poseidon1 said:

henryhallsdanceband said:

Just a quick update on my ongoing 'project' sorting out my MiLs Trusts (of which my wife and my now deceased BiL are the named beneficiaries) .  I've now got all three trusts registered with the HMRC TRS.   Next we are 'retiring' my MiL and her (now deceased) sister as the trustees of the trusts, and appointing my wife and myself in their place (Halifax have OK'd this)  I'm going on the basis that my wife is the assigned replacement for my MiL and I am the assigned replacement for my MiL's sister (though deceased she's still a named Trustee).  

Been speaking a lot with Halifax/Scottish Widows on the matter - the trusts were set up on the basis of advice given by Halifax Financial Advisors in financial reviews my MiL had with the Halifax (as she had existing investments with them) and then set up by Halifax/Scottish Widows.  The reviews were some 20-25 yrs ago and a few years apart.  It frustrates me (more than a little) that the Halifax seems unable to tell me the precise nature of the trusts that they set up for my MiL - given they were set them up by Halifax FAs.

Anyway.  Once we've got that sorted out I'll prob get STEP advice on understanding the status of the trusts and what can be done with the funds sitting in the investments - either prior to my MiL deciding to go fly with the angels or after.  At least one of the trusts is definitely a Bare Trust - and it would be good to know if my wife could request of the trustees for some funds to be released out of the investment held in it sooner rather than later...to help her with some current 'life stuff' an additional bit of income would go a long way to helping with.

Thanks to all for advice so far provided.

Sounds like progress ( of sorts).

Having mentioned Halifax/Scottish Widows as involved with the original trusts, it's a very strong liklihood that the underlying trust investments in each case are Scottish Widows life company investment bonds.

Not overly surprised that the present Halifax financial  services team are not particularly helpful in providing the guidance your family now requires. Neither Halifax, Bank of Scotland or Lloyds ( all part of the same banking group ) sell IHT mitigation schemes anymore.

Such services are now handled by Schroder Personal Wealth who have partnered with Lloyds to provide this type of 'sophisticated' planning for the banking group customers. Understandably Schroders would not be interested in picking through the detritus of Halifax/Scottish Widows legacy trust schemes.

At this point you now need to turn to a STEP qualified trust specialist, to pick through each trust deed to determine what powers you have to advance trust capital, and the best way to achieve this objective.

 If I am correct about the nature of the trust investments,  the one thing you should not be doing is blindly encashing the investment bonds whilst owned by the trustees. Depending on the investment appreciation over the years, the tax consequences ( on at least two of trusts ) could be significant.

 As for the bare trust (if indeed it is a bare trust), any tax consequences of encashing investment in that structure will be directly  bourne by the underlying beneficiaries, on a 'look through' basis.

The trust specialist, will no doubt advise in greater detail.

Each Trust holds a Personal Investment Plan (Bond); the policies being Joint Life - payable on 2nd death.  Goodness knows what that refers to as the beneficiaries of the investments held by the Trusts are my wife and her brother - and they are identified in the Investments as the lives covered.  We will go to our FA and see if he can engage with a STEP specialist if he is unable to deal with it himself.  

We have some financial pressures at the moment and if my wife could draw on the investments in trust over 2-3 years without her incurring big tax hits that would be good.  But given my MiL is now 94 and frail we have to take into account potential IHT and also understand whether any money coming out of any of the trust funds before she decides to go 'fly with the angels' would be considered 'deprivation of assets' (or whatever the equivalent in IHT terms) in respect of the 7yr rule. I don't know whether the funds in the investments held in trust are considered to be my MiLs or whether they are the beneficiaries.

Of Trusts and Investments held in trust I know some things; however of them many things I know not.

Suggest you nix the FA, who evidently is out of their depth and no longer has the 'backroom' technical support the larger insurance companies used to provide with regard to these IHT mitigation schemes.

As Savvy_sue suggests it is incumbent on the family to seek a STEP trust specialist to assist. A decent sized Chartered accountancy firm with reasonable IFA links should be able to review the various trust documents and determine if there is reasonable scope to provide capital advances to your wife and her brother ( parity is important) , notwithstanding the possibility that MIL maybe the primary beneficiary at this point.

Given how old these trust arrangements are, it would not surprise me that one or other of the formal settlements are life interest trusts for MIL, but with trustee power to advance capital to the 'back stop' beneficiaries ( in all likelihood your wife and her brother) at the trustees' discretion.

However, if indeed MIL is the current primary life interest beneficiary, the trust capital is treated as forming part of her personal estate, so advancing capital to others would constitute a Potential Exempt Transfer, requiring her to survive 7 years for that 'gift' from her estate to fall out of account. If she dies prior to, the capital advanced reduces her nil rate band at that time. Also, as you pointed out 'deprivation of capital'  for local authority assessment purposes, could also be in point under these circumstances.

Alternatively, both MIL and her children could be coterminous life interest beneficiaries of one or other of the trusts, so your wife may already have a contingent trust entitlement she could access, without triggering potential deprivation of capital issues.

You mentioned a bare trust, who are/is the named beneficiaries/y of that arrangement? If your wife and her brother are the named beneficiaries, then that 'trust ' capital is already theirs to do with as they please.

Engage a STEP specialist accountant ASAP, as indicated they can advise on options open to vary/restructure the trusts , but also outline how to mitigate the potential  income tax liabilities now embedded within the gains accrued  by the bonds over the years.

 The fact that your wife and her brother are joint lives assured on the bonds, prevents the bonds being prematurely encashed on the eventual death of MIL. This would have been deliberate long term income tax planning when the bond trusts were originally created.