Newbie advise for Life Assurance / Death in Service Trust accounts for child beneficiaries

Romeo5793

Hi There

My sister died very suddennly in Early December working full-time. She was divorced with 2 young children under 11, who are her sole beneficiaries. I am an executor of her will, along with our brother. Their father is not on the scene. Her employers offered a Life Assurance / Death in Service policy which they are now seeking to pay out. Her Expression of wish specificed a 50/50 split between each child. They have asked me to set up 'two separate bank accounts for the separate trust, one for the benefit of each of the two minor beneficiaries of the trust, into which the lump sum death benefit has been paid, split equally between the two bank accounts."

The HR person says that they have prepared a draft Trust Deed (Bare Trust) with their solicitors, and that we "need to set up bank accounts for the lump sum benefits to be paid in to, for you both to manage under trust". They also say that in order to complete the claim from that the insurance company require to pay out, they need these bank account details with Account holder name, sort code and account number etc. They have proposed issuing the trust deed for signature via DocuSign in due course, to be coordinated by their solicitors, and that it 'will remain undated until the funds are transferred, and it is witnessed, at which point it will be dated and a copy shared with you". They have then 'left it with me' to open the bank accounts and said that the solicitors recommend (though not essential) that the bank accounts describe the trust in the name, 

So off I go to try and open said bank accounts. Not sure what type of accounts are permissible but I start by assuming they need to be specific Trustee Accounts and start looking at a Trust Bank Account from Metro Bank https://www.metrobankonline.co.uk/business/sector-services/products/trustee-banking/. Only to find, of course, that they require the Trust Deed to be signed and registered in order to open an account, as do all financial institutions I have looked at that offer specific Trustee accounts. Which makes perfect sense as why would a bank open an account for a legal entity that may or may not actually exist at that point - "Account Opening Requirements: A certified copy of your Trust Deed, Confirmation of registration on HMRC’s Trust Registration Service, or a valid exemption reason & for all registered trusts, please provide a Confirmation of Registration document.  It can be downloaded from the TRS website using the credentials that were created when the trust was registered"

So my questions are:

Is a Trust Bank Account such as the one from Metro Bank the right type of account I should be opening for this purpose (x 2)?
Why don't the company or their solicitors know that you need a complete trust deed and not a dfraft trust deed to do so?
Or can it just be a normal savings account (seems unlikely), if so, in whose name? Mine or the children?
Are there any other options or providers I should be considering for this death in service lump sum payout?

Amounts are fairly substantial, over the £85K FCA protection limit in each case, and we are planning to use approx half for education (and have it in writing from the solicitor in the guidavce notes that this is an acceptable withdrawal) and will invest the other half after it has landed in whatever bank accounts I need to open. There may also be more funds incoming as I have not yet contacted my sister's various workplace pensions.

All advice gratefully received as this was unexpected and I am managing the admin as well as looking after 2 grieving children plus my own and working and do not currently have the time or resources for speciailist legal advice (though will seek it if it is necessary).

Keep_pedalling

Sorry you find yourself in such a horrible position. Considering the very young age of the children, the about of money involved and the heavy responsibility you have had to take on, it might be worth taking professional advice from an IFA on the best way to proceed.

xylophone

As it seems that the children have an absolute entitlement to these funds from the insurer, (the only reason that they cannot take

the money under their own control now is by reason of their minority), the Trust will be bare.

You and your brother must manage the funds for the sole benefit of the children.

They are individually entitled to their own personal allowances and their own savings allowances.


https://www.gov.uk/trusts-taxes


I imagine that it would ease admin if one bank  Trust current account is set up for the receipt of the funds and for the money then

to  be individually allocated to the children?  

Skipton BS offer a bare trust account for minor children - each child's account may have up to £50,000 deposited therein.

See also https://forums.moneysavingexpert.com/discussion/comment/81218434/#Comment_81218434 re other building

societies offering trust accounts.

You might then exercise your right as Trustees to use some part of the remaining funds  for the sole benefit of each

child by opening a stocks and shares ISA  for each child (Fidelity and a global mixed asset fund might suit) - you could do the

same in the next tax year and following as appropriate?

https://monevator.com/best-global-tracker-funds/comment-page-1/


A JISA does not require registration with the TRS and neither does a  cash savings account held in bare trust for a child.

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


Using deposit accounts for cash and JISA for investment might therefore ease the burden of administration?

In view of the sums involved, you might prefer to take professional advice

https://adviserbook.co.uk/

Tick "confirmed independent" and other options required when the menu comes up.


https://www.caterallen.co.uk/accounts/specialist-banking/solutions-for-trusts  might also be worth a look.

DRS1

Bit of a chicken and egg conundrum.  The trust does not exist until the money is paid into the bank account and the account can't exist until the trust exists.
Have you tried speaking to Metro about this and seeing if they will open the account with the trust deed "to follow"?
If every bank and building society has the same issue perhaps you need a solicitor to act for the trustees (ie you and your brother) and receive the money into their client account.  Then the deed can be dated and then you can open the Metro account or whatever other account you want.  I am not sure an IFA is set up to handle client monies but solicitors should be.
I imagine there will  be some comments about solicitors but I suggest you find one who is a member of STEP and they can help you with questions like can we spend money on the child's education (the insurer's solicitors don't act for you so you should not rely on what they say - any more than you should rely on what people say on here).

xylophone

A solicitor who is a member of STEP will certainly advise about the law pertaining to Trusts/TRS etc and will draw up a Trust

Deed but will probably not be able to offer financial advice - he may, however, be able to suggest a suitable independent financial

adviser expert in trust investment and taxation.


https://www.step.org/about-step/public

If the OP checks out the adviser book link, when the menu comes up, she will see trust and trust planning as a category on the

menu - she could tick this box when looking for an appropriately qualified adviser.

DRS1

Yes.  I was thinking more about the OP's immediate problem of having somewhere to receive the funds and a solicitor's client account seemed like a good answer to me if you can't open your own trustee account yet.  I admit there will be fees to pay - the more they do the more the fees.  So if the insurer's solicitors' trust deed is done then perhaps don't get the STEP solicitor to do anything about it - having two firms of solicitors drafting and redrafting documents can be a bad idea for the client even if it is something simple like a bare trust deed.

GibbsRule_No3.

Curious, even though the father "is not on the scene", as the children are young if he finds out the mother has died, would he have some form of claim?  A friend of mine has a young daughter, where the father is not and since she was under one, has not been around, every so often he does get a job and the tax people try and get money from him for maintenance, doesn't work often and large sum in arrears. I was wondering what would happen to daughter if the same thing happened as has happened here.  Not an easy situation for OP.

Romeo5793

Hi All, thank you for your advise, it is much appreciated. I am still in the chicken and egg situation - and Metro have confirmed they will not under any circumstances open an account based on a draft trust deed with completed 'to follow'. I am going to go back to the employer with these findings and ask them to ask their solicitor what they want me to do about this and whether they will complete. I think I will need to find an IFA as well.

To answer the question above, the father is a non UK national that left the UK for the US on a false passport and cannot re-enter the UK. So whilst he does know of the death, they are divorced. I can't see how he could realistically make any claim and doesn't have the resorces (or juristication) to do so that I can see. Might be different for a UK based British father.

DRS1

I think you should ask if it is possible to date the deed as soon as it is executed with the money to be paid out when the account is set up.  Strictly there is no trust until there is money in the trust so there may be some confusion about when the trust began but apart from some form filling I am not sure that actually makes a lot of difference.  I am guessing the trustees (you and your brother) will be asked to sign some receipt anyway.

An alternative may be for the insurers to cut a cheque (or two) instead of doing a bank transfer?  Then you will have time to set up the account but you would need to make sure the payee matched up to the account name.