My partner died and my son needs a trust account as he is the sole ben

rlhope81

Hi,

My partner died suddenly without a will so I have to follow the rules of intestacy for probate. My 6 year old son will be the sole beneficiary of my partners savings (luckily we owned our house as joint tenants) but as he is young I have been advised I need to find an account that he can't touch until he is 18 and has 2 administrators.

Does anyone have any advice on the best types of accounts particularly in terms of management and the payment of any taxes. The amount is likely to be in the region of £50k once probate is finalised. I should mention he also has another savings account which is a Trust account with about £20k in it. Not sure what impact this might have overall.

I would appreciate guidance here as the solicitors dealing with probate have just said to get an account and 2 administrators.

Many thanks

poseidon1

Sadly yet another unhelpful solicitor. 

What has actually happened is as a result of your partner's intestacy,  a statutory Bereaved Minors Trust (BMT) for your son has been created. An explanation of what this entails is covered in the article link below -

https://www.moneymarketing.co.uk/analysis/finding-alternatives-to-burdensome-bereaved-minors-trusts/#:~:text=While Alfie is under 18,a tax return each year.

 There are number of compliance and trust administration issues which will need to be addressed;

1)  The trust needs  to be  registered with HMRC within 2 years of death. 

2) As indicated by the article, the trust is discretionary in nature ( despite there only be a sole beneficiary). This discretion means trust income is ordinarily taxed at the rate of 45% but lodging a vulnerable person election form VPE1 ensures the trust benefits from the tax rate the beneficiary would otherwise be entitled to , but for the intervention of the trust. A trust tax return must still be submitted nonetheless if trust income arises.

3) At present you are your son's sole trustee, but this is not ideal if something were to happen to you. Is there a close family member who could be appointed as Co trustee to act alongside you?

4) Investment - you have been told to just get an account which of course is an option but with interest rates on the decline this might not be best investment option for £50k over the next 12 years until your child attains age 18, especially since you already have a further £20k of separate trust monies,  presumably already languishing on interest bearing deposit.

As I indicated at the start, your present solicitors have been useless so no point going back to them. However you do need professional guidance on your future course of action, and to assist with the necessary documentation for the appointment of a Co trustee. I therefore reccomend you consult a STEP qualified solicitor. STEP is the Society of Trust and Estate Practitioners and are specialist of a higher order in trust and probate matters compared to the average high street solicitor.  link to the STEP website below
https://www.step.org/about-step/public

Returning to the investment matter,  you will have seen in the above article that Life company investment bonds were mentioned as a way of avoiding having to  submit annual HMRC trust tax returns.

For the relatively small sum you are dealing with, an investment bond may well make sense. Whether that should be an offshore or onshore product would be a matter to discuss with an appropriate investment adviser. However to be clear,  the BMT monies cannot be contributed to a Junior ISA, although this maybe an option for the other £20k depending  on its original source.

 Possibly after consulting with a STEP lawyer, they maybe able to refer you to an appropriate investment professional. Not all independent financial advisers are familiar with investing on behalf of trustees.

Finally, it occurs to me you may not be familiar or comfortable with investing outside the ambit of basic bank deposit accounts. That will of course be your perogative  but bear in mind 12 years is a long time to invest on his behalf having regard to the  future ravages of inflation.