Money left to children

Flugelhorn

poseidon1 said:

As to the risk of misappropriation by the parent, I have seen a couple stories on this forum of that exact thing happening ( not everyone live in perfect family bliss and harmony like the Waltons). In any event if a particular child's trust fund goes pear shaped ( for whatever reason) the buck stops with the original trustee/executor both morally and legally, and the child/children concerned can (and should) pursue the original trustee for recompense.

there was one not so long ago where the exec / trustee was a family friend and while one child got their inheritance, when the other was of age the money had just disappeared  - spent on other things 

poseidon1

silvercar said:

poseidon1 said:

silvercar said:

Keep_pedalling said:

silvercar said:

Would a deed of variation work? Only those who potentially lose out would have to agree to it.

No, a minor cannot make a deed of variation.

If you have a co-operative family, then no one is likely to sue someone for breaching the exact wording of the will. With a similar clause, we just put the money in accounts in the names of the children, the parents controlled the accounts of the minors and the parents chose when to reveal to their offspring their inheritance. If the worse had happened and one of the grandchildren not survived to 21, then theoretically the other grandchildren could have asked for their share of the deceased’s inheritance. But I couldn’t imagine that anyone would have behaved like that. If a deceased grandchild had spent the money and not survived to 21, I suppose that another grandchild could have demanded their share of the money from the executors, which would have been their own parent and the parent of the deceased. I can’t imagine anyone in our family behaving like that.

Sure, the executor/trustee could ignore the instructions in the will that imposed the primary responsibility on them ( rather than the children's respective parents) to preserve the trust funds until each child attains the appropriate vesting age.

However, the additional risk in that scenario ( apart from child dying early ) is the respective parents not fulfilling the task delegated to them either by misappropriation of the child's funds for their own benefit, or making inappropriate investments and losing all or part of the money as a result.

As to the risk of misappropriation by the parent, I have seen a couple stories on this forum of that exact thing happening ( not everyone live in perfect family bliss and harmony like the Waltons). In any event if a particular child's trust fund goes pear shaped ( for whatever reason) the buck stops with the original trustee/executor both morally and legally, and the child/children concerned can (and should) pursue the original trustee for recompense.

I would suggest the larger the sums of money involved the higher the risk of undesirable outcomes if one attempts ( as primary trustee) to delegate ones duties in this casual way.

The parents couldn’t appropriate the funds as they were put in the names of their children.

It wasn’t a casual way, it was a deliberate decision to minimise the costs of administering trusts etc in order that the beneficiaries inheritance is maximised. Also, 2 of the grandchildren were already over 21, 1 over 18 and 1 over 16, so the time before a DoV could have been done was relatively short.

I hear what you are saying and appreciate the sentiment behind the methodology used, especially where the amounts may have been very modest.

What I meant by casual, is I assume no formal deeds of appointments were drawn up for each transfer of the executor/trustee function to the replacement parent trustees, and neither were the parents informed of the 45% tax compliance requirement for trust income the child were not entitled  to until attaining the vesting age. Not sure how or why a DOV would have been in point  since the 16 year old could not be a party.

 However , unless the  arrangement you outlined involved the parents utilising investment bonds to sidestep the 45% tax bill on any income arising on the funds prior to the vesting age, it sounds to me as if the strict legal tax compliance position was not followed and any income arising was presumably treated as belonging to each child during their minority?

 Furthermore can I assume none of these trust arrangements were registered on HMRC's trust register? With trusts contingent on survival to a particular age ( or survivors take all) they are  a single trust fund with multiple beneficiaries , not individual trusts for each.

Indeed, even in the case of Bare absolute trusts terminating at age 18 (where underlying income does belong to the child) and are individual trusts for each child, even those entities  (if not falling within the exclusions) are supposed to be registered with HMRC see link below. However where the registration requirement is overlooked (through lack of acknowledge) in my view no harm done from HMRC point of view if no tax  exposure would ever have been forthcoming in respect of the Bare trust.

https://www.saffery.cmoreom/insights/publications/trust-registration-service/#:~:text=In particular, bare trusts, which,in the list of exclusions.

The same cannot be said in the case of contingent interest trusts especially those created by testators who had no idea that is what they were burdening their executors with.

The complexity and risks inherent in the mismanagement of contingent interest trusts ideally  mean  they should be avoided from outset.  If one is lumbered with dealing them, I am not sure I could suggest the solution is to avoid established trust law on the subject and ignore HMRC strict compliance requirements, but ultimately each to their own and I suppose many can plead in mitigation ignorance of the rules, in the event their actions are ever discovered.

In the present case, the OP is on notice of what is required, so up to them to decide whether your 'solution' is the way to go bearing in mind DOV is completely out of the question in their case.

In passing I commend Spendless in his post, intervening on his own parent's will to head off the age 25 contingency they originally  embedded in their wills. He is absolutely correct that far more thought and (informed)  deliberation with those who have to eventually discharge the trustee role would be the ideal  at the Will drafting stage. 

silvercar

I think I think we used fixed rate bonds that didn’t mature until the grandchildren were over 18, so no interest arose from the accounts as minors. These were in any case small amounts.

the bigger one involved using a solicitor and an actuary, as there was some pot of money where the spouse was entitled to the income and the offspring the capital. The costs of administering that were too big as a percentage of the pot, so we managed to disband it. Not sure of the details, other than the solicitor involved took such a chunk in charges, that the deceased would have definitely written something else in the will had they been aware!

There was also another one, where a great grandmother wrote a will in the early 80s that left £1,000 to any great grandchildren that arrived before her demise, for them to have when they were 25. £1k in the early 80s would be significant, she lived till the year 2000 and had great grandchildren who were toddlers at the time. The youngest only reached 25 last year. £1k when you are 25, even with interest along the way is not as good as it would have seemed in the 80s.