Bank Account for Discretionary Trust

poseidon1

roadweary said:@poseidon1 - thanks for this.  I'm clearly struggling to understand all of this.....what I fathom is that the Trust mechanism was discussed in the will, that the first Deed of Appointment, set the trust up in 2020.  I understand since then that there is a requirement to register this with HMRC which is to be done imminently.

There's been no discussion about investing any of the sums in the stock market....it's not anything we have any experience in and it has been our assumption that it would just sit in the bank account.....but due to it being a Trust bank account (@NorthYorkie says it's not a Discretionary Trust but a 'Interest in Possession Trust') it seems finding any account will be a challenge....and in fact finding several to have the 85k per Bank protection even harder.

Does the type of Trust make a difference to the type of bank account?  Legally, does it have to opened as a Trust Bank Account?

I agree for the uninitiated ( which is most people ) trusts are indeed confusing and challenging.

To be clear a trust embodied within a will, has an effective start date for IHT purposes being the date of death of the testator. When did your father die?  that date sets the 10 year clock running.

With regard to stockmarketing investing, this is probably only appropriate if your mother has decent life expectancy ( say 7 years +).

So from the point of view of you and your brother who I assume are trustees and the ultimate beneficiaries of the trust ( when mother eventually passes), stockmarket investing might address the ravages of inflation on the trust funds the longer your mother survives, whilst also potentially produce an increasing income for her over the years.

In the interim a Trustee Bank account/savings account is necessary to ensure that only the trust is taxed on Bank interest arising.

I have seen sad situations on this forum, where trustees in ignorance set up an account in their  personal name with no trust designation, unaware that the bank would directly report the income to HMRC as their own personal taxable income  rather than that of the underlying  trust beneficiary. A confusion that subsequently took time and effort to sort out. Best to get things right from outset.

As to whether the type of trust  ( discretionary or interest in possession) affects your quest for a bank account, it doesn't. The banks that provide a service in this sector  are not concerned about the tax status of a trust.

As to choice of bank, your choices are limited.

Professionally speaking I would lean towards Cater Allen who I used to have some dealings with before I retired 10 years ago. They are wholly owned by Santander and currently offer 1 year fixed deposits at 4.05% which is almost double that payable by Metro Bank for example.

Furthermore, unlike Metro Bank, Cater Allen do not charge any monthly, annual or set up fees for their current accounts.

Indeed given Cater Allens longevity in the sphere of providing banking services to private clients in general and the trust sector in particular, I would struggle to reccomend anyone else at your level of trust funds - see below

https://www.caterallen.co.uk/about-us

If your firm of solicitors had a decent sized private client department I would have expected them to be able to make a professional introduction to the bank on your behalf. Sadly you cannot approach them direct.

SadCodeMan

One possible suggestion:

If your timeframe for the investments might be on the shorter side and so equities be a bit too risky, you could always look into shorter dated gilts or even funds which invest in corporate bonds very close to maturity. Some funds specialise on investing on ultrashort bond maturities which have the result of providing close to interest rate returns.

The potential advantage if you can find a reasonable platform to hold them is that it might make spreading the funds across more counterparties a little easier than if you just keep to bank accounts.

poseidon1

SadCodeMan said:

One possible suggestion:

If your timeframe for the investments might be on the shorter side and so equities be a bit too risky, you could always look into shorter dated gilts or even funds which invest in corporate bonds very close to maturity. Some funds specialise on investing on ultrashort bond maturities which have the result of providing close to interest rate returns.

The potential advantage if you can find a reasonable platform to hold them is that it might make spreading the funds across more counterparties a little easier than if you just keep to bank accounts.

Agree Gilts and bonds are a distinct possibility but for investment 'virgins' with no knowledge, its all a bit of learning curve.

Probably best to engage a wealth management firm with competency in trust investment matters if this option appeals.