Bare trust query

koicarp1

A great aunt has left my little girl a 6 figure sum in her will, which should be settled by her solicitor in a few weeks. I'm thinking we should set up a bare trust, with three trustees including myself. Who's best to set up the trust? Myself, her grandparents (great aunt no longer with us) or perhaps the solicitor? 
Currently we use ii who don't offer bare trust or jsipp (which great aunt wanted us to set up), so we will be looking at ajbell, bestinvest, hl etc

Keep_pedalling

You daughter will be entitled to her inheritance on her 18th birthday so SIPP is out of the question. I would not take on a professional as trustee it’s not really needed. 

DRS1

So the will left a significant amount of money to a minor child outright?  Are you sure there are no trust provisions in the will?

Or maybe it just says her mother and/or father can give a receipt for the money.  In that case I would say the bare trust should be set up by the mother and father (whoever gave the receipt).

olbas_oil

Legal structure:  .AJ Bell operate dealing accounts for children and include the trust declaration forms. You will have to register the trust with the Trust Registration Service, and include that reference on the application form.

Investment:  You may well want to take advice about how to safely invest a six figure sum. A 'dealing account' can hold a wide variety of investments, including global trackers.

Taxation: A sum of this size might well generate income above the personal allowance. I agree that a SIPP may be too much of a long term investment, but annual transfers into Junior Isa's would help avoid both paying tax, and, even worse,  the necessity to complete annual returns, At £9k/year you may be able to move from taxable bare trust to sheltered ISA for the whole amount.

Maturity: At 18  she becomes fully entitled to the capital. As trustee, you have to honour this, But as a parent, consider whether you would have been responsible enough when you were 18.. Maybe a few locked away 10 year investments at 15-18 might be a wise decision for a trustee? ..

wmb194

olbas_oil said:

Legal structure:  .AJ Bell operate dealing accounts for children and include the trust declaration forms. You will have to register the trust with the Trust Registration Service, and include that reference on the application form.

Investment:  You may well want to take advice about how to safely invest a six figure sum. A 'dealing account' can hold a wide variety of investments, including global trackers.

Taxation: A sum of this size might well generate income above the personal allowance. I agree that a SIPP may be too much of a long term investment, but annual transfers into Junior Isa's would help avoid both paying tax, and, even worse,  the necessity to complete annual returns, At £9k/year you may be able to move from taxable bare trust to sheltered ISA for the whole amount.

Maturity: At 18  she becomes fully entitled to the capital. As trustee, you have to honour this, But as a parent, consider whether you would have been responsible enough when you were 18.. Maybe a few locked away 10 year investments at 15-18 might be a wise decision for a trustee? ..

BIB; so deny the child her inheritance when she's entitled to it?

poseidon1

koicarp1 said:

A great aunt has left my little girl a 6 figure sum in her will, which should be settled by her solicitor in a few weeks. I'm thinking we should set up a bare trust, with three trustees including myself. Who's best to set up the trust? Myself, her grandparents (great aunt no longer with us) or perhaps the solicitor? 
Currently we use ii who don't offer bare trust or jsipp (which great aunt wanted us to set up), so we will be looking at ajbell, bestinvest, hl etc

I would be more inclined to see exactly what your Aunt's will stated with regard to legacy in favour of your daughter for example whether there is a  contingent age before she becomes absolutely entitled. 

If you have a copy of the will and can provide  the specific clause ( or clauses) in favour of your daughter,  will then have a better idea of appropriate course of action going forward.

As regard bare trusts if that does prove to be the best approach in this case, HL ( in my opinion) have a far better drafted document compared to A j Bell.   A J Bell did not make a great deal of effort with theirs - see thread below directly bearing on this issue 

https://forums.moneysavingexpert.com/discussion/6570381/setting-up-a-bare-trust-account-for-child#latest

The OP in that case took a little convincing to recognise the benefit of using HL instead of AJ Bell but after some deliberation ultimately recognised the wisdom of doing so.

 Incidentally who is the acting executor and what is the current age of your daughter?

xylophone

Provided that the money has been left to the child absolutely and unconditionally, it should indeed be held in bare trust for her.

Assuming that a JISA has not already been opened £9000 may be contributed in this tax year and in subsequent years. Income and gains are tax free.

With regard to income arising on the bare trust, it will be taxable on the child - she has her own personal allowance, starter rate for savings allowance, personal savings allowance, dividend allowance and capital gains allowance. 

Don't forget to check on the tax return situation. 

And ensure the child receives a sound financial education because she will be entitled to access and control at age 18.

https://www.gov.uk/apply-tax-free-interest-on-savings

https://www.gov.uk/guidance/register-a-trust-as-a-trustee

https://www.gov.uk/trusts-taxes/types-of-trust