Children's legacy advice in Scottish Law

luflo1998

My father in law left my two children a substatial amount in his will five years ago. The will stated it should be invested into a trust earning interest/ income. The children would receive this when they were 21 but it could be released before that age if it was for their education or benefit. The executor, my husband's sister, on advice of her lawyer, said the children could have it now for their education which we agreed. The lawyers said they would pay the legacy amount into the children's accounts. We asked about interest. The lawyers said that the money had not been placed in an interest account so it was simply the original amount. What do we do? The children have lost out on five years of interest approx £5,000 and the executor has not done what the will has asked.

sammyjammy

Did the solicitor set it up on behalf of the sister?  If so she needs to query it and find out exactly what she asked them to do first.

buddy9

If the children were under the age of 16 at the time, there might have been an obligation on the executor to consult the Accountant of Court for safeguarding directions, depending on the amount. You might want to establish whether this happened.

https://www.scotcourts.gov.uk/courts-and-tribunals/courts-tribunals-and-office-locations/find-us/the-office-of-the-accountant-of-court/

https://www.legislation.gov.uk/ukpga/1995/36/section/9

luflo1998

Thank you for replying - The will says this, (referring to £20,000 each ''

(SIXTH)

I

direct my Executors to hold any part of my estate

held for a beneficiary under the age of twenty one years (hereinafter referred to as the "Trust Fund") for the following trust purposes: -

1     . For behoof of such child contingently on him or her attaining a vested interest as after provided for ;

2     . To accumulate the income arising from the Trust Fund by investing all surplus thereof and the result ing income therefrom in

accordance with the powers hereafter conferred until such child attains the age of sixteen years ;

3     . For payment of the income of the Trust fund to which such child is prospectively entitled to such child from the attainment by him or her of the age of sixteen until he or she attains a vested interest as provided for in the immediately succeeding paragraph;

For payment of the capital of the Trust Fund and the income accumulated prior to him or her acquiring a vested interest in the income to such child on his or her attaining the age of twenty one years and subj ect as after-mentioned the said capital and accumulated income shall not vest in such child until the date of payment of his or her share ;

I have assumed that the money would have been set aside from the 'estate money' into a separate account earning interest. Is this not what this means? Apologies if I do not understand.

poseidon1

Also do not conflate the rates of deposit interest now available with what was achievable 5 years ago when Bank of England base rates were at an all time low.

Even once interest rates began to rise in 2nd half of 2022, it would have been difficult for the trustees to source accounts paying decent rates. For the purposes of calculating loss of interest over that period I would say the rates on NSI income bond rates would be a realistic benchmark.


EDIT:

Having now seen the precise trust terms, the trust income would have been liable to 45% income tax during the income accumulation period to age 16. This would have necessitated annual trust income tax returns and associated professional compliance costs. 

Frankly, given the combination of very low intial interest rates, coupled with relatively complex income tax reporting, this formal trust was disproportionate in its complexity for the lowly sum of £20k per child.

Professional admin fees could easily have wiped out any interest, and impacted the capital itself.