Disabled Persons Trust

Addledmum

Hi All,

Trying to navigate investing money in my son's disabled persons trust fund. It seems some platforms (Interactive Investor, Trading 212) do not accept trust accounts.
Has anyone on here found a low fee platform which does accept disabled persons trust accounts?

many thanks

poseidon1

I am pretty sure there are no DIY investment platforms which will accept formal trust monies of the type you described.  Those that do offer trustee accounts limit their offering to  Bare Trusts, where the child beneficiary ultimately takes personal control of the account on attaining age 18.

Trusts for disabled persons ( vulnerable person trusts), have complexities that ordinarily require the trustees to take professional investment and tax administration advice.

Questions therefore:

* How much is in the trust, and are the funds currently held on interest bearing deposit?

* From whom did the trust monies originate?

* What are the formal terms of the trust deed on behalf of your son?

* Have you registered the trust on HMRC's Trust register ( a mandatory requirement with penalties for non compliance ) - see link

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

Additionally the trust will be required to separately register for submission of self assessment trust tax returns, with a complex vulnerable person's tax election system to utilise your son's personal tax status to minimise annual trust tax liabilities. In this regard have you enlisted the services of a trust tax accountant? In the meantime see link below -

https://www.gov.uk/trusts-taxes/trusts-for-vulnerable-people

Your question implies you have little or no understanding of the potentially onerous trustee responsibilities attached to this form of trust.

Addledmum

Hi many thanks poseidon1, yes the trust is registered on HMRC trust register and the VPE1 application accepted by HMRC. We have an accountant doing the trust returns and currently the funds are totally managed by an IFA on a platform with fairly heavy fees. I understand why I may have given the impression I have little or no understanding but I am confident we have the legalities and tax reporting requirements in place across a solicitor who drew up the trust, our accountant and then our IFA who has set up the current investment arrangements for the trust (in the trusts name).

We also have a trust bank account with Metro. I have recently started making our own personal investments on Trading 212 and it got me wondering whether there were any such platforms that I could invest some of my sons money in something relatively safe like bonds.

He is yet to turn 18 and will always lack capacity (Court of Protection application for Deputyship for F & P currently going through).

There are significant funds in the trust that we have put in there for his future when we are no longer here. As you say I think Interactive Investor will do a bare trust but not a disabled or vulnerable persons trust.

I thought I would put out some feelers to see if anyone else had already walked this  path.

Albermarle

Addledmum said:

Hi many thanks poseidon1, yes the trust is registered on HMRC trust register and the VPE1 application accepted by HMRC. We have an accountant doing the trust returns and currently the funds are totally managed by an IFA on a platform with fairly heavy fees. I understand why I may have given the impression I have little or no understanding but I am confident we have the legalities and tax reporting requirements in place across a solicitor who drew up the trust, our accountant and then our IFA who has set up the current investment arrangements for the trust (in the trusts name).

We also have a trust bank account with Metro. I have recently started making our own personal investments on Trading 212 and it got me wondering whether there were any such platforms that I could invest some of my sons money in something relatively safe like bonds.

He is yet to turn 18 and will always lack capacity (Court of Protection application for Deputyship for F & P currently going through).

There are significant funds in the trust that we have put in there for his future when we are no longer here. As you say I think Interactive Investor will do a bare trust but not a disabled or vulnerable persons trust.

I thought I would put out some feelers to see if anyone else had already walked this  path.

It does not answer your question, but I would be interested to know what benefit there is in setting up this trust ( with all the complications of tax, legal fees, restrictions on where/how the money can be invested etc) whilst you are still alive?
I always thought these trusts were really more useful for once the parents had died, so set up as part of a will. 
It is relatively easy for parents to manage the day to day finances of a disabled young adult, without the complications of a trust.
I understand one benefit is potentially saving inheritance tax, as then you can gift the disabled person money via the trust and if you live 7 years it will be out of your estate. However this would only apply to a small % of people.

Addledmum

Albermarle - we opted to do this because of the IHT. We are home owners and the value of the house when we die will exceed the IHT joint limit of £625k. Whilst we are alive we do manage our sons day to day expenses but any investment returns we make in our name for him are charged at our marginal rate, not his. Also any money he inherits from relatives will go directly into his disabled persons trust.. I have registered the trust and completed the VPE1 myself and the trust was set up at the same time as our wills by our solicitor. We have an accountant to do the returns but he seems confident that after the first couple we should be able to complete this ourselves also. My son lacks mental capacity and when we die will have high care costs so any money in his own name would be taken along with any universal credit by the local authority towards his care costs. Money held by trustees within a disabled persons trust is to my understanding currently not considered his for these assessments as he still only has the 'hope' the trustees will use it for his benefit but he has no control over it. That means when we are gone, there should be some funds for gifts from the trust for his benefit such as a holiday, any private medical fees, clothes and on going birthday and xmas presents each year.

poseidon1

I note that you have set up a fully compliant,  well thought out arrangement for your disabled son for all the right reasons and with an understanding of your long term rationale in doing so.
Many people who visit this forum with trust queries are in no way cognizant of what they are doing or why, hence my initial skepticism of your query for which I apologise.

Returning to your original query, DIY investment platforms have no desire to engage with the complexities of the different forms of trust which exsist in this country other than Bare Trusts which are essentially simple nominee arrangements with  limited timespans ( age 18 ).

Depending on how much is in the trust fund, have you considered switching to traditional stockbrokering wealth managers with long pedigrees in managing family trust funds, to manage the  investments?

I imagine the IFA is limiting the portfolio to unit trust/ OEICs,  whilst a traditional wealth manager can in addition also embrace direct investment in government gilts, Investment Trusts, etfs, Corporate bonds etc. Firms that immediately spring to mind in this space are Killick & Co, Rathbones and Walker Cripps.

The fee structures for these firms will depend on if you give them full discretionary management powers, or limit them to an advisory arrangement ( ie they suggest investments but you have the last say on implementation).

Finally you seem to have ticked all the boxes for a properly run trust, but is there an investment policy statement in place which the IFA is adhering to?   See link below to a template example - 

https://library.standardlife.co.uk/iht18.pdf

If you do decide to switch to a traditional wealth manager they will certainly expect an investment policy statement to be in place which sets the formal parameters of their investment instructions.

Albermarle

Addledmum said:

Albermarle - we opted to do this because of the IHT. We are home owners and the value of the house when we die will exceed the IHT joint limit of £625k. Whilst we are alive we do manage our sons day to day expenses but any investment returns we make in our name for him are charged at our marginal rate, not his. Also any money he inherits from relatives will go directly into his disabled persons trust.. I have registered the trust and completed the VPE1 myself and the trust was set up at the same time as our wills by our solicitor. We have an accountant to do the returns but he seems confident that after the first couple we should be able to complete this ourselves also. My son lacks mental capacity and when we die will have high care costs so any money in his own name would be taken along with any universal credit by the local authority towards his care costs. Money held by trustees within a disabled persons trust is to my understanding currently not considered his for these assessments as he still only has the 'hope' the trustees will use it for his benefit but he has no control over it. That means when we are gone, there should be some funds for gifts from the trust for his benefit such as a holiday, any private medical fees, clothes and on going birthday and xmas presents each year.

I fully understand the part highlighted in bold, and yes if he has any significant assets, benefits could be stopped.

As you might guess I have a similar family situation, although the person in question is older than your son. Hence my questioning the need for a trust whilst still alive, as we have thought about it but so far have not done anything, except to have setting one up as part of our wills.
To be honest after reading so many horror stories about trusts, it has put us off, for now anyway, Good to see you have organised it properly though. 
Relatives wills ( past and future) have directed any money directly to us. So far the sums are not that large and have already been spent on a new specialised vehicle.
The house will go to another able adult child, maybe you have not got any other children that you can do that with?
In this case the joint IHT allowances will be £650 K + £350 K for the Residence nil rate bands, so One Million in total. 
We have not bothered with a Deputyship either, and this has never caused us an issue so far in handling the various benefits/payments etc.