Opening account for a minor who has inherited

nicter

Hi Myself and one other are executors of my fathers will Probate has just been granted.

Dads will has left a share to each grandchild one of whom is only 16. The others are all over 21.

The will states " my trustees shall hold my share on trust for such of the following as survive me and are living at the date of my death and attain the age of 21"

My question is, do we as executors have to open an account for said child or is it up to their parent to do so

Any advice gratefully received

RAS

It's very difficult to prevent a child accessing an inheritance when they are 18 years old but does the will specify what happens if junior dies before age 21? Or specify trustees?

@poseidon1 might be able to provide more information about the relevant clause.

If they can access at 18, get the parents to set up a JISA and pay the inheritance into there?

And have a careful talk about thinking about the future.

nicter

Thankyou RAS .Its a lot of legal jargon which I can post if needed but it looks to me that should that child not reach 21 the share is redistributed to the other beneficiaries The executors are the trustees

poseidon1

The survivial to age 21 requirement is unfortunate, since but for that condition the trustees of the Will could take a pragmatic approach and pass the trust funds to the child at age 18 on the basis there would be no material breach of trust by doing so.

As things stand the testator has burdened the trustees of the Will to hold and accumulate the trust monies for the next 5 years until the age 21 vesting age, not something I imagine they are particularly happy to do, especially if it is a very modest amount.

Also worth noting that this type of trust is unfortunately not a bare trust, where the child is entitled to trust income as it arises. Regrettably both capital and the accumulated income, vests at age 21.

This means:

1. The trust ( small as it is ) has to be registered on HMRC's trust register
2. The trust income is liable to trust income tax at the 45% rate applicable to accumulation trusts.

In short a lot of complications occassioned by what I would view as thoughtless drafting of this survival clause to age 21, which I am certain the lawyer that drafted it would not have warned the testator of the potential consequences. An all to common occurrence we see on this forum.

Assuming we are talking about a modest 4 or 5 figure amount, my usual reccomendation to avoid the 45% income tax compliance, is for trustees to consider investing in life company Investment bonds.

These produce no taxable income or capital gains whilst invested, and at the end of the trust period the bond can be transferred to the beneficiary who can then cash it in at little or no income tax liabilty (assuming its' an onshore bond). Alternatively if it performs exceptionally well, encashment could be spread across two or more tax years to avoid a tax charge.

The following article summaries the benefits of investment bonds in trust scenarios-

https://connect.avivab2b.co.uk/adviser/articles/tech-centre/investment-and-tax-planning/personal/investment-bonds-trusts-in-wealth-transfer-strategies/

nicter

Poesidin1 Thankyou so much for your reply and advice. The amount is likely to be around £25.000

A life company investment bond seems to be the sensible way to go, will just need to decide who would be the best person /people to put as trustee .Can I just ask please , hopefully this wont be the case, but what happens if one of the trustees dies before the end of the trust period ?

poseidon1

https://forums.moneysavingexpert.com/discussion/comment/81977315#Comment_81977315

You indicate there are two trustees, so if one predeceases during the trust accumulation period, the survivor retains power to wind up the trust alone. However where co trustee does die, usually prudent to appoint a replacement just in case something happens to the survivor.

If both trustees predecease with no replacements, then under the general law of trusts executors for the last survivor ends up wielding the power to appoint new trustees . Until they do the trust fund is frozen - the article below explains -

https://bbslaw.co.uk/services/private-client/trusts/