discretionary trusts and investment platforms

wanna_make_some_dough

I am hoping to create a discretionary trust. I would like to know the platforms that would let me invest the money as a trustee in stocks and shares. I have asked AJ Bell and iWeb who have told me that it would not be possible on their platforms.

Keep_pedalling

What is the purpose of the proposed trust? DTs are a pain to manage and are subject to pretty high taxation rates.

poseidon1

I can think of no DIY investment platforms that would even consider providing a service to trustees of a discretionary trust in the administration of a trust portfolio, and for good reason.

Trust portfolio investment management is a specialist area usually requiring the kind of investment expertise commonly available from stockbroker firms or wealth managers. Indeed in this respect few IFA firms would hold themselves out to be competent in this area.

Therefore unless the trustees purport to have specialist investment knowledge themselves and are au fait with their duties and obligations under the Trustee Act 2000, they should think very carefully about assuming the role of investment managers of such trusts, for fear of being personally held liable for losses to the beneficiaries in extreme circumstances.

If the OP has not already done so, familiarising themselves with their duties in this area would be wise before trying to progress matters further. The following blog could be a start in that direction.

https://renaissancetrust.co.uk/blog/trustee-investment-duties-navigating-powers-responsibilities-and-compliance-under-the-trustee-act-2000/

EDIT

Generally, think very carefully whether you even properly understand the significant tax compliance, administration , annual accounting and overall professional costs implicit in setting up and running discretionary trusts. Usually not worth contemplating unless the amounts being gifted into trust are very high 6 figures.

wanna_make_some_dough

The trust is to be created with an intent to reduce inheritance tax. I have been advised to reach out to SJP. I have heard /read many non glorifying views and hence the thought of a platform that would let me choose the investments I want without trailing fees.

Keep_pedalling

You should stop listening to someone who not only advised you to set up a DT but to also contact SJP.

Unless you are seriously rich then a DT is almost certainly a terrible idea, and if you are seriously rich the you should be paying for independant financial advice.

There are other ways of reducing your IHT liability and It would help if you could give us some info about your financial situation. What is your current net worth (or if your are married your joint net worth)? What do you have in the way of pension pots? What is your marital status? Do you have any children?

poseidon1

https://forums.moneysavingexpert.com/discussion/comment/82065789#Comment_82065789

Although I spent a lifetime administering and advising on family trusts for the very wealthy, there are ways to reduce/mitigate IHT exposure without creating an expensive discretionary trust structure which you are unlikely to fully appreciate the complexities thereof.

Perhaps you could explain to the majority of forumites here who wisely eschew discretionary trusts as a sensible form of estate planning, how you arrived at your decision to pursue that option and the level of liquid wealth you propose to settle.

DRS1

It would be understandable if the OP did not want to disclose too much detail about their financial position on here but to get good advice they will need to tell someone.

If you are seriously thinking about estate planning and setting up trusts then you should talk to a solicitor who specialises in the area. There is a thing called STEP which has various professionals with a particular interest in or knowledge of Trusts and Estates. You may want to use this to find a member near you

Member search | STEP

Albermarle

The trust is to be created with an intent to reduce inheritance tax.

Who advised you to do this? Was it by any chance somebody who will profit from you setting up a discretionary trust- such as charging you initial and ongoing fees?

wanna_make_some_dough

I am certainly not super rich. My daughter would have a significant IHT bill on my passing. I have reached out to a STEP professional for advice on IHT planning. The advice was to create a trust (I may have misunderstood trust=discretionary trust) and place my BTL and some of my cash in the trust to a value below the £650K limit (for me and my wife combined) and reduce the bill over a period of time. When I did question about a platform for my cash to invest in stocks and shares rather than bank accounts and bonds, SJP was the advice given. If this is not the best advice, I am open to suggestions. Thanks.

Keep_pedalling

https://forums.moneysavingexpert.com/discussion/comment/82066319#Comment_82066319

Your estate would have the bill not your daughter and she gets £1M tax free and 60% of the rest. I am surprised this person is STEP qualified because the advice you have been given is terrible.

Assuming your daughter is an adult why would you put cash in trust rather than simply gift it to her? Assuming you and your wife want to maintain the income from the rental property then you have the issue of gift with reservation of benefit on giving it away or putting it in trust, which means it will not fall out of your estate after 7 years. CGT will be due on the transfer as well. If you don’t need the income then just sell it, it is much easier to reduce your IHT liability with liquid assets that it is with property.

poseidon1

https://forums.moneysavingexpert.com/discussion/comment/82066319#Comment_82066319

OK useful background information.

I note that a BTL property is part of the trust asset being gifted into trust therefore presumably to avoid triggering a potential CGT liability on the intial gift, the lawyer will be utilising CGT hold over relief to holdover the gain into the trust?

Furthermore I also assumed the lawyer warned of likely future 6% 10 year IHT charges, on the value of the trust exceeding both nil rate bands?

Therefore assuming the lawyer has provided a full detailed report on all key tax compliance points pertaining to your proposed gift and arising on the trust in future, then depending on the quantum of cash to be invested, suggest you explore stockbrokers and wealth managers with specific competency in trust investment matters.

In this regard the following stockbrokers/ wealth managers maybe worth exploring :

• Killick & Co
• Rathebones
• Walker Cripps
• JN Finn
• Canaccord Genuity ( gilt portfolio specialists)

As regards banking facilities for trusts, you will find the mainstream high street banks will have no interest in assisting. The following lawyer exchange on the Trust discussion forum may offer some options -

https://trustsdiscussionforum.co.uk/t/list-of-organisations-that-offer-accounts-for-trusts/26152

Hopefully, you have a decent accountant on retainer to handle annual tax returns and trust accounting although some of the brokers above can provide that service ( at a cost).

Assuming the assets destined for the trust continue to appreciate in value ( despite trust running costs), you will not only save 40% IHT on £650k after 7 years survival, but reclaim your respective nil rate bands for use against the residue of your estates.

In the meantime, the trust is not only a resource for your daughter, but also any children she may have in future. However, as time moves on you may need to give some thought to future replacement trustees, and/or educate your daughter into the role as ultimate successor of this arrangement.

EDIT

Worth mentioning that if you do not grant your daughter a right to income from the trust (an interest in possession), the trust income will be liable to the top rate of tax at 45%. Granting an interest in possession reduces the tax charge to basic rate.