Trust bank account best options

MissSuS

Hello everyone

I am selling my deceased mother’s house as my stepfather has had to go in to a home. She left 100% to me but it’s in a trust letting him live there. The house is worth around £250k. I am the sole trustee and the trust was set up by her solicitor and they registered it with HMRC.

Metro Bank is my choice to hold the funds but I am open to suggestions. They offer a fixed rate account and easy access. The easy access is 0% interest. I can’t understand why they offer that (to avoid tax returns?) but I am happy to lock in the money.

My questions then

Does this feel like a reasonable course of action?

Is it possible this is not allowed?

Are there any other/better options?

For the tax on interest, does that get paid directly by the bank or do I need to do a tax return, and is it my personal tax return or I need to do a special trust tax return? 

Or does the interest get reported by the bank to HMRC and they just send a bill, and who would pay it, me or the trust?

The account interest gets paid ‘on maturity’ so there may be multiple years worth. It would be easier if they just paid it all out when the account closes but I don’t see that option.

I have read this similar thread https://forums.moneysavingexpert.com/discussion/6630998/metro-trust-bank-account

and note the suggestion of National Savings and Investments who offer a better rate. The user poseidon1 says the interest is due to the beneficiary but I don’t see any mention of interest in my mums will. Just that ‘the Trustee (me) will hold the capital and interest for (me)’. Is that true in all cases? If that were true then it would go to my stepfather and he would have to deal with that income declaration (I am not involved in his financial affairs, but that’s another story).

I would pay for professional advice if needed but only if needed.

Thank you all.

PS. What type of trust is this? I've seen reference to IPDI, Life Interest, Express, Interest in Possession. They all could fit the bill from what I can make out. Maybe they're the same thing or subsets of each other? So difficult !

Keep_pedalling

Assuming your stepfather is entitled to the income from the trust until his death I would have thought leaving it in a non interest bearing account is not in his best interests.

My understanding is that any income generated is taxed at the beneficiaries marginal rate but our trust expert should be along shortly with better advise than I can give.

Brie

Yes you'll need to fill out a tax return if you earn more than the threshold for interest and then your employment tax code will be changed to ensure the right tax is collected or you may be asked to pay some upfront. Tax returns are fairly straight forward and you can do it all online once you have registered for an account with HRMC. And HMRC are very good, in my opinion, at answering questions should you have any, just don't try calling them when there's a major deadline looming as that's when it's hard to get through.

Have you considered an ISA so you don't have to pay tax on interest? Putting money into a pension? Ensuring that all your debts are cleared?? Any home improvements, appliance/car upgrades required?

I know nothing about trusts but it may help those that do know if you give the exact working from the will/trust documents.

poseidon1

https://forums.moneysavingexpert.com/discussion/6679597/trust-bank-account-best-options

Please provide redacted wording of your mother's will trust.

For information, there would be no circumstance under a qualifying IPDI trust for your stepfather, where you as the ultimate capital beneficiary on his death would also be entitled to the trust income whilst he is alive.

Either the trust ends entirely ( because he can no longer live there) or he is entitled to trust income generated from property sale proceeds until his death.

Despite the solicitor having registered the trust on your behalf, they appear to have failed to explain your trustee responsibilities under the terms of the trust. Perhaps I can do so if suitable information provided.

Unless or until you provide this clarification, do not under any circumstances assume you have a right to the trust income and take any action based on that assumption. You could occassion a breach of trust for which you could be held personally accountable by those responsible for his financial affairs.

MissSuS

Thank you Keep_pedalling, Brie and poseidon1 for your helpful replies.

I don't have the Trust document unfortunately. I signed it and returned it and stupidly forgot to take a copy. I will ask the solicitor for one. My understanding/assumptions were based on the willl wording.

Just for clarity, I am not trying to grab the interest, I'm looking to do the correct course of action. I get on well with my stepfather and have no issue with him receiving the interest if due.

Replying to some specific points:

"For information, there would be no circumstance under a qualifying IPDI trust for your stepfather, where you as the ultimate capital beneficiary on his death would also be entitled to the trust income whilst he is alive."

My assumption / plan was that the interest wouldn't get paid to me while he was alive, it'd get added to the account in the same way normal interest gets added to personal savings accounts. Only after his passing would the capital and interest come to me.

Despite the solicitor having registered the trust on your behalf, they appear to have failed to explain your trustee responsibilities under the terms of the trust. Perhaps I can do so if suitable information provided.

He explained nothing, he just sent a one or two page document which was probably standard wording with names and addresses replaced.

I will certainly wait before setting up any account and arranging where the interest goes. Need to get some viewers first!

poseidon1

https://forums.moneysavingexpert.com/discussion/comment/82101768#Comment_82101768

I note you were given zero explanation of your duties and obligations by the solictor, which regrettably appears all to common from what I have observed on this forum.

Incidentally the trust document would be your mother's Will ( nothing else). Surely you retained a copy for your own records at the time of your mother's death? Not sure what you would have 'signed' and returned to the solicitor in this context.

bobster2

@poseidon1 is the expert on the legal aspects.

From a practical point of view - as someone who has acted as a trustee with funds in a bank account that is paying interest I can tell you…

Yes - you need to file a tax return for the trust. This cannot be done via HMRC's personal self-assessment system.

You need to file a Self Assessment: Trust and Estate Tax Return (SA900). This cannot be done via the HMRC web interface. You either need to do it on paper, or buy purchasing some HMRC approved software to file it electronically. The software I use costs about £30 each year. Or you could pay a tax professional to handle it.

If tax is due on interest received (income) then you need to arrange to pay this. The bank won't do this automatically. Ideally you will be able to ask the bank to pay HMRC direct (either by issuing a cheque or bank transfer).

(Incidentally - I just take on the cost of the software myself - as I'm not a beneficiary of the trust I figured that trying to get the bank to pay me £30 for this would be too complicated!).

poseidon1

https://forums.moneysavingexpert.com/discussion/comment/82102553#Comment_82102553

Out of interest and for the benefit of others, which bank had you managed to source to hold your interest bearing trust funds?

bobster2

https://forums.moneysavingexpert.com/discussion/comment/82102864#Comment_82102864

It was a Trustee Savings Account with Skipton in the end. But I'm not sure they still advertise them? This was a couple of years ago.

Pays modest interest - typical of a high street savings account.

poseidon1

https://forums.moneysavingexpert.com/discussion/comment/82102904#Comment_82102904

Had a quick look and other than bare trust accounts for children under 18, no mention at all of any other services for trusts.

Skipton used to run their own trustee company but that has quietly disappeared.

However Skipton do have the following guidance on their website related to HMRC trust registration requirements, which seems a bit odd if they no longer actively offer trust accounts.

https://www.skipton.co.uk/financial-advice/investment-login/registering-your-trust#accordion-e1928909b3-item-bbf2044e89

Whether or not Skipton does offer services to new trust applicants, the 2.05% interest currently available on their Community account is unappealing compared to accounts paying 4.59% to 4.65% now available from NSI to trustees on a fixed interest basis.

bobster2

https://forums.moneysavingexpert.com/discussion/comment/82102995#Comment_82102995

Yes - I think they must have stopped opening new accounts shortly after we got in. The interest rate probably isn't that great - but we were struggling to find anything suitable at the time. Maybe will move it at some point.