Trust Bank Accounts
Options
Comments
-
Oops, sorry, I forgot I had received this from Mark:
Provided the interest remains in the trust, benefit agencies will not be troubled.
Therefore, I can press ahead and try and invest it more wisely. I do not want to take any risks and was told that you never lose the capital on a bond.0 -
It is a bare trust which has to be for me as it was my injury (therefore I was not allowed to put it in trust for my son).
I'm wrong about the discretionary trust part then. A quick bit of Googling says that "personal injury trusts" have their own rules and are not assessable for benefits as long as the money isn't drawn, despite being bare trusts.
Three trustees who don't know each other sounds a bit excessive in that case. Two is usually the desirable number in case one pops their clogs. After two you have to ask what the third is bringing to the party.My predicament is that the three trustees which I have (I am not one of them, it took me a long time to decide but it was advised that it would be better for benefit purposes if I weren’t) are not close friends or family (I have none - violins!) so I do not want to burden them with having to all get together (they don’t know each other though will obviously meet to set up the trust account) to set up different investments, which will require form filling, ID, appointments etc. In truth they are just kind, responsible (and trustworthy) who are helping me by providing their names so that I may actually gain from the compensation money.
If you want to have the money invested to protect it against inflation until your son needs the money, and any one of the trustees is leery about the risk involved or disagrees about the right approach, it could get messy. Do you need the signatures of all three of them for any transactions?0 -
I sent my previous message too early. I had meant to add, I am hoping to put the money directly into bonds etc inorder to avoid inconveniencing the kind ladies who are helping me any further.
Someone asked me why I was thinking of bonds? Simply because I read somewhere that trust money is often put in bonds. I thought I might get more interest.
Bonds is a very vaguely defined term in finance. By "bonds" I am assuming you mean fixed-term deposit accounts.
Fixed-term deposit accounts are ideal if you definitely aren't going to need the money for 2-3 years because investment is too high risk and the best you can do is take advantage of the higher rates for tying the money up.
Once you get past 5 years there is a better case for investment but you have to bear in mind that investments can make and have made a loss over 5-6 year periods (unless you waited a bit longer).
The timescale makes this is a very thorny issue with no right or wrong answer. From the information you've given the timescale to spending the money could be anywhere from 5 years (son goes to uni) to 10+ years (son wants to buy a house) to immediate (you are unfortunate enough to have your cancer progress to a terminal diagnosis and decide to take the money out to travel round the world with your son and tick off the bucket list).
If you don't want to take "any risks", then your only real option is to keep the money in cash and live with the certainty that it will be eroded by inflation.
If you want to keep some access rather than tying all the money up until your son is 18, you could consider a "bond ladder". This is where you open 1, 2, 3, 4 and 5 year fixed rate deposits, and then reinvest the proceeds of each bond in a 5 year bond, meaning at any one time you know that 20% of the capital will become available within maximum one year.
Fixed rate deposits, like any deposits, are protected by the Financial Services Compensation Scheme. The cap on compensation is irrelevant to you so the money is 100% protected. The only scenario in which you can lose money is the irrelevant one of financial apocalypse.I do not want to take any risks and was told that you never lose the capital on a bond.
If you are going down this route, ensure you only use deposits from the big comparison sites (this site, Moneysupermarket, etc) and that the bank appears on the FCA register and is authorised to offer deposit accounts. If neither of those applies then there is no FSCS protection and you can lose 100% of the money. There are quite a lot of scams which offer "fixed rate bonds" that are dressed up to look like deposits.0 -
The OP will need to check that the financial institution(s) chosen will accept holdings in the name of Trustees.0
-
Thanks Malthusian. The reason for the three trustees was incase one died there would still be two signatories as two signatures are required for any transaction. If I had two trustees and one died, the remaining trustee has the power to add another trustee, in which case they could choose their spouse or friend and run off with the money! There has to be two signatures for any transaction so if I died the money would not be able to be released into my will if only one remained, that’s why the trustees have to have that power. That risk only exists where there remains one trustee however as all trustees must agree before adding a trustee.0
-
I don’t need to worry about the trustees getting leery. Their role is to help me maintain my eligibility to benefits and therefore ‘benefit’ from the compensation.0
-
This is a really helpful wealth of information Malthusian. Thank you for this. I am going to have to read it a few times before I properly understand it, I really do appreciate your time, however. Fantastic, thank you!0
-
Hello, I’m getting confused again! If I wanted to go ahead and invest my compensation money in bonds, would I have to open up a trust account first, in order to do this (the money is still currently with my solicitor but she will give me an interim payment). I still don’t understand exactly how bonds work, eg do bonds have an account number which the solicitor could pay the money directly into? If they don’t then the solicitor isn’t going to buy the bonds directly is she so it would presumably have to be paid into a trust account. Am I correct? If so, I can get the trust account set up and worry about investments afterwards. Thank you kind people on this forum!0
-
The Trustees can open a current account into which the money can be paid.
The Trustees can then decide on savings/investments.
https://forums.moneysavingexpert.com/showthread.php?p=76045751#post76045751
The subject of instant access and fixed term savings for Trustees was covered in the above.
These are savings accounts which are sometimes loosely referred to as "bonds".
However, governments can issue bonds (in the UK known as "gilts") as can companies and other institutions. In essence they are loans which pay interest at certain points and return capital at a certain point.
But https://www.telegraph.co.uk/sponsored/finance/investment-library/low-risk-investments/10843733/how-bonds-work.html
Bonds are not without risk: any bond is only as good as the company, government or concern issuing it. If the company issuing the bond runs into trouble, it might not be able to pay the income – and it could fail to pay out when the bond matures. Always remember that bonds, like all investments, can fall in value and you may end up with less than you put in.
The above article also explains the concept of a "bond fund".
It would be possible for the Trustees to open an investment account and transfer money from the Trust current account into it in order to purchase such investments.
They might opt to have income from the investments paid into the current account so that they could make disbursements to the beneficiary as required.
Or they might choose to keep any income arising within the investment account in order to purchase more units of a fund.
Or they might choose to buy only accumulation units in a fund.
It is possible to hold some NS&I products in Trust. Might this be a possibility?
https://www.nsandi.com/system/files/asset/pdf/trust-faqs.pdf0 -
Are you allowed a certain amount of capital without affecting your benefits?
Would the Trustees be able to distribute a certain amount each year from the Trust to enable you to make a gift into your son's CTF/JISA?0
This discussion has been closed.
Categories
- All Categories
- 343.4K Banking & Borrowing
- 250.2K Reduce Debt & Boost Income
- 449.8K Spending & Discounts
- 235.6K Work, Benefits & Business
- 608.5K Mortgages, Homes & Bills
- 173.2K Life & Family
- 248.1K Travel & Transport
- 1.5M Hobbies & Leisure
- 15.9K Discuss & Feedback
- 15.1K Coronavirus Support Boards