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AIBU?

To not want PILs to name dd as a trustee of an offshore trust?

20 replies

AnderbyWold · 17/02/2019 09:57

PILs are very well-off. They have a substantial proportion of their savings (several million) in an offshore trust to avoid paying inheritance tax on it.

Currently, the ‘trustees’ are dh and his sister, along with his sister’s eldest dc, who is 20.

PILs announced yesterday when we were having dinner together that as soon as dd turns 18 later this year they will add her as a trustee too.

AIBU to be very uncomfortable about this? I didn’t grow up in the same world as dh, and I’m not very happy even with him being linked to an offshore fund - I’d rather we just paid full inheritance tax on his parents’ estate when they pass away.

And I worry that this could come back to bite dd in the future - she’s very interested in politics and is planning to study it at university. What if she decides she wants to be an MP? I can’t imagine that formal links to tax avoidance schemes would help her chances.

WIBU to talk to PIL’s about this? Or is it dd’s decision?

OP posts:

Report

FamilyOfAliens · 17/02/2019 10:03

I would feel the same way as you do, OP, but it’s her decision.

So that means PIL must ask her permission, not simply add her.

And if she were my DD, I’d recommend she book an appointment with a financial advisor before she reaches 18 to discuss all the implications with someone who didn’t have a vested interest in her being a trustee.

celtiethree · 17/02/2019 10:07

Do you mean trustee as in tasked with administering the trust? Or a beneficiary of the trust?

Singerleon · 17/02/2019 10:08

We have had similar type issues in our family before. I don’t want my DC used as part of a tax avoidance scheme although it’s always dressed up as for their benefit. My DC are still young so I can veto it easier.

I’d advise your DD to take independent advice and speak to her about being asked to sign anything and how it can impact her. Too many times in our family you are asked for a ‘quick signature’ and people get offended when you ask to look into what it is.

AnderbyWold · 17/02/2019 10:09

Do you mean trustee as in tasked with administering the trust? Or a beneficiary of the trust?

PIL’s employ/use an advisor for the day-to-day administering of the trust.

As far as I understand it, the advisor makes investment decisions and the trustees just approve them.

OP posts:

ATBhinchers · 17/02/2019 10:12

You want them to pay inheritance tax?!That's such a weird skewed view. Presumably they've already paid income tax on the money as well as many other taxes such as tax on interest earned. I think it's a nice thing to do and if you disagree then as your child will then be an adult at 18 perhaps they could decide for themselves.

ATBhinchers · 17/02/2019 10:13

The limit on inheritance tax is due to go up soon anyway as the government have probably realised it's a bit shitty taxing people more than once on the same money. Or maybe that's just my optimistic view!

ememem84 · 17/02/2019 10:22

I sense a negative view of “offshore” here and thought that it’s all to do with tax evasion. Also tax avoidance is perfectly legal. People using isa’s In the U.K. are effectively avoiding paying more tax than they have to.

Op you are aware that if you’ve got a pension it’s most likely invested offshore. Most pension funds are run out of Ireland.

I live in jersey. Offshore. And work in offshore finance. The offshore jurisdictions are highly regulated. Well most are. Maybe not the likes of Panama etc but IOM, Channel Islands Ireland Luxembourg etc are.

Get dd to take advice and find out what she will be responsible for. If they have an advisor and all she will be needed for is effectively to approve his/her decisions then make sure she understands what it is they’re doing.

spongedog · 17/02/2019 10:35

I would be very surprised if either of the young people (the 20 year old and your DD) has the experience or knowledge to be a competent trustee. I would take the advice of a PP and get DD to find out what it really requires and any legal responsibilities. So what could she be held accountable for if eg local taxes and laws werent complied with? I am an ex-City risk manager and I would be very wary with this type of set up.

JenniferJareau · 17/02/2019 10:37

If it isn't illegal then I can't see anything wrong with it.

Presumably they've already paid income tax on the money as well as many other taxes such as tax on interest earned.

Agree.

MsTSwift · 17/02/2019 10:42

It wouldn’t help if she becomes a labour politician. Our labour politician friends have to be very right on - send kids to nearest state school even if it’s crap etc. No way would they want any involvement with something like this although it’s not illegal. Probably less of an issue if she veers in the other direction politically...

ATBhinchers · 17/02/2019 10:51

Luckily no one in their right mind wants to be a Labour politician

ememem84 · 17/02/2019 13:56

Also, if pil are beneficiaries and are U.K. based it’s likely they’ll be paying income tax on any distributions made to them

The trust would likely have to pay tax on any U.K. source income too. Plus cgt.

As far as I’m aware trustees can only be held liable for the value of the trust fund. Will she be a trustee in her own name or is it a corporate trustee (that she will be a director of...) the latter would be better in my experience. No personal liability for the directors.

Londonmummy66 · 17/02/2019 17:37

If the trustees are resident in the UK it probably won't be an offshore trust - which could give you all a lot of tax problems

ememem84 · 18/02/2019 08:28

Good point...

Another thought if dd is to be a trustee will she ever inherit/benefit from the trust? There could be massive conflicts of interest if so. Or she could be excluded as a beneficiary. Usually trustees don’t/can’t benefit from the trusts they look after. But that all depends on the trust deed. Get a copy of that and get dd to read it.

Everanewbie · 18/02/2019 11:11

I would imagine it is a pretty mainstream offshore bond. Usually used because the funds are not subject to corporation tax as per an onshore bond but are taxed upon being remitted to the UK.

Don't be freaked out by the term offshore, and immediately think Cayman Islands, Jimmy Carr etc etc. Your daughter needs be aware of the facts and responsibilities of being a trustee, so look at taking legal and financial advice.

Lifecraft · 18/02/2019 11:17

Presumably they've already paid income tax on the money as well as many other taxes such as tax on interest earned.

Most of my wealth comes from London house price inflation, on which I have paid not a scrap of tax, ever.

ATBhinchers · 18/02/2019 11:30

Good for you. That's not usually the norm though. Either way I can't see who in their right mind would want someone to have to pay inheritance tax. Weird.

Lifecraft · 18/02/2019 11:46

Good for you. That's not usually the norm though.

It is the norm though. Most people don't pay IHT because they don't leave enough to qualify. Of those that do, most of them do so because off house price inflation, houses bought in the 60s - 90s for peanuts that are now worth very large sums.

So all this "they've already paid tax on it" is largely bollocks.

Everanewbie · 18/02/2019 13:08

FFS, usually we hear about how boomers are selfish and should help the younger generation with buying houses etc. As soon as someone does it they're vilified for not arranging their estate in a manner that sees the maximum amount of IHT deducted.

But OP, in answer to your question. Check out the facts with a professional. Not the ideologically driven dribble (including me to be fair) on here.

ATBhinchers · 18/02/2019 20:45

@lifecraft but they did pay tax on the earnings that paid for the house in the first place so my point still stands.

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