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Trustee to a estate ( £1 million ) what kind of investment other than property?

(29 Posts)
CosySlipperSox Sat 27-Dec-14 13:52:12

I am a trustee for my gran's estate. We have to decide what to do with her assets (mostly property), to generate an income during my mums lifetime, as mum gets the interest. We Grandchildren will inherit after my mums death.

After inheritance tax, there will be about £1 million.

Dh and I own some property and as a family we've owned a fair bit of property that has been developed, sold on or rented.

But...I am the least business minded person in my family, but have a lot of responsibility with this. Obviously I'm aware that there are financial advisors out there, but what kinds of things might people investment in, other than property? Not sure exact terms of the trust yet, but I'm starting to ponder this.

Advice appreciated!

CosySlipperSox Sat 27-Dec-14 13:52:32

'An estate' grr

financialwizard Sat 27-Dec-14 13:54:15

Stocks and shares, bond's amongst a plethora of other investments. You really do need to see a financial advisor.

Lonecatwithkitten Sat 27-Dec-14 13:54:49

You should sub-divide into residential and commercial property as their yields are different.
Other investments
Stocks and Shares
To name just a few

CosySlipperSox Sat 27-Dec-14 13:57:37

Oh shit. Yes I do, lol!
I have a savvy dh and DBs but gran wanted me in there due to my risk averse nature!
I fully accept my current state of ignorance, but wanted to chat before seeking proper advice (and being bamboozled by my brothers).

CosySlipperSox Sat 27-Dec-14 13:59:04

If there is a wealth of successful property experience in the family, wouldn't it just be better to stick with property?

Happy36 Sat 27-Dec-14 14:00:51

I would recommend seeing an independent financial adviser. The most suitable investment depends largely on how long you want to invest the money for, as well as other factors such as your appetite for risk and whether you want an income from the money. Without knowing these things it is difficult to recommend a specific investment vehicle.

If you are investing in the medium to long term your adviser will suggest looking at some funds, which are like baskets of investments, such as equities (shares) which tend to carry higher risk and therefore higher returns over a long period and bonds - either corporate or government bonds - which very generally have lower risk and lower returns. If you are looking at this type of investment you may also consider any ethical restraints you have (for example, not wishing to invest in a tobacco company). You can buy shares directly, and "exchange traded funds" which invest in commodities, for example, but the trading costs can be significant and you would either need to pay a lot of attention to the markets or pay someone else to do so; based on what you've written above this doesn't sound like a feasible investment option for you.

CosySlipperSox Sat 27-Dec-14 14:04:08

Thanks happy. I think it would have to be low risk, and it also needs to generate some income for my mum. The duration of the investment is unknown, as the trust will cease to exist when my mum dies. This us certainly daunting ...

Happy36 Sat 27-Dec-14 14:04:36

The downside of investing in property is liquidity. If one of the beneficiaries of the estate needs cash and the estate's value is invested in property you would have to sell a property (unless the income from any rented properties is sufficient) and perhaps settle for a price lower than you'd wish for in order to obtain that cash, depending on market conditions at the time of sale.

(This could also then possibly lead to the other beneficiaries saying that as trustee you are not preserving the value of the trust as best you can).

Therefore if property is the desired investment, I'd recommend leaving sufficient liquidity either in cash or other easily sold assets to pay for envisaged outflow.

Happy36 Sat 27-Dec-14 14:05:35

Go to see an independent financial adviser. Try to get a recommendation by word of mouth if you can. They will charge a fee but it's worth it in the long run.

CosySlipperSox Sat 27-Dec-14 14:06:22

Happy...No one is allowed to use any of the capital until my mum dies, so surely liquidity is not an issue?

AuditAngel Sat 27-Dec-14 14:13:26

But you will need to consider (sorry to be blunt about this) your Mum's expected length of life, consider how quickly you would want to liquidate the trust after her death; the potential relative timescales and costs of liquidating different types of assets (government bonds compared to selling property).

As your mum is entitled to the income, you will want to look at income generating rather than "for growth" investments, as choosing for growth, would benefit the beneficiaries after your mum's death, but to her detriment during her life time income.

AuditAngel Sat 27-Dec-14 14:14:59

Also (and this is not something I deal with) but I believe there is now a tax charge once a trust is 10 years old. As well as consulting an IFA, I would also suggest seeing an accountant for some inheritance/trust tax planning advice.

CosySlipperSox Sat 27-Dec-14 14:15:45

As a bit of an aside... How usual is this as a way of dealing with one's estate. I think my gran wanted to control my mum's access to the capital, but actually my mum would just have liquidated it now and shared it 5 ways with her own children. I wonder why gran wanted to delay our inheritance until we are OAPs with adult children...

CosySlipperSox Sat 27-Dec-14 14:19:41

Thanks audit, mum is early seventies and her mum and aunt lived to 96 and 97. If mum lives to a ripe old age, which I hope will be the case, we won't inherit until we're pensioners. I'm not a grasping person, far from it, but genuinely wonder why my gran planned it that way. Maybe because she was very frugal, and wouldn't want to enable us to make frivolous choices by having spare cash, lol!

Collaborate Sun 28-Dec-14 09:10:41

If you don't take independent advice and balance the needs of your mum and the other beneficiaries you may be in breach of your duty as a trustee, and may become personally liable. It's not worth it. See an IFA who regularly advises trustees.

Happy36 Sun 28-Dec-14 09:47:42

cosyslippersox If the trust cannot be touched until your mum's death then yes you are correct basically in saying that liquidity won't be an issue until then although do remember that a certain amount of cash or liquid assets will be needed to pay the costs of the Trust (and if a property owned by the Trust needs maintenance).

OnIlkleyMoorBahTwat Sun 28-Dec-14 09:55:59

Sorry for your loss flowers.

Property needs maintenance and management. Does your mum want to be a landlord?

Definitely see an IFA for that amount of money. They will talk to you about risk and diversification etc.

ClashCityRocker Sun 28-Dec-14 10:00:14

I agree with audit angel - see an accountant. The trust will need to complete tax returns annually and it may be subject to an additional IHT charge every ten years - although it sounds to me like a life interest trust, so it may avoid this (although you do need to see an accountant to clarify this).

As an aside, it isn't an uncommon approach - a million pound estate, managed correctly, should allow for a sizeable income for your mother whilst preserving long term growth of the assets.

But definitely an IFA needs to be involved.

ClashCityRocker Sun 28-Dec-14 10:02:43

Property needs maintenance and management. Does your mum want to be a landlord

I believe the trust will be the landlord, with the trustees acting on it's behalf, so it will be the trustees who are effectively 'managing' the properties. The mum would just be receiving money, assuming she isn't also a trustee.

PuggyMum Sun 28-Dec-14 10:04:42

Hi. I work in this area although not an adviser!

Who are the beneficiaries eventually?

You say you and your dh already invest in property so think about how you may want things set up for when you inherit.

Buying and selling property is a costly exercise in itself so you need to weigh up those costs.

What kind of income does your mum need / expect? If she is ok financially, any income she receives will add to her estate and add to her IHT liability. Plus be used for care home fees.

If she agrees to keep any income in the trust and only take out what she needs as and when this would protect the funds.

I don't envy anyone who is a trustee or executor where things are a little complex.

ClashCityRocker Sun 28-Dec-14 10:18:28

If she agrees to keep any income in the trust and only take out what she needs as and when this would protect the funds.

I'm not sure on this, I think it depends whether it is set up as a life interest or discretionary trust, and I suspect it's a life interest, so she will be taxed on income as it is received within the trust, rather than when it is withdrawn. So it will still be the mums money, but will effectively be shown as a loan to the trust from the mum until she withdraws it.

tb Sun 28-Dec-14 18:55:15

It could be that the assets have to be invested in accordance with the Trustee Investments Act, which from memory used to be something like an investment account with the TSB.

Boomtownsurprise Sun 28-Dec-14 19:05:36

Am I missing something? You asked why liquidity is necessary... How is the trust set up? Is it that she can live in the house but is expected to fund all her own old age care?

Or is it something you need some access to? Will look after DM and whatever's left will be split on her death?

TranmereRover Sun 28-Dec-14 19:10:56

this is giving me the heebie jeebies; I've just agreed to act as trustee under someone's will (I will not be a beneficiary or related in any way to the deceased / the beneficiaries) and the estate is likely to be vast. I fear I may have bitten off more than I can chew :-(

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