discretionary gift trust-easy to set up?

[needanewername]

Hi, I was wondering whether anyone knows how easy it is to set up a discretionary gift trust (protection) without legal advice?

I am separating from DP with whom I have 2 young DC and have taken out a life insurance policy for £400 K as I am worried about their future if anything happened to me since he's not very good with money. This will pay off my share of the mortgage and leave some money over. I have had a meeting with a solicitor under the Will Aid scheme and she said it would be best to put this in trust as otherwise a large portion of it would be liable to Inheritance Tax.

I have obtained the form from the Life Insurance company and my solicitor has said she will witness it without a fee as long as I don't require advice in filling out the form. There are explanatory notes on the form but I just have a few questions, mainly about why they strongly recommend that there be an additional trustee? Would it be OK to be the only trustee if I have trustees named in my will?

Also, would I be both settlor and trustee? Has anyone had any experience in doing this as I would be grateful for advice as to whether I would be unwise to do this without help or whether it's a simple matter and I can save myself the solicitor's fee?

Thanks

Am not a trust lawyer but just been through a similar exercise (w legal advice)...

Our policies are in a discretionary trust (most flexible trust). Re my policy, I am settlor and trustee (automatically am trustee under our trust document, which was provided by insurance company) of my trust, w DH as additional trustee (and beneficiary). I think the reason for the additional trustee is that if can't administer the trust ie you die, who will?

Additional points:

• a trustee can be a beneficiary, but a settlor cannot be a beneficiary without negative tax consequences, by the way.

• good idea to have a letter of wishes (which you can write yourself) to give them an idea of what your wishes are for the trust. The letter is not legally binding, so need to choose trustees carefully (ie so they don't go off on a jolly),

• if your DCs have to wait until they are older than 18 to access the funds, negative inheritance tax consequences.

• make sure your will aligns w your trust document ie vesting age of DCs, beneficiaries etc.

I can't answer whether additional trustees can be appointed by your will nor whether you need legal advice. We took the view that it was necessary. Hope someone else comes along w answers / further advice (esp a trust lawyer!)

Hi needanewername, If you don't appoint another trustee now there will be no one to administer the trust in the event of your death. Much much easier to appoint at least one additional trustee now than to try and sort things out after your death. I think it is unlikely that additional trustees could be appointed by your will - though would need to see the trust deed to be sure. Do you have a sibling or similar who would agree to be a trustee? There shouldn't be anything required of anyone who agrees to be a trustee unless you die during the term of the policy.

Thanks both of you, the reason why I would prefer no additional trustees is because I have no family in this country, they would be happy to do what they can from abroad but the form I got from the Ins Co. says any additional trustees have to have their ID checked by a financial advisor, there is a section on the form the IFA has to fill in so not sure how I could do this.

Plus my IFA isn't local, I have dealt with them online/phone, I suppose I could ask them to find a trustee and verify their ID but presumably they might want a large fee for doing this as can't see what's in it for them otherwise? I'm not sure really why the IFA has to verify the ID of additional trustees but it doesn't suggest any alternatives eg legal professionals.

Sorry, forgot to ask bunnymother, what are the negative inheritance tax consequences of DC waiting until older than 18 to inherit as I had thought 21 a better age, that is what I wanted to put in my will although it's not finalised yet

Hmm, that's annoying that the IFA needs to check the ID of the trustee - we didn't have any such requirement. Contact your IFA - presumably they have dealt with the issue of O/S trustees before so could let you know a practical solution ie scanned and emailed copies of the trustee's passport, or post a (locally certified) copy of the passport. I would NOT allow anyone else to choose a trustee - they will effectively be administering your DCs inheritance, so should be someone you trust.

Not sure what exactly the neg inheritance tax consequences are, but the advice was that there are such consequences, so we had to balance having DCs w access to money sooner against paying more ££ to HMRC. Younger won!