Setting up trusts for children following an inheritance

[MyGranWasAManageress]

My mum died recently, she had a will and left everything to my 4 children to go into trust until they are 21. We're at the very beginning of the process and I'm aware it will be some time until the estate is settled. Not sure if it's relevant but my mum lived in Scotland so the Scottish legal system applies. We're in England.

My DC are aged between 3-13. The total estate is probably going to be around £120-140k depending on what her property sells for and legal fees etc accrued along the way. My mum really didn't want me to engage a solicitor for sorting the trusts as a friend of hers lost a lot in fees they charged.

To get to the point(!) I'm struggling to find information on how I will set up the trusts. Do I just approach banks/building societies? Will I need to have them set up so the money goes directly into them when the estate is settled?

I was a trustee of a discretionary trust set up when my parents died (trust now wound up). The trust was originally set up by my parents alongside their will. I honestly don't think this is something you can do yourself, as if it is not done correctly there can be so many problems.
A discretionary trust may be different, but trusts have tax implications, and you don't want to get on the wrong side of hmrc. I would seek some legal advice in the first instance.

Definitely use a solicitor. Yes you will pay but if you don’t know what you are doing, then what option do you have? You also have different ages of children so the one who is 21st first will only have 8 years for the trust to make any money. The 3 year old will have 18 years.

Yes - you need a solicitor. The bank won't know what to do, and good luck in trying to open a trust bank account! I tried all sorts of banks plus Nationwide and no-one knew what to do. Eventually managed to get a trust account with RBS but it was torture. Banged about from one department to another.

I can recommend an excellent solicitor who set up a trust for me. Difficult to say what the costs were as we got a few things done at the same time - wills, PofA etc but I'd guess it was less than £500. (Total bill was less than £1k). He's in Aberdeen (although I'm Central Belt and location wasn't an issue)

Thanks for the replies. When she told me her plans I said to her I thought setting up a trust was not straight forward and I didn't think I would be able to do it. She said she spoke to her solicitor who said not to worry about the word "trust" and it would be fine to just set up some bank accounts to hand over when they were 21. TBH my mum was always on shaky terms with the truth so I'm not surprised it was bullshit incorrect. The will names the children individually and for the estate to be divided equally between them. 2 of them have ASD so I'm a bit nervous about the whole thing and wish I didn't have to deal with it. But hey ho nothing I can do now.

I'll be speaking to the Scottish solicitor next week and see if I can get a more detailed idea of what's involved. It would be easier if I could use a solicitor local to me for the trust stuff, assuming that's permitted. I think she didn't want a solicitor managing the trusts long-term, but again I'm not willing to get into legal problems over it.

The trustees manage the Trust, not the solicitor. I assume that will be you?

Yes I'll be the trustee and I'm also the executor of the will

You just need to open accounts in the children's names jointly with you, so the accounts need your signature for a withdrawal. It is that simple.

@Joe66, it's not that simple. That would not be a trust, and it wouldn't make the op a trustee. A trust is an agreed document setting out the trustees responsibilities, and makes sure that they can be held legally responsible if the trust is mismanaged. (It has happened that trustees have misapproptiated the funds they are supposed to be looking after) Most trusts also have tax liabilities.
If the op did as you are suggesting, there is no protection for the money at all.

If at all possible see if you can get accounts that pay some interest. Your 3yo's inheritance will have significantly depleted in real terms if you can't.

I'm a solicitor. Please don't try to set up a trust without proper legal advice from a solicitor who specialises in private client (i.e. wills, trusts, etc) work. You will also need to understand the tax implications of different trust structures.

To set up a trust you will require a trust deed - not a document that a non-lawyer should have a stab at drafting.

Also, you will need to consider whether you're setting up separate trusts for each child, or one trust of which the children are all beneficiaries. I don't specialise in trusts so I can't say for sure, but given the costs of setting up and running trusts, I think it is not really "worth it" under a certain minimum amount of money. Someone once mentioned to me that there would be no point in putting £25k into trust, for this reason.

Definitely use a solicitor. You can go on the SRA's Find A Solicitor page to search for one in your area with the relevant expertise.

Thanks all.

From what I've been reading, it does seem a will creates a trust so it is different to other trusts in some senses. But I've got to work out how to best set it up and I'm going to take some expert advise.

Actually holding money in trust is exactly that and you don't need a solicitor to draw up a trust deed. The fact that you have the money set aside in a separate account which you are protecting meets the definition of holding the money in trust.

@Joe66, it's obvious you know zilch about trusts/trustees, tax implications and legal responsibilities. Your advice is terrible.

Lucisky ah, I'm sure you're right. I held 470k in trust that way, oh dear, I'm probably liable for an horrendous tax bill. Oh well. Do you know how far back HMRC can go? I think fiduciary duty is fairly basic isn't it? Providing you are not taking financial risks with the money and are protecting it, what more does op need to do? I'm a bit confused now. Does the will itself not create a trust? In what way would the money not be protected in a couple of bank accounts at different banks bearing in mind the 85k compensation limit? Or invested in some blue chip companies? With op as a signatory? It would be good for OP to have an explanation of what she needs to do then.

@Joe66, as far as I am aware hmrc can go back as far as they like, depending on the circumstances.
You may not have been taking risks with the money, but what guarantee had the beneficiaries of the 'trust' got that you would look after it? If there was no trust drawn up, there was nothing stopping you from spending the money as you fancied, not that I am implying you would, but if you had, there would have been no come back for them legally as you could have just said the money was yours all along.
Such a large sum must have accrued a lot through sensible investment. Surely tax would have been payable on this income?
In my case the will was one thing, there were four beneficiaries, the fourth one being a discretionary trust. This trust was then dealt with in a (large and wordy) document separate to the will.
Our trust has recently been wound up and the money distributed as specified in the trust, due to a further death in the family. A complicated sibling situation necessitated the creation of the trust in the first place. I am very pleased to no longer be a trustee, as I seemed to spend too much time with accountants and investment advisors.

Also, another thought, Joe, as your money did not appear to be in a proper trust, what would have happened if you had died? It would have been considered part of your estate and taxed as such. A trust would not have been considered part of your estate Also, when you distributed the money, as there was no trust, wouldn't it have been seen as a gift, and possibly subject to iht if you failed to survive the correct amount of years?
I don't know if these suppositions are correct, but they are certainly things that need considering.

It sounds as though your mum's will may have established a discretionary trust for your children. You will still need advice on your duties as a trustee, and on the circumstances in which you can make withdrawals from the trust, the circumstances in which you may make withdrawals (e.g. the terms of the will may be broad - enabling you to withdraw from the trust for any purpose for any beneficiary, or they may stipulate "for education purposes", or similar more limited purposes) how you should record your decisions as to what withdrawals to make, and so on. As a trustee you owe fiduciary duties to the beneficiaries (your children) to distribute the trust monies in accordance with the trust deed (which in this case could be the will).

You will also certainly need professional advice on the tax consequences of withdrawals. You can get an idea of trust taxation principles online (Google "taxation on discretionary trusts") but I really would not attempt to get this right myself without specialist advice - and I am a solicitor. If you make a mistake and distribute trust monies without paying the correct tax, leaving insufficient monies to pay the tax as and when the error is discovered by HMRC, you could be personally liable for a hefty tax bill.

I really would urge you to take legal advice on this.

OP, I think your mother might have been confused between

• Setting up a discretionary trust for your children, for which you do indeed need a solicitor and

• Opening a children’s bank account, which will you will hold in trust for them until they are 18 or 21 .

I have the latter for my children and yes it’s very easy to open. However the interest rates are now pitiful , so I’ve moved some of it to ISAs and ( once they are 16) to a help to buy ISA. But these are too small for the amount of money you are talking about .

So you probably need financial advice as well as legal, to work out how to invest this money . Setting up the trust only gives you a way to manage it and it can be very tax efficient . However It doesn’t tell you WHERE to invest it and HOW to get the best returns .

( I hope I’ve explained that properly as I’m not a solicitor, and if not I’m sure someone will correct me ).

It sounds like the will is the trust and you are the trustee. We did exactly this for our DC when we set up wills.

I would just get a solicitor to clarify that for you and then it's just up to you to look after the money and pay it out according to the will when each child is 21.

Yes Hoozz that was certainly her intention and her interpretation of what would happen. Still waiting to hear from the solicitor. They aren't very responsive and bordering on rude when I rang to ask to speak to who was dealing with it.

Sorry, meant to thank everyone for their responses, I have read all the posts and will still seek independent advice on tax implications and my responsibilities for managing the money.

Thanks Lucisky, but I was being sarcastic

@Joe66, oh, it was sarcasm was it? It seemed more like stupidity to me.

Well joe there’s a place for sarcasm but I’m not sure this thread is it . Lucisky spent her time posting some questions to help you, you might be a bit more polite even if you disagree with her.

When people post wrong information on legal threads then it’s often corrected by those who know more. Usually in a courteous manner.

Rosemary the legal position is the trust is created by the will document, therefore the trust already exists. With such a small amount, the most efficient method of keeping the money safe is to put it in 3 accounts with the trustee holding the monies jointly with the individual children. There is no need to use a solicitor if you are reasonably intelligent. There is no need to have a trust deed drawn up at a cost to the beneficiaries for 2 reasons. The trust already exists and you are eroding the capital by spending it on legal advice. I would be wary of a solicitor suggesting a trust deed should be drafted because it is unnecessary and its a typical response from a solicitor that they should do that and charge four of five hundred pounds for doing so. Sarcasm because Lucisky is suggesting she is very knowledgeable but actually isn't. I apologise profusely for upsetting you and shall retire from this thread humbly, head down . . ..