Experiences of trusts to manage money after a bereavement ?

[TrustyTrust]

(Namechanged for this, also I already posted in Chat but am hoping for more replies!)

Has anyone got any experience of setting up /benefiting from a trust, set up to manage money received after a bereavement?

My sibling has died recently. They had 2 children, one under 18 who is estranged from the father.

The children are due to receive some money - pensions, Death in Service etc. Neither child can manage money yet, it could be catastrophic so I believe trusts are needed but I have no experience...

Has anyone got any advice please?
I know I will need legal advice but am trying to understand more first.

I expect I will need a Discretionary Trust, as I really don't want either child to have the money for a few years yet, and I want to retain some control. The few people I know who had trusts or a large sum of money at a young age, pissed/snorted it away or spent it on a high powered car, which they then crashed.

Does the will state that they can not inherit till a certain age if not the one who is over 18 will get the money once it is distributed.

A very easy solution is placing the money in a junior isa for each child , the money comes to them at 18 you don’t have control in that once it is in the isa you can’t access it and at 18 the money is theirs to do what they want with. Trusts are complicated and have to be registered with HMRC with tax implications therefore if it’s a large sum then you will probably need advice from an IFA on trusts. Who is the childrens legal guardian surely you need to discuss this with them.

@TrustyTrust How much money and what is your role in this? Are you executor or concerned aunt? Trusts can be expensive to set up and unless it’s a big sum, making regular payments to DC, it’s probably not worth it. An ISA is a good idea if under£20,000 each. I would look at other savings vehicles such as investment trusts. If it’s loads of money, see a financial adviser.

Just because you’ve read about other dc spending money on things you don’t approve of, are you so dismissive of these dc to think they would do the same? Do you not know them at all? I’d be furious if any thought my DC would do what you’ve suggested with money. Indeed, they haven’t,

OP, to answer your questions, you can only put the money into trust if the will states that; wills will often specify held on trust until 25 for example.

If the will doesn't specify then the adult will inherit directly and there is nothing you can do other than to offer financial education and advice.

If the will does allow/specify a trust then as others have said, setting up a discretionary trust requires a trust deed drawn up by a solicitor and trustees, who are usually also specified in the will. The trust will need to be registered with HMRC and will likely need to do its own tax return each year. The trust pays tax on income and gains (the funds within it likely invested so should earn income/ accrue gains) and the distributions need to be carefully managed to ensure tax pool rules are not breached. You will almost certainly need an accountant to assist - trusts have a reputation for being used for nefarious as well as legitimate purposes and the recent registers etc are an attempt to reduce that.

Personally, I wouldn't even consider a discretionary trust for less than £250k given the costs and hassle of running them.

As the other PPs have already said, unless the will says otherwise then the child who is over 18 will be entitled to their share of the estate immediately and you cannot keep it from them.

For the child who is under 18 they cannot receive the gift until they are 18 or whatever other age is stated in the will. In that case a bare trust is created if they will inherit at 18 or a "contingency trust" if a different age is given eg 21 or 25.

As has already been said, the adult child must be given their share directly, unless they do not have capacity, in which case the court of protection will need to be consulted.
The child’s inheritance will have to go into a trust, and their father would likely be considered as the trustee unless the court disagrees. It’s not a case of the money being handed over to a 3rd party to decide how to distribute it.
‘If you’re the executor, you need to consult a solicitor asap. Also, if the father of the children was married to the deceased he could end up a beneficiary of any insurance payout!

My son is supposed to benefit from a discrecanory trust fund which his great grandma set up over 5 years ago without my or my sons fathers knowledge, it’s managed now by my sons grandma and sons fathers uncle. They have refused to tell us anything about it as say the money stays with them indefinitely for them to decide if and when he gets it. Legally trustees don’t have to disclose anything to beneficiaries unless I take them to court which would be costly. To be honest any good will which was meant in his late grandmas intention by setting such a thing has been lost in its management since she passed away as now 5 years on the trustees hold this over us (family relations hand never been the same) just giving a perspective or my experience. It’s incredibly controlling to use this money in this way in our case the amount is not even worth such trouble not that I know but an indication was given of a few thousand pounds

Thanks totally who have given constructive advice.
I didn't make it clear - this is NOT monies from the will but rather mostly from pensions and similar. As such, the companies' trustees can rule where the money goes, and it can be put into a trust.

Thank you for taking the time to be so rude to a recently bereaved stranger.

I know the DC very well, thank you. I know what they have been through and I know howntheynare likely to spend the money at thisnyoung age.

I'm not sure why you think I've read about other people spending inheritances unwisely. These are people I knew, and in some cases they did not survive the consequences.

That must be a headache for you.
To be clear, I'm not hiding the money. But they're not ready to have it yet.

I probably am being controlling, but that's a part of being a parent isn't it? Albeit I'm not their parent, but I am now the legal guardian of the youngest.

I’m so sorry for your loss.
No real knowledge, but when my dad died, my mum ended up putting all sorts in trusts. I’m fairly sure there was something called a Deed of Variation which enabled her to disperse his estate sensibly.
hopefully someone with actual knowledge can help.

What a sad and stressful situation. I don't think the origins of the money make a difference- trusts are still too complicated and expensive to be worth it in many cases.
Varying the will isn't possible for under age beneficiaries either (and probably not relevant here).
You may end up just investing the money (some in isas) either yourself or via an adviser. You (or their guardian if not you) can then keep the login etc details (with the children's permission once they're 18).
Pretty sure the 18 y o has to have the money now unless they let you manage it. Hopefully you will be surprised.

@TrustyTrust Hopefully these young people don’t know you are being rude about their capabilities and the fact you don’t trust them. And you think my post was rude!

Speak to a financial.adviser. They can get authority to deal with the Pension Trustees & arrange a suitable investment for the monies which can then be put into Trust.

I think you're incredibly rude, yes.
I've also noticed you on other threads being being similar.
Maybe gives you a little boost, putting the boot in to to others.

I think if the pension/death in service has the children named then they will automatically give the child that's over 18 their portion, they couldn't give it you to put in trust as they're adults. The younger one they're likely to have a discussion with you about.

does the will mention anything about trusts? (I appreciate the pension/death in service payment is held separately but the pension trustees may use the will as guidance if it's not clear).

The over 18 year old to get the money and the under 18 year old to have theirs put in an isa. I would talk to your adult neice/nephew about putting it into a LISA/isa and forgetting about it until they are older 6 more sure of what they want to use it for.

@TrustyTrust Are you seeking to control this narrative as well as the DC? You don’t necessarily get to choose to do either. You have overreacted. We all lose people and have to deal with money, I’m dealing with DM’s estate as executor right now.She died 2 months ago. Money has been left to grandchildren but they are all over 18, but only just. So they are getting the money and will be offered guidance on investment. However it’s their money. Not mine.

To be clear, I'm not hiding the money. But they're not ready to have it yet.

You don’t actually get to make that decision for the over 18 year old, unless they lack capacity and you have some legal power over their affairs.

If it’s coming from pension / death in service, I think it’s unlikely that any trustee would agree to paying money into a discretionary trust, particularly for the oldest. They may agree to a different type of trust for the younger beneficiary.

As others have said, trusts are often not worth it unless the sum of money is above about £250k.

But you really need decent legal & investment advice, not MN.

You are sensible to be concerned about young adults managing large sums independently (or being exploited) - trusts of this type commonly cite 25 IME (or even 30 as the age of taking control) for exactly this reason. Trustees can grant the money earlier in full or in part if needed for eg education or establishing a home

You need to speak to a lawyer with experience of trusts, however if this wasn't considered by your sibling in the will then the child over 18 will automatically inherit (in E&W at least) so you can probably only do this for the younger child. Ideally this would all have been set up when you agreed to be guardian for your sibling's children in the event of death.
I agree with PP that for a few thousand its not worth it, for a few hundred thousand its definitely worth looking into if only to confirm what is possible (its a number of years since I last did this and the rules change).

My brother and I both inherited the same amount of money (large sum - 40k ish) from a grandparent in our early 20s. I am 3 years older.

I kept mine in the bank and used it a few years later for when I was ready to buy a house. I’ve no idea what my brother did with his, but he has no house and no money left 10 years later.

My parents firmly believe that giving that particular 22 year old 40k was a terrible decision. He spent it - probably on holidays, drink, partying and god knows what! If someone gave him 40k now he’d spend it very differently indeed!

So yes I’m with you OP, SOME young people really shouldn’t be given huge sums of money and SOME will be totally responsible. You know your nephews. You may not have much choice in the matter, but I understand where you are coming from.

Thanks again for those who have offered useful perspectives.

To clarify - the money is NOT from a will. So far some of the trustees HAVE said they can pay into a trust even for the over 18yo.

As per my OP I was looking for insight before I engaged legal professionals.

The sum will be substantial. 6 figures per child. The children are recently bereaved and very traumatised. Neither lacks capacity but both are vulnerable due to the situation.

Yes, you've guessed I'm concerned about exploitation as well. Your first paragraph is what I am thinking of.
By the way, the death was sudden so none of this was figured out beforehand. I am guardian as I'm his aunt and I care about him. And he is estranged from his very, very awful father.

Exactly, some young people will be fine and sensible with money, or would make mistakes which are not life changingly bad. I would have been fine too, as I've always beenboring sensible.

Others are not.

No it’s not a headache for me it’s an ongoing tax headache for the trustees my sons great grandma was given incorrect advice to put this into trust because like you she didn’t want to give control to her great grand child. Whilst she was alive if she had said anything to me or my child’s dad as his parents we would have had a sensible discussion about investing it a junior isa which doesn’t have the same tax implications. I am bringing up my child to make his own life without money being held from him from extended family members like some carrot if they disapprove of his life choices.