Elderly Aunt's Wealth Manager and her disabled children

[ditherwood]

Hello all,
My aunt is 81 has untreatable colon cancer and I have just discovered a substantial amount of money which she has employed financial advisors to help with. She and I aren't close particularly but as both of her children are severely mentally and physically disabled from birth (genetic chromosomal) I and my cousin are being made legal guardians of her children and trustees to a fund that will ensure her children's ongoing care.

This trust was apparently set up to avoid inheritance tax, but this only works if she survives another seven years which as she has been told she can no longer have chemo or radiation therapy it seems unlikely she will survive that long. This has rung alarm bells as why would a financial advisor suggest this at this late stage when they have been managing her finances for several years?

Today was the first time I have spoken with anyone from the FA as they now need me and my cousin to sign the legal papers as official guardians and trustees. The fund I've been told today is one allocation of her money and is £331k - the maximum they can apparently put in a fund.

I am uncomfortable on a lot of levels here and keen to hear others thoughts on this. I don't know anything about these FA's although according to their website they are registered with another company which is FCA registered but has limitations, namely they can't hold money but may control it and BIPRU firm MiFID activity restriction (no idea what this means).

I want to ensure my aunts money is looked after responsibly so that her children (both in their early 60's) can live comfortably with the support they need. I want to make sure she isn't being fleeced by these guys and i want to protect myself and my cousin, I asked what would happen if the fund ran out or was compromised, what financial implications would be incumbent on me and he replied I would be legally responsible to pay bills etc, which I can't do and shouldn't have to!! I'm obviously not signing anything, have written out over 50 questions to ask them, my aunt and to discuss with my cousin.

What are your thoughts please? V grateful for any ideas here, thanks.

Being the guardian and trustee is a big undertaking for you and shouldn't be undertaken lightly as it does carry certain legal duties and responsibilities, so you are right to ask as many questions as you need to. Mencap could be a useful source of information for you here, or look around locally to find a solicitor or financial adviser who is also a member of the Society of Trust and Estate Practitioners (STEP).

Your aunt's advisers may well have raised the issue of IHT planning often over the past years but it is only now that she has been galvanised into action. I speak from experience..... clients are reluctant to address the fundamental basics sometimes and prefer to put decisions off until a future meeting, but then it becomes too late.

If you want to PM the name of the firm of advisers to me I am happy to check them out for you. I'm a regulated adviser myself so am familiar with the jargon/credentials, etc.

Hi Sunseed, that's a really kind offer thank you, I will PM you shortly. The suggestions of Mencap and Step are also really useful too - thank you.

I guess you could be right about them suggesting the IHT some time ago, my aunt is not the easiest woman to deal with so it's entirely possible she was avoiding the practicalities until now. Much appreciate advice, thank you : )

Well I wouldn't be signing anything I wasn't sure of. have you checked they are actually on the FCA register?

justoverthehorizon They aren't directly registered with the FCA, they are registered with another company that is registered with the FCA.

Is that the same thing essentially?

Trusts for disabled people is something I have just started to look into, (my grandson has asd, it is very unlikely he will ever be able to budget or manage his own money). It seems that leaving money to someone who is unable to work/budget etc can impact on their ability to receive means tested benefits, social care etc, an inheritance of £150000 wouldn't last very long. So if money is left through a discretionary trust, the inheritance can fund the extras in life that means tested benefits do not cover. This is my understanding, its well worth looking into.

justoverthehorizon not sure, possibly?

Slight tangent, but do you know what the entire 'pot' of inheritance is that the trustees will be required to manage to provide for the disabled children?

The fund you mention of £331k would be lucky to provide an income of £15k-£20k a year, which is not a great deal if care costs are to be considered.
Is your aunt leaving them the house too?

From your write up its not clear whether £331k is all the money involved or just one part of it.

Firstly ask about the Financial Advisor's fees. Many FAs try to charge high percentage ongoing 'management' fees on an annual basis, simply for sticking money into investment funds (which themselves charge a fee) and perhaps changing which funds are invested into or their allocation (e.g. from 20% bonds/80% equities to 30% bonds/70% equities). This makes them a lot of money for very little effort, often preying on the elderly or those who really do not understand finance/investments - thinking they are getting a top notch 'service' without which other people are making less money/being less successful with their investments.

You could instead engage FAs as and when required to provide some technical guidance and recommendations on funds for a fixed fee and then action the investment changes yourselves. So you could just pay a one off fee for some advice on how to invest the money and then perhaps have it reviewed every 5 or 10 years, receiving some more advice/recommendations and paying a fixed fee each time. This is likely to be a lot cheaper in the long run than ongoing annual charges. Especially as I imagine the circumstances require a simple 'invest and forget' approach, where the trust funds are invested into bonds or equity funds that pay interest/dividends, and this interest/dividend income is paid out of the trust to the beneficiaries to support their living costs.

I would recommend you check a site called reddit, the "ukpersonalfinance' subreddit and post something similar there. They have clued up members who will be able to give decent guidance.

Partyforone this is interesting, hadn't occurred to me, will look into this aspect. All the best for your research too x

Divoc2020 I know this is one pot that I will be a trustee for but there is apparently a lot more money/pots and a house in my aunts name and she is considering buying a house for them in their name.

LonelyFromCorona I don't have a lot of detail although he did mention there was other money and allocations thereof. My aunt also owns a house and is considering buying another one for my cousins.

Really interesting re the fees, and some FA's targeting the elderly which is what I suspect is happening in this instance.

Great advice re ongoing fees vs one off advice, I will definitely look into this in greater detail and action if possible.

Off to check out "ukpersonalfinance' subreddit thank you x

If you're going to be a trustee and legal guardian I think you need to get all the info on the table to understand what would ne in the estate, where the assets are, what the will says, etc.

Palavah good points, I've added these to my list thanks. Do they disclose wills?

There are some other potential benefits to setting up a trust for a disabled person, so even if it’s unlikely to avoid IHT the financial adviser may think it’s still worth it. This is a useful overview: www.litrg.org.uk/tax-guides/disabled-people-and-carers/trusts-disabled-people

But the financial adviser should be able to explain everything to you. If they can’t, that would definitely ring alarm bells.

AristotleAteMyHamster this is a really useful link thanks. The FA did explain aspects but I felt it was hard to understand and he got a bit rambly.

Thanks @ditherwood, the discretionary trust is the only gem I have picked up so far, but it is so very important. Hope you find a trustworth advisor.

There's no reason why your aunt couldn't or shouldn't be totally transparent with you abouy the context of her will. Do you know who the executors are? Are you and your cousin the only trustees?

Palavah My aunt is really secretive, she didn't even want me to have any details about the fund or any information about what guardianship entailed etc. My cousin and I are the only trustees, no idea who the executors are.

I would be very cautious about doing this yourself. The taxation of trusts is particularly complex, as is efficient `IHT planning.

You can do your home conveyancing for a house purchase, but engage professionals to mitigate risk and mistakes.

In addition, having someone manage the money at arms length, does reduce any conflicts of interest.

I am not saying to ignore fees etc, but a DIY option could cost you a lot more in the long run.