Discretionary trust for child

[trustfundtess]

Does anybody have any advice on this type of trust for my child please? Someone else is wanting to set it up for my child and have me as the trustee. I don’t want to go into the background but suffice to say this is a sort of relative of my child who is setting this up for him. I don’t know how much it will be for yet but the idea is a monthly payment made for him until he reaches 18 in 9 years. How do these trusts work and would tax be payable on it and if so by whom? Once I have the offer through I will be talking to a solicitor but in the meantime I want to try and understand how this would work.

I believe trusts require two trustees. Someone would be the beneficiary (your child presumably). From what I understand, trusts can be set up to gift money away from an estate (the estate of the person who is giving the money) so that it won’t incur IHT if they survive 7 years AFTER the last money given. Tax is payable by the trust, not your child. This is my basic understanding but I might be way off. Can you speak to an IFA?

Surely if your relative is wanting to set it up then they have looked into everything. Personally this type of arrangement is not straightforward and specialised, so a qualified financial advisor specialising in trusts will be needed. Your post sounds a little naive so this forum may not be the best to get advice on.

@Lovingbookshow nice of you to say that.
I don’t want give too many details and just wanted an idea as to how they work. Once the offer is actually finalised I will seek professional al advice

I would make full use of the junior isa you can invest 9K a year without tax implications. Obviously if you are heading into trust discussion I assume the monthly amount will be a lot more than the junior isa allowance. To answer one of your questions if you go through with a trust the trust, the trustees are responsible for paying the tax. I did work in probate and trusts set up by unscrupulous firms were a knightmare where families didn’t fully understand the consequences.

Try to convince them to put it into a Private Pension (Junior SIPP) for the child instead as this will grow more (longer time) and be more tax efficient - also pensions are a form of trust.