hello, we are executors & trustees of a Discrestionary trust that came into force in 2021.
we have not been able to invest in any banks, the solicitors recommended going through a financial investor. The cost against paying any investor against interest may not be viable. Could you please advise and would the beneficiaries be able to sue us? We are not beneficiaries, only friends but are finding it stressful & difficult.
I am in the same situation. I and two others are trustee's for a property which my disabled daughter lives in. We managed to get an account with the Nationwide in which we have invested a modest sum in an accessable savings account , but since then the Nationwide have decided to discontinue offering Trustee Accounts. It's very difficult to know what to do. Also any interest over £100 per annum incurres a tax liability. It seems so unfair when sacrifices have been made to protect, house and support our diabled loved one. The Government needs to sort this out. If anyone can offer a "light at the end of the tunnel" I would be very pleased to hear back.
I think the government should probably make it a requirement for high Street banks to offer accounts for disabled trusts.(I made this point to mencap).Also I don't know why there isn't are larger tax free part for income from disabled person's trusts so trustees don't incur more fees doing tax returns. Does seem unfair given the purpose of the trusts.
Hi. Presumably the trust money sits somewhere? My belief is that, so long as you act in a manner that you feel is in the best interests of the beneficiary/ies, it is unlikely they or anyone else could take legal action against you, but it would be sensible to check this. Be wary of financial advisors - some, such as St James Place, levy high charges on an on-going basis, calculated as percentages of the investment sum, so there is a risk of funds being eaten way by management/advisory charges etc. The disabled persons trust I set up for my daughter a couple of years ago is with Cater Allen bank - no interest but also no charges. It took a long time to get the account set up but at the time they were the only bank providing trust accounts. Some people who post on here have used Virgin, but I don't know of any others. Good luck - I hope you get this sorted so you can rest assured that you have done the best you can.
One suggestion for cash accounts is to try Flagstone. They do offer Trust Accounts (AFAIK) and that can pay a decent interest rate (at the moment).
They are the company that allows the money to be invested via one portal into multiple high interest Bank Accounts (currently paying 4-5% interest), most of these accounts are FSSA protected. The portal makes it money from taking 0.3-0.5% of the interest.
Definitely worthwhile exploring.
Hi I asked about bank accounts yesterday and mencap said try Skipton ( can get without adviser).You can invest with bestinvest or Hargreaves Lansdown. They do investment accounts for trust.
I think bestinvest pay decent interest on cash on the account.
We chose not to use an ifa to save fees.
IFA's will charge ongoing management and advice fees.
SJP suggest 1.5% charge (AUM) for advice + ongoing management. This advice can be useful as the plan is to have the money in the Trust grow (and not erode) over time. The management costs will ensure that the Trust funds change direction, depending upon the markets. SJP preferred option for funding a Trust is via an Investment Bond- which will traditionally return less than a general investment- but as it has no 'growth', attracts much less issues with tax/HMRC returns/admin. Providing the return is over 5-6%, even with their charges taken out- that is still the fund increasing by 3% every year.
Other IFA will charge less, worthwhile having a word with them. The minimum seems to be a charge of 1% AUM, with a flat rate for the initial advice.
We are exploring this ourselves- hence the 'apparent' knowledge. Have set up a Disabled Person's Trust with Renaissance Legal and are speaking to their Financial arm (Renaissance Finance) about how to fund/manage the Trust.
Personally I wouldn't use St James place as their fees are far too high. I'm actually not a fan of Ifa's. They're useful for investment bonds, which are useful products for avoiding annual tax returns, but if one is capable of making investment decisions for oneself then they don't offer much more.(I'm fortunate that I do understand investments, have worked in the field and already manage my own).I'm not prepared to pay 2.5 to 3% initial fee, then 1% per year to ifa, then another 1% or more for the funds they invest with. It was cheaper to do it ourselves.
I should add we have a good STEP solicitor who is also a tax accountant who created our trust and does our tax returns.
You are spot on with the fees problem. A fee for the platform and more for ongoing management-plus if the funds are actively managed, that is another cost.
You certainly seem to know the field. What are your thoughts on the Investment Bond versus General Investment for a Discretionary/Disabled Trust?
At the moment we don't need to remove regular amounts annually, to provide an income for the beneficiary, so we are going with the general investment option. Hargreaves Lansdown have 0% platform fee for etfs and you can get etfs that have a total annual charge of around 0.3% . My parents IFA has demonstrated that his fund picks are not performing any better than passive etfs. (You may know that most fund managers don't outperform the market over 5 to 10 year period). There are also a few low cost multi asset funds by vanguard, hsbc for example, that do everything we'd need for growth at a level of risk we'd be happy with, though there's a fund charge with these, 0.45% with hl.I believe hsbc do investment bonds through advisors in there branches. I've contacted them to get an idea of fees, no reply yet, to see if they are cheaper than IFAs.
I should add it kind of depends on how much you are investing.Have to take into account cost of tax returns.
For us calculations showed investing ourselves + paying tax + paying tax accountant was better than paying for IFA services.
It is really difficult and expensive to set up and operate these trusts, and the tax situation is very complex and restrictive even with the vulnerability beneficiary election. We have had one for many years, and it is challenging to find an appropriate advisor who doesn’t charge too much. We did look at the Mencap trust information but found it quite confusing and it looked expensive with all the different charges, but that maybe because it is more comprehensive as I think it takes on board legal administration which you would otherwise have to set up separately. Renaissance does sound quite a straightforward option, not sure how it works if you are not in their area. We now have a local advisor in conjunction with a solicitor, which may or may not be the best/cheapest way. You either need to find a good solicitor who will suggest an advisor they are familiar with or vice versa, but no guarantees that you will be comfortable with both. You need to spend a fair bit of time making enquiries, which is exhausting.
I think the extra expense and trouble we all have to go to to make provision for our disabled children is something which should be taken up with the authorities. We are setting up trusts specifically for this purpose, not to shelter wealth from tax. There is the vulnerable person election, but all this is so complex that usually professional help is necessary.
Hello Blue4rose
Thank you taking the time to post
There are various different resources available to download for free on Mencap's website mencap.org.uk/willsandtrusts if anything on there is able to help you please do let us know. If you having difficulty managing the trust, have you spoken to the solicitor that set this up?
Is it just the investment side of things you having difficulty with?
Have you looked on STEP.org? there is a search engine on there that allows you to search for STEP qualified financial advisors, as well as solicitors.
I'd be interested to know how you get on with your local advisor along the with solicitor?
Many thanks.
We have gone to a lot of trouble to come up with the best arrangement over the years, and in particular one which will work when we are no longer around as we will have no other family to manage things. We thought that Mencap and Renaissance offers the most comprehensive solutions which included professional appointee services if needed, but Renaissance were only just getting their services up and running nationwide. We went to Mencap seminars to be directed to the local solicitors who were running them, some better than others. We did use one originally, who was excellent, but she moved on shortly afterwards, and in any case we weren’t impressed by the financial advisor she introduced us to. We found Mencap charging structure a bit complicated and it was difficult to work out the long term costs. We the arranged a STEP solicitor as a trustee, but he then moved practice so in the process of changing this aspect, also with a new and less expensive advisor. We thought the corporate trustee set up with Mencap looked like a good idea in principle though, also the Mencap Trust does not involve choosing investments as it seems to be invested much like a pension fund in a mix of assets, which we quite like. With hindsight and hearing of other people’s experiences we probably would have done this differently, just wish we had been better informed. It is really interesting to hear the different ways people have addressed this
Hello Shearing
Has the solicitor who help set up the trust given you any other guidance on this, or suggested which financial advisor to use? If you were to visit STEP.org there is a search engine that allows you to look for STEP qualified professionals that are able to give advice specifically around this area of law. STEP stands for Society of Trust and Estate Practioners; it's a key qualification to have when solicitors and financial advisors are operating in this area of law.
It seems sensible you are questioning this against the cost of the advisor because the money is really to benefit the beneficiaries, but if doing this is going to be in their best interest, it may well be worth while doing. Do you have a letter of wishes document you able to follow?
Because the beneficiaries technically have no absolute right to anything in the trust, they shouldn't be in a position to sue; we haven't come across an issue like this before and i do not want to give you incorrect guidance
I strongly advise speaking to the solicitor again (who set up the trust) and voicing your concerns.
Mencap also offer a useful guide 'Guide to being a trustee' which you may find useful, you can download it for free here mencap.org.uk/willsandtrusts
We also run free planning for the future webinars, which i recommend you attend if you haven't do so already, this is a topic that could come up and you would be able to ask questions to a legal professional. places can also be booked via mencap.org.uk/willsandtrusts
Thanks
Useful to learn of the existence of STEP - just wish I'd known about them before now.
Thank you so much to you all , as there’s lots of information it will take us a while to check it all out. Hopefully will have some better news for the future. Thank you all again for responding to my call. Take care.x
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