Proceeds from Trust wind up paid to minors - what can be done next?
Jona
Member
Hi all.
A discretionary Trust, set up by grandparent, has been wound up with proceeds paid to beneficiaries.
3 of these beneficiaries are minors, so cash is sat in child bank accounts managed by parent as guardian and effectively in bare trust.
Consideration is being given to roll this cash into new Trust.
- Could a discretionary Trust arrangement be used? I am not sure what powers the Parent/Guardian has in this instance as it feels like giving away something that was absolutely owned by the child, and which may end up not benefitting them.
- Who would be the Settlor of the new Trust arrangement? Would it be the parent; and as such parental settlement rules bite.
Thanks for any views and input.
Comments
You can't put it into Trust; it is owned by the child; child can not create a trust and why would the child want to give it away?
The decision to pay out of the trust looks wrong and action could have been taken to retain it in trust and (if necessary) split the trust into 3 - one for each child.
Unless there is the ability to reverse the winding up of the previous trust (unlikely), then looks like it won't be possible.
Not sure if a child can contribute to their own Junior ISA? I've only ever dealt with cases of the parents/other family members setting up and contributing to one, never moving money from a child bank account into their own JISA?
@Wildparaplanner I see no issue with a parent trustee moving capital from a child's bank account to a JISA. The only minor sticking point is the loss of access. In all other aspects it is materially the same as the bare trust, with the benefits of having an ISA conversion at age 18.
I have a client where we have c£50k in grandparent settlement (bare trust GIA on platform) for each child and they top up £5k p.a. Now children are into teens, we are using the annual contribution to buy into new funds in the trust and cash out £9k of the trust fund to JISA each year, washing through the gains. This is all very clearly in the best interests of the children, who will now have most or all the existing trust fund tax-free into ISAs at age 18