Trust fund for grandchild for university fees

Personally I would favour a discretionary trust, where it’s up to the trustees whether and when they release money, and how much, with the fund not becoming the property of the beneficiary until they are older. But that would involve personal involvement unless you pay professional trustees. There are pros and cons with any type of trust and it’s an area where specialist advice is needed. The OP is in the unfortunate position of not really having enough of a grip on what her husband set up, and I think needs much more information.

TinSoldier

Katie59

Personally I don’t think setting up a trust fund for any child or GC at 18 is a good idea, better to wait until they ask or obviously need the money. Then you can judge if it will be a good idea, inheritances are more difficult because you don’t know the circumstances in 10 or 20 yrs time.

But they haven't set up a trust fund at 18. They set up funds for all their grandchildren to help with university fees when the time came. The youngest is now 18 and has a vested right to claim the money.

The intention was good but as you say they have control and can do whatever they want with it, of course if you have £millions and £50k is small change it doesn’t matter, most of us are not in that league. Many young people, even as graduates don’t have a clue how to handle money, it’s only when they leave the shelter of education that they learn it doesn’t grow on trees.

Stansgran - teenagers are odd ducks, and as they live abroad, I presume you don't see the family that often.
You have good advice on here about finding out the exact nature of the Trust. My parents did something similar for our children, and all but one of them just asked for it to stay where it was. They didn't want the temptation of dipping into it (as Katie59 has pointed out) and 3 couldn't get their heads around moving it about to get a bit more interest. One of them did want to move into advantageous savings, and did.

I suspect some of this is because you haven't quite got your head around it all, and would have preferred simple savings. Unless your grandson is actually going to lose the money (unlikely if it is a Trust for him) I would let it lie. At some point he will want it, and be grateful.
I do recognise the hurt to you, but you don't know exactly what is going on in the family at the moment. Is there another family member who can help?
I do hope you sort it out and can stop worrying when you have so much to deal with.

Katie59

Personally I don’t think setting up a trust fund for any child or GC at 18 is a good idea, better to wait until they ask or obviously need the money. Then you can judge if it will be a good idea, inheritances are more difficult because you don’t know the circumstances in 10 or 20 yrs time.

But they haven't set up a trust fund at 18. They set up funds for all their grandchildren to help with university fees when the time came. The youngest is now 18 and has a vested right to claim the money.

Reasons not to leave a lot of money to 18 yr olds

40 yrs ago a local farmer, fell out with his son and left the lot to his 3 grandsons maybe £2m in those days, they were normal enough boys I was at school with 2 of them. It ruined their lives, they wasted the lot on aeroplanes, fast cars, drink, gambling and women. There were plenty of “friends” who helped them spend it, I still see 2 of them occasionally the third died early from drink, they live like tramps and what they have got is spent in the local pub.

Obviously an extreme example but I know at least 2 others who gave children/GC too much too soon

It can be a good tax planning tool, Katie. If done correctly the gift is made when the fund is set up. If you save money in an account in your own name that’s part of your assets for the purposes of a care or benefits assessment and the interest (unless it’s an ISA) is yours for income tax purposes. Then you have the tax hurdles to jump when handing the money over - does it exceed your permitted annual gift allowances, will you survive seven years …

Personally I don’t think setting up a trust fund for any child or GC at 18 is a good idea, better to wait until they ask or obviously need the money. Then you can judge if it will be a good idea, inheritances are more difficult because you don’t know the circumstances in 10 or 20 yrs time.

Send them an email or letter outlining your deadline for closing the account and be done with it. No need to be angry with them. They aren't bothered by the account's existence and they do not appear to actually need the money. Save your energy and annoyance and refocus it toward more productive feelings and actions. Your husband's declining health is the priority here.

It would be helpful to know from the OP that this is definitely a bare test of which the grandchild is the sole beneficiary, and whether the fund acts as sole trustee. At present we’re working on assumptions. If it is a bare trust and the OP and her husband are not trustees they need have no involvement whatsoever - give the trustees the grandchild’s contact details and let them sort it out. I hope the OP and her husband aren’t paying the trustees’ management fees and that, as she implies, these are taken from the fund?

If you're not in their lives your generosity might be considered to be interference.. it doesn't sound as if any of them need the money. I would leave the matter with the trustees and try to get on a better footing with your DD in a way that doesn't involve money..

Now that you have said the funds are in shares, I can understand why you might be worried and want to be rid of this. Assuming you are not the trustees, technically you are rid of it. It’s a matter between the trustees and your grandson.

The only danger I can foresee is if it were advantageous to sell some of the shares at short notice - if there was wind that a particular company was at risk - but the trustees(s) couldn’t act without your grandson’s permission, therefore risking capital losses.

He’s 18 and it’s his money but it came from you and it’s hard to see your generosity being treated so casually. I don’t know how much is involved and please do not divulge that here but hopefully it’s invested in fairly safe companies. I think you have to think of it similarly to any kind of gift. You cannot control what someone does with it once it’s handed over - which technically these funds were was as soon as you set up the trust - assuming it is a bare trust. If your grandson were to decide not to go to university then it’s still his fund to do with as he pleases.

I think I want to be rid of the responsibility. Their lives are busy and we are not in them. DH thinks they should be more interested in sorting it out but the grandchild’s parents are well off and indifferent about it. I just think we’ve wasted time and effort and would have preferred to put it to better use. I want to move on. It was a good deed DH thought .

Perhaps he doesn’t want to go to university and feels it is added pressure.

It’s not unusual for 18 yr olds ( or even 25 yr olds) to have no interest in finance, cash just appears as if from nowhere. I assume the money from the trust fund will be placed in a safe short term investment until it is claimed. Until then it is subject to IHT rules for 7 yrs

Please correct me if this is wrong, I’m sure there are a lot of money pots sitting waiting to be claimed for one reason or another

Great advice Whiff and make sure you tell him the exact amount of money he'll miss out on Stansgran, and yes your D does owe you an apology.

Thank you all for your replies. @TinSoldier that was helpful to me about him having to give permission for the funds to be dealt with. He is not doing A levels as he lives abroad. I am calmer today about this as I personally dislike shares( I see it as gambling)

Set your grandson a time limit to claim and fill in the documents say a week and if he doesn't then tell him he will lose the money. He will soon get his tail in gear as he won't want to lose the money. He's an adult about time he acted like one.

Your daughter owes you an apology.

Has your grandson said why he doesn't want to accept this gift?

What a strange reaction to your phone call! They should be extremely grateful that you have opened a trust fund for them.

Presumably your question about bank fees means that the funds were placed with an investment manager to provide income and capital growth for your grandson.

It sounds like your DH set this up as a bare trust where assets are held on behalf of a specific beneficiary and where the anount of capital had to be defined at the time the trust was created.

If that is the case, the funds are treated as belonging to the beneficiary from the date the trust was set up. When they reach 18, they are entitled to have the assets transferred to them. While a beneficiary is under 18 the trustee(s) have control of the administration of the funds.

Note, it is not uncommon for trustee(s) to continue to administer and invest the funds after the beneficiary reaches 18, but this can only be done with the beneficiary’s agreement.

In other words, your grandson does need to sign some documents either to have the funds transferred to him or to allow the trustee(s) to continue to look after the funds to his best advantage until needed. Important to consider this aspect in case the funds were placed in advantageous term investments set to mature on grandson’s 18th birthday. These may now have reverted to something with a lower yield that the trustee(s) can do nothing about without your grandson’s permission.

Your grandson may not realise this. He is probably thinking more about his A Levels than paying for tuition fees and course materials in October.

My advice it to talk to your daughter again, explaining that the money may not be earning all that it could be until grandson acts.

Bear in mind that a gift into a bare trust is treated as a “potentially exempt transfer” for IHT, meaning there was no immediate inheritance tax charge on the gift and there will be no charge if the donor survives the date of the gift by seven years.