Education fund/trust and inheritance tax
Discussion
On my wife's side of the family, there are currently 3 old people (over 90) with a combined value of about £1M. Most of this will probably pass to my mother-in-law initially and then onto my wife and her brother after about 20 years.
I have two children (6 and 3) and was wondering if there is a tax efficient way for some of this money to be locked away in an education trust to pay for university fees?
I can find references to trust funds for private education, but nothing for university fees.
I have two children (6 and 3) and was wondering if there is a tax efficient way for some of this money to be locked away in an education trust to pay for university fees?
I can find references to trust funds for private education, but nothing for university fees.
IMO you need to have a specialist look at this as IHT is a really tricky area and add the school fee's etc and really there needs to be very specific planning. You would need either an Accountant who specialises in Estate/Trust law. Again my view is a mid range firm and get a fee, not as much as you might think, the possible figures involved would make proper planning a real benefit. Despite Tory promises the reality is that IH is easy money and only likely to be more so in the future.
Hi
You need an IFA, and/or solicitor.
Decide if you want to purchase an investment geared up for this purpose and timescale and if in addition to that you want the money held in Trust.
The latter could be done through some sort of generational planning vehicle (a Trust of some sort) if you were looking to bypass your generation and pass it straight down to the relevant children.
What you are asking for should be meat and drink to a vaguely competent financial adviser or solicitor. (granted, it can be difficult to find either of those!)
You need an IFA, and/or solicitor.
Decide if you want to purchase an investment geared up for this purpose and timescale and if in addition to that you want the money held in Trust.
The latter could be done through some sort of generational planning vehicle (a Trust of some sort) if you were looking to bypass your generation and pass it straight down to the relevant children.
What you are asking for should be meat and drink to a vaguely competent financial adviser or solicitor. (granted, it can be difficult to find either of those!)
It's not a job for an IFA (unless they are a very good one which with due respect most aren't when it comes to things liek this)...it's a job for a specialist lawyer/will writer. Money can be left in trusts for education etc quite easily (for example for your children) thus avoiding the IHT when your Mother-in-law potentially passes the money to yourselves.
I believe any gifts (i.e. not trusts) need to be made seven years the death of the person giving the gift if they are not to be subject to inheritance tax.
Having said all given the total estate of these three people is £ 1mil it may be easier to wait for your mother-in-law to set her will up in the correct way rather than trying to deal with three different people.
I believe any gifts (i.e. not trusts) need to be made seven years the death of the person giving the gift if they are not to be subject to inheritance tax.
Having said all given the total estate of these three people is £ 1mil it may be easier to wait for your mother-in-law to set her will up in the correct way rather than trying to deal with three different people.
Sorry Beardy, what you mean is get a good IFA not a rubbish one, as opposed to not at all.
I would suggest you familiarise yourself with the stated objectives of the OP and the Trustee Act.
How are you proposing the Solicitor or Will writer (heaven forbid! - do your homework on these) provides the Trustees with investment advice on the trust assets ? and furthermore, why would he want to definitely incur the costs of a solicitor when it may be that an off the shelf trust (effectively provided gratis alongside packaged trust products) will suffice in this case?
At the end of the day its his choice whether or not he chooses to be cost effective or not, as well as whether or not he can find himself a competent IFA.
I would suggest you familiarise yourself with the stated objectives of the OP and the Trustee Act.
How are you proposing the Solicitor or Will writer (heaven forbid! - do your homework on these) provides the Trustees with investment advice on the trust assets ? and furthermore, why would he want to definitely incur the costs of a solicitor when it may be that an off the shelf trust (effectively provided gratis alongside packaged trust products) will suffice in this case?
At the end of the day its his choice whether or not he chooses to be cost effective or not, as well as whether or not he can find himself a competent IFA.
TFP said:
Sorry Beardy, what you mean is get a good IFA not a rubbish one, as opposed to not at all.
I would suggest you familiarise yourself with the stated objectives of the OP and the Trustee Act.
How are you proposing the Solicitor or Will writer (heaven forbid! - do your homework on these) provides the Trustees with investment advice on the trust assets ? and furthermore, why would he want to definitely incur the costs of a solicitor when it may be that an off the shelf trust (effectively provided gratis alongside packaged trust products) will suffice in this case?
At the end of the day its his choice whether or not he chooses to be cost effective or not, as well as whether or not he can find himself a competent IFA.
True. However I am yet to find an IFA that gives good advice on underlying investments. The problem with 99% of IFA's is that they may be able to advise you on the right vehicle for investment but the reality is their investment advice is generally poor...it's consensual and lacks real conviction and insight. With any IFA I was thinking of using I would ask them for copies of the investment advice/quarterlies/buy lists that they were giving to people in 2006/7 or say 1999/2000.....compare the advice they were giving to what happened in the following two year period. You don't see many IFA's publishing data on how their buy lists perform.....I would suggest you familiarise yourself with the stated objectives of the OP and the Trustee Act.
How are you proposing the Solicitor or Will writer (heaven forbid! - do your homework on these) provides the Trustees with investment advice on the trust assets ? and furthermore, why would he want to definitely incur the costs of a solicitor when it may be that an off the shelf trust (effectively provided gratis alongside packaged trust products) will suffice in this case?
At the end of the day its his choice whether or not he chooses to be cost effective or not, as well as whether or not he can find himself a competent IFA.
What are the standard fees on a packaged trust product/off the shelf trust ?
Edited by Beardy10 on Thursday 21st July 06:46
There are only two additional points I am prepared to make:
Your analysis is based upon conjecture rather than empirical evidence. How many IFAs have you actually used ?
Secondly, most IFAs will have a panel of collective investments, the performance of which are published in numerous places which you can access for free.
I think boil it all down and your issue is: Why didn't my IFA forsee the financial crisis ? If your IFA actually chose funds that consistently underperform their benchmark then you should raise this with them - remember that absolute returns and benchmark performance are two different things. Your IFA could have put you in the best performing fund of any particular denomination and it could still have lost money - no investment adviser can guarantee performance. Set whatever returns you have or haven't achieved in the context of what that funds does in terms of investment approach, underlying assets and the prevailing investment climate.
I'm certainly not defending all IFAs. I know how rubbish many of them are. Vote with your feet.
(ok, that was probably three points, possibly four)
Your analysis is based upon conjecture rather than empirical evidence. How many IFAs have you actually used ?
Secondly, most IFAs will have a panel of collective investments, the performance of which are published in numerous places which you can access for free.
I think boil it all down and your issue is: Why didn't my IFA forsee the financial crisis ? If your IFA actually chose funds that consistently underperform their benchmark then you should raise this with them - remember that absolute returns and benchmark performance are two different things. Your IFA could have put you in the best performing fund of any particular denomination and it could still have lost money - no investment adviser can guarantee performance. Set whatever returns you have or haven't achieved in the context of what that funds does in terms of investment approach, underlying assets and the prevailing investment climate.
I'm certainly not defending all IFAs. I know how rubbish many of them are. Vote with your feet.
(ok, that was probably three points, possibly four)
TFP said:
There are only two additional points I am prepared to make:
Your analysis is based upon conjecture rather than empirical evidence. How many IFAs have you actually used ?
Secondly, most IFAs will have a panel of collective investments, the performance of which are published in numerous places which you can access for free.
I think boil it all down and your issue is: Why didn't my IFA forsee the financial crisis ? If your IFA actually chose funds that consistently underperform their benchmark then you should raise this with them - remember that absolute returns and benchmark performance are two different things. Your IFA could have put you in the best performing fund of any particular denomination and it could still have lost money - no investment adviser can guarantee performance. Set whatever returns you have or haven't achieved in the context of what that funds does in terms of investment approach, underlying assets and the prevailing investment climate.
I'm certainly not defending all IFAs. I know how rubbish many of them are. Vote with your feet.
(ok, that was probably three points, possibly four)
The way to really change someone's wealth is through two main means. Your analysis is based upon conjecture rather than empirical evidence. How many IFAs have you actually used ?
Secondly, most IFAs will have a panel of collective investments, the performance of which are published in numerous places which you can access for free.
I think boil it all down and your issue is: Why didn't my IFA forsee the financial crisis ? If your IFA actually chose funds that consistently underperform their benchmark then you should raise this with them - remember that absolute returns and benchmark performance are two different things. Your IFA could have put you in the best performing fund of any particular denomination and it could still have lost money - no investment adviser can guarantee performance. Set whatever returns you have or haven't achieved in the context of what that funds does in terms of investment approach, underlying assets and the prevailing investment climate.
I'm certainly not defending all IFAs. I know how rubbish many of them are. Vote with your feet.
(ok, that was probably three points, possibly four)
I personally have used three IFA's in the last twenty years...I've also looked at investment advice that friends and family have been given on myriad occasions. As someone that manages institutional investors money for a living I tend to get asked my opinion quite a lot.
It's very obvious to me that IFA's do provide financial advice on how to invest (some better than others) but very,very few actually provide genuinely good advice on where those investments should be made in terms of asset classes or geographically. Most simply regurgitate what the fund managers tell them or what they have read in the FT.....how many times do you see an IFA really come out with "independent" contrarian advice ?
Where a good IFA is worth their weight in gold (and I believe mine is) is in making sure you are taxed as efficiently as possible and your investments are made as efficiently as possible .
As you may have gathered I am an IFA. Running a not inconsiderable amount of retail money, certainly a lot more than your average IFA.
Naturally I think I am doing something right.
As for the fund manager presentations, you have to take the whole lot with a healthy dollop of salt. The bond managers will say its a good time to buy bonds, the equity managers will say its a good time to buy equities. Even the commercial property guys will come up with some slick lines.
I can count on one hand the managers who have actually said, now is not the time to buy my fund.
I'll stop blowing smoke up my own ass now.
What type of money do you run ?
Naturally I think I am doing something right.
As for the fund manager presentations, you have to take the whole lot with a healthy dollop of salt. The bond managers will say its a good time to buy bonds, the equity managers will say its a good time to buy equities. Even the commercial property guys will come up with some slick lines.
I can count on one hand the managers who have actually said, now is not the time to buy my fund.
I'll stop blowing smoke up my own ass now.
What type of money do you run ?
TFP said:
As you may have gathered I am an IFA. Running a not inconsiderable amount of retail money, certainly a lot more than your average IFA.
Naturally I think I am doing something right.
As for the fund manager presentations, you have to take the whole lot with a healthy dollop of salt. The bond managers will say its a good time to buy bonds, the equity managers will say its a good time to buy equities. Even the commercial property guys will come up with some slick lines.
I can count on one hand the managers who have actually said, now is not the time to buy my fund.
I'll stop blowing smoke up my own ass now.
What type of money do you run ?
Absolutely agree about fund manager presentations....but how many people do take a dollop of salt ? Not many. Naturally I think I am doing something right.
As for the fund manager presentations, you have to take the whole lot with a healthy dollop of salt. The bond managers will say its a good time to buy bonds, the equity managers will say its a good time to buy equities. Even the commercial property guys will come up with some slick lines.
I can count on one hand the managers who have actually said, now is not the time to buy my fund.
I'll stop blowing smoke up my own ass now.
What type of money do you run ?
And I'm sure you haven't heard many people say they don't want your money because it's the wrong time to invest.
I run Long Only and Long/Short absolute return credit portfolios across the ratings spectrum. So I've had a busy few years....
TFP said:
The only one who really stands out as saying "now is not the time to buy my fund", was Theo Zemek.
Fund management firms are generally staffed by mediocre people and have a horrible business model with tiny margins. There are very few people like Theo Zemek. As businesses they have huge fixed costs, a variable income stream and rely on maybe 12 people out of hundreds/thousands to really drive their performance. A lot of that is driven by the pensions industry which seems to be totally preoccupied with with infrastructure and processes before they will allocate money to fund management firms. The result is the fund management firms typically have a lot of mediocre people because given the number of people they need to have on their org charts they can only hire mediocre people. It's a very bad way to run a business....oh and they are obviously in the UK hugely exposed to the level of FTSE. If FTSE had stayed at levels we saw in 2008 quite a few wouldn't be with us anymore.Gassing Station | Finance | Top of Page | What's New | My Stuff