Trust fund investment and advice fees
Discussion
First time dabbling in this part of PH, so apologies if my questions are repeats - just point me to the answers...
My mum died last year and her will leaves her estate to her five grandchildren, the three youngest of which live here in Australia. I was the Executor, but handed that to a trusted friend (in fact one of my Mum's best friends - they'd known each other over 60 years when Mum died) through Power of Attorney. As the trust is required to be set up in the UK, and I'm not currently resident there and wouldn't normally be so, I've also now handed over the Trusteeship to the same friend and her daughter.
My queries relate to getting financial advice for investing the Trust. Whilst I'm not one of the Trustees, we've agreed that I'll be party to the decisions.
We've been referred to a financial advisor to help with this, and I'm curious as to whether GBP3,000 for the initial advice, followed by a running commission of 0.75% of funds invested is par for the course. It seems high to me, but I'm not in the UK market.
We'll have a fund of around GBP370k to manage, with the first of the grandchildren being eligible for their share in mid-2022. The second would be about 4 years later. We're happy to take some risks on the investments.
I'm completely green on this, so any pointers appreciated. Ta.
My mum died last year and her will leaves her estate to her five grandchildren, the three youngest of which live here in Australia. I was the Executor, but handed that to a trusted friend (in fact one of my Mum's best friends - they'd known each other over 60 years when Mum died) through Power of Attorney. As the trust is required to be set up in the UK, and I'm not currently resident there and wouldn't normally be so, I've also now handed over the Trusteeship to the same friend and her daughter.
My queries relate to getting financial advice for investing the Trust. Whilst I'm not one of the Trustees, we've agreed that I'll be party to the decisions.
We've been referred to a financial advisor to help with this, and I'm curious as to whether GBP3,000 for the initial advice, followed by a running commission of 0.75% of funds invested is par for the course. It seems high to me, but I'm not in the UK market.
We'll have a fund of around GBP370k to manage, with the first of the grandchildren being eligible for their share in mid-2022. The second would be about 4 years later. We're happy to take some risks on the investments.
I'm completely green on this, so any pointers appreciated. Ta.
The thing I'm pondering is how the Trust (if you have one) will distribute the money.
If the investments grow steadily, as we hope they do, then the last grandchild to be paid out will receive more than the first. Is the plan to simply give them a 20% lump sum at a certain age, or to give them income?
I have never been a Trustee, though I declined an offer once. It seems like another layer of complexity and cost to be avoided if possible. Every percent of £370K is £3,700 not only gone, but not available for growth. A 'compounded loss' if you like!
If the investments grow steadily, as we hope they do, then the last grandchild to be paid out will receive more than the first. Is the plan to simply give them a 20% lump sum at a certain age, or to give them income?
I have never been a Trustee, though I declined an offer once. It seems like another layer of complexity and cost to be avoided if possible. Every percent of £370K is £3,700 not only gone, but not available for growth. A 'compounded loss' if you like!
The trust is a requirement of the will, so can’t be avoided. The distribution is on the basis of available funds at the time of eligibility. So the first gets 20% of whatever’s there in mid-22, the second gets 25% of whatever in mid-25, the third gets 33%, the fourth gets 50%, and the fifth whatever is there in 2035.
We’ll check the rules regarding transfer to Australia once the first two have been paid. Transfer fees are just a necessary evil, but there are ways to minimise.
Whilst 370k isn’t a lot in the great scheme of things, it’s more than any of the grandchildren would ever have thought possible before - none of us kids were ever presented with anything remotely close this - so I’d kind of like to not mess it up.
The point about any fees paid means less available to invest or pay to the grandkids is noted - it’s almost tempting to just leave it alone!
We’ll check the rules regarding transfer to Australia once the first two have been paid. Transfer fees are just a necessary evil, but there are ways to minimise.
Whilst 370k isn’t a lot in the great scheme of things, it’s more than any of the grandchildren would ever have thought possible before - none of us kids were ever presented with anything remotely close this - so I’d kind of like to not mess it up.
The point about any fees paid means less available to invest or pay to the grandkids is noted - it’s almost tempting to just leave it alone!
£3k doesn’t seem bad but it depends what it covers. If it is just asset allocation / choice of funds then it’s not great value, but opening accounts for trusts, particularly with non resident minor beneficiaries isn’t straightforward. Similarly if the administration of the trust is included in the 75bps it isn’t bad.
It’d be worth getting some Aussie tax advice too on how the income is treated on vesting. I guess as Aus has no iht they should be fine but I guess there may be cgt?
It’d be worth getting some Aussie tax advice too on how the income is treated on vesting. I guess as Aus has no iht they should be fine but I guess there may be cgt?
PomBstard said:
The trust is a requirement of the will, so can’t be avoided. The distribution is on the basis of available funds at the time of eligibility. So the first gets 20% of whatever’s there in mid-22, the second gets 25% of whatever in mid-25, the third gets 33%, the fourth gets 50%, and the fifth whatever is there in 2035.
I suppose I'm the sort of person who, if told I have to do something, thinks 'Actually, do I?'The resident forum Trust boff is Nik at Intelligent Money who no doubt will easily be able to explain the options. I would ask myself - does a Trust add cost (and therefore reduce the payout) and is the complexity worth the candle? The main thing is to look after the inheritance as well as possible with the beneficiaries' interest at heart. Anyway, as you're not the Executor it's off your plate
The only flaw with the payout plan is that the last beneficiary is very likely get more than the first. But unless you hold it all until 2035 I can't think of a more equal way. Perhaps you could offer the first four grandchildren the option to keep their money invested so that they can, if they wish, get more but later.
On the IFA question, unfortunately I can't recommend one so I hand you back to the panel!
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