NRB discretionary will trust - specifying assets?

[Gilgongo]

I've been reading about Nil Rate Band Discretionary Will Trusts and think I understand the issues, but what I can't seem to find out about is whether you need to specify which assets are included in the trust if your estate is likely bigger overall than the NRB value. If the estate has things like property, yachts, shares, medieval golden sceptres, or bitcoin for example, should the will specify which asset types are "in" and which are "out"?

G

[scrumpyjack]

I've been reading about Nil Rate Band Discretionary Will Trusts and think I understand the issues, but what I can't seem to find out about is whether you need to specify which assets are included in the trust. If the estate has things like property, yachts, shares, medieval gold sceptres, or bitcoin for example, should the will specify which asset types are "in" and which are "out"?

G

I assume one would define it as a cash legacy otherwise if specific assets are bequeathed the total might not equal the nil rate band. The executor can realise sufficient assets to meet the bequest.

[Gilgongo]

Perhaps, but from what I can understand, one of the advantages of the trust is that if the estate contains assets that are likely to increase in value then if these assets are put into a discretionary trust, any increases in value will be kept out of the estate of the beneficiary. This is what made me think about nominating specific assets.

So would such allocation be at the discretion of the executors then?

[scrumpyjack]

Perhaps, but from what I can understand, one of the advantages of the trust is that if the estate contains assets that are likely to increase in value then if these assets are put into a discretionary trust, any increases in value will be kept out of the estate of the beneficiary. This is what made me think about nominating specific assets.

So would such allocation be at the discretion of the executors then?

The Will could presumably be drafted to allow the executors to decide which assets could be allocated to discharging the legacy and on what basis (eg at probate value)

[Dod101]

I think that you need to convince yourself about why you want a NRB discretionary trust in the first place. After you justify that to yourself, you can decide and nominate the assets to go into the Trust.Trusts are not hassle free nor financially free for your executors or for the trust executors.

Usually too much trouble and expense I would have thought.

Dod

[Gilgongo]

I think that you need to convince yourself about why you want a NRB discretionary trust in the first place.

Indeed, although the reason why I'm asking is that I am both an executor, beneficiary and trustee named in my parents' wills. Until now I'd not given the trust side of it much thought, but the subject came up when visiting them at Christmas. So I thought I'd investigate the general issues.

[Dod101]

I think that you need to convince yourself about why you want a NRB discretionary trust in the first place.

Indeed, although the reason why I'm asking is that I am both an executor, beneficiary and trustee named in my parents' wills. Until now I'd not given the trust side of it much thought, but the subject came up when visiting them at Christmas. So I thought I'd investigate the general issues.

The NRB is only £325,000, not a life changing amount these days for most people, and I would not be putting that sort of money into a trust. If you added a zero on the end it might be worth it, but given the hassle and expense of setting up and running a trust I would forget the whole idea. Of course you may see benefits which more than outweigh the costs and hassle but I have been through the sort of thing you are thinking of but after two or three years I just would down the trust.

Dod

[hiriskpaul]

I think that you need to convince yourself about why you want a NRB discretionary trust in the first place.

Indeed, although the reason why I'm asking is that I am both an executor, beneficiary and trustee named in my parents' wills. Until now I'd not given the trust side of it much thought, but the subject came up when visiting them at Christmas. So I thought I'd investigate the general issues.

I would have a discussion with your parents about the trusts.

I am the executor for an uncle's estate that has been a total nightmare from beginning to what is hopefully approaching the end. One of the final hurdles is a discretionary trust set up in the will. This is a total pain. Trust bank accounts are becoming increasingly difficult to set up. I was going to use Metro Bank, but they have recently introduced charges. I was going to use Hargreaves Lansdown for investments, but they have recently stopped offering accounts to trustees. Then there is the ongoing admin to consider.

Another issue is tax. Setting up a NRB trust in a will will not save any tax. In fact, trusts are heavily taxed and will likely cost more than leaving assets that can be sold with the proceeds reinvested into beneficiaries ISAs and possibly SIPPs.

I have been asked to be an executor by a number of people. If I discover that any of them have set up discretionary trusts in their wills I would think twice about whether I would want to continue as an executor and/or trustee.

Unless your parents have particularly strong reasons for wanting control over assets being placed into the hands of trustees, I would say they should rewrite their wills and get rid of discretionary trusts. Don't set up discretionary trusts in a will just because someone has told you it is tax efficient, because it likely will not be.

[hiriskpaul]

Ps, if the will says that particular assets are to be placed in trust, then the trust will have an initial value based on the Probate value of those assets. OTOH, if you said you wanted a certain proportion of the estate to be placed into trust, then you could leave it to executors to decide which assets to place in trust.

[Gilgongo]

Thanks - I think I'll have a chat with my parents. One thing I don't know is what the letters of wishes for the trusts say exactly (my father mentioned that the trust was for helping to fund care for the surviving partner, which I suppose might be because assets held in trust wouldn't be counted in terms of means testing or something perhaps. Not sure.

Anyway, now I've got a better handle on the potential downsides I'll see if I can get more details.

[UnclePhilip]

The NRB is only £325,000, not a life changing amount these days for most people, and I would not be putting that sort of money into a trust. If you added a zero on the end it might be worth it, but given the hassle and expense of setting up and running a trust I would forget the whole idea. Of course you may see benefits which more than outweigh the costs and hassle but I have been through the sort of thing you are thinking of but after two or three years I just would down the trust.

Dod

Perhaps those much richer than me can scorn discretionary trusts. However, we've set up a lifetime discretionary trust for our offsprings, putting an investment property into it. Of course there's some extra tax administration, but if we survive for 7 years there'll be a 6 figure IHT saving. I certainly consider that worth the small administrative inconvenience....

[Dod101]

The NRB is only £325,000, not a life changing amount these days for most people, and I would not be putting that sort of money into a trust. If you added a zero on the end it might be worth it, but given the hassle and expense of setting up and running a trust I would forget the whole idea. Of course you may see benefits which more than outweigh the costs and hassle but I have been through the sort of thing you are thinking of but after two or three years I just would down the trust.

Dod

Perhaps those much richer than me can scorn discretionary trusts. However, we've set up a lifetime discretionary trust for our offsprings, putting an investment property into it. Of course there's some extra tax administration, but if we survive for 7 years there'll be a 6 figure IHT saving. I certainly consider that worth the small administrative inconvenience....

Yes but that is not the question being asked. I have not scorned discretionary trusts in principal They can have their uses. I have simply said that I cannot see the point in one in the circumstances outlined, and so I cannot see that it is worth the hassle and expense. You are taking advantage of the seven year rule for potentially exempt transfers and you presumably have your own reasons for gifting to a trust; possibly the potential beneficiaries are or were minors.

Dod