How to find a discretionary trust manager?

[KM01]

Hi all,

My father died last year, and had stipulated in his will that a nil rate band discretionary trust should be set up, trustees being my mother & the fund managers. He drew up the will when that was advisable for IHT purposes between married couples, which it no longer is, but it seems worth setting up the Trust in any case. The fund manager is named in the will as Lloyds Bank but we are not obliged to go with them. The family are agreed that we would like the fund to be invested in ESG funds and Lloyds don’t offer this.

How can I identify other fund management companies with transparent fee structures and who will offer ESG options? A brief search indicates that fee structures seem to be hard to identify without a lot of phoning.

Any ideas gratefully received!

KM01

[Dod101]

Hi all,

My father died last year, and had stipulated in his will that a nil rate band discretionary trust should be set up, trustees being my mother & the fund managers. He drew up the will when that was advisable for IHT purposes between married couples, which it no longer is, but it seems worth setting up the Trust in any case. The fund manager is named in the will as Lloyds Bank but we are not obliged to go with them. The family are agreed that we would like the fund to be invested in ESG funds and Lloyds don’t offer this.

How can I identify other fund management companies with transparent fee structures and who will offer ESG options? A brief search indicates that fee structures seem to be hard to identify without a lot of phoning.

Any ideas gratefully received!

KM01

Do not use a bank as a fund manager what every you do. Can you not be your own fund manager? The trouble is that you will then need to mug up on trust taxation etc as well as the investment side. Are you really sure that a trust is good idea? When my first wife died quite some tears ago now, we had that provision in our Wills as well but I soon realised that it was more hassle than was worthwhile. We kept it going for two or three years and then wound it up, simply dividing the assets equally amongst the potential beneficiaries. As it is disctretionary, the trustees can split the assets any way they like amongst the potential beneficiaries. It was just too much hassle and expense.

Dod

[bluedonkey]

I agree with Dod. Having been involved professionally in trusts, I would strongly advise you to consider whether the annual hassle and cost is really really worth it. Find another solution to whatever the problem is.

[scrumpyjack]

I agree with Dod. Having been involved professionally in trusts, I would strongly advise you to consider whether the annual hassle and cost is really really worth it. Find another solution to whatever the problem is.

Totally agree, trusts are a recipe for expense, tax and hassle. It is certainly not worth it unless the amount runs well into 7 figures and even then still only a last resort IMO.

[swill453]

But how can it be avoided if the will mandates it? On the other hand, who exactly could enforce the clause?

Scott.

[Howard]

Dod and bluedonkey are almost certainly right in my view from the limited information you have supplied.

Having had a presentation by a well known wealth manager I did some basic research on setting up a discretionary trust for my family and consulted two other managers. My conclusion was that they were a brilliant way for banks/wealth managers/fund managers to extract significant amounts of money from someone else’s investments. And almost purposely designed to be complicated from a tax and legal perspective.

The complications made it tempting to suggest to my children that they take on the task! In defence of your Father, he might have been in this position.

I’d have no compunction in deciding to take a simpler course which hopefully your Mother will understand fully and can take into account ESG investment objectives. Investing in ETFs or ITs with environmental credentials is relatively easy and can be done in a low cost and low maintenance manner. Other posters may add suggestions on the best way to do this.

regards

Howard

[KM01]

Thanks for these comments.

I don’t have the time, inclination, or knowledge to manage the fund, and as someone has pointed out, it is a requirement of the Will that it is set up, so it can’t be avoided in the short term even if we choose to terminate it fairly soon after. Also, it is my mother’s money, and her decision, although she is looking to me to suggest what might be best. Ultimately the beneficiaries will be me & my sibling + several grandchildren, and I’m not comfortable making investment decisions on their behalf. Presumably the executor has a duty to ensure that the terms of the Will are fulfilled so they will enforce in the short term.

Having decided that a Fund Manager is a necessity for the remainder of my mother’s lifetime, I would like to identify one that offers ESG investment options, and has a transparent fee structure. If I start phoning/emailing round the many potential companies I have found online I imagine I’ll be bombarded with sales pitches. I’d rather do my own research and make a decision based on comprehensible numbers and any recommendations of good customer service (probably more important than investment track record for me, as I would prefer tracker funds, if identifiable ESG funds exist).

[bluedonkey]

The professional charges as a % of the investments will each year significantly degrade the value of the money left by the will.

[Dod101]

Thanks for these comments.

I don’t have the time, inclination, or knowledge to manage the fund, and as someone has pointed out, it is a requirement of the Will that it is set up, so it can’t be avoided in the short term even if we choose to terminate it fairly soon after. Also, it is my mother’s money, and her decision, although she is looking to me to suggest what might be best. Ultimately the beneficiaries will be me & my sibling + several grandchildren, and I’m not comfortable making investment decisions on their behalf. Presumably the executor has a duty to ensure that the terms of the Will are fulfilled so they will enforce in the short term.

Having decided that a Fund Manager is a necessity for the remainder of my mother’s lifetime, I would like to identify one that offers ESG investment options, and has a transparent fee structure. If I start phoning/emailing round the many potential companies I have found online I imagine I’ll be bombarded with sales pitches. I’d rather do my own research and make a decision based on comprehensible numbers and any recommendations of good customer service (probably more important than investment track record for me, as I would prefer tracker funds, if identifiable ESG funds exist).

If it is your mother's money that would suggest that she is the sole or main beneficiary of the trust. If she agrees that it is not necessary, that should be sufficient to overcome the 'requirement' of the Will to set up a Trust in the first place. Who else is going to challenge it? Once your mother has the funds then she can change her Will to ensure that you, your sibling and grandchildren are beneficiaries. If you proceed as you are proposing much of that money will disappear in fees, especially if the assets are basically the nil rate band which, let's face it, is not a life changing fortune.

However it is up to you but you may well regret it in due course.

Dod

[Howard]

Thanks for these comments.

I don’t have the time, inclination, or knowledge to manage the fund, and as someone has pointed out, it is a requirement of the Will that it is set up, so it can’t be avoided in the short term even if we choose to terminate it fairly soon after. Also, it is my mother’s money, and her decision, although she is looking to me to suggest what might be best. Ultimately the beneficiaries will be me & my sibling + several grandchildren, and I’m not comfortable making investment decisions on their behalf. Presumably the executor has a duty to ensure that the terms of the Will are fulfilled so they will enforce in the short term.

Having decided that a Fund Manager is a necessity for the remainder of my mother’s lifetime, I would like to identify one that offers ESG investment options, and has a transparent fee structure. If I start phoning/emailing round the many potential companies I have found online I imagine I’ll be bombarded with sales pitches. I’d rather do my own research and make a decision based on comprehensible numbers and any recommendations of good customer service (probably more important than investment track record for me, as I would prefer tracker funds, if identifiable ESG funds exist).

It sounds as though the executor might be the bank? Did they persuade your Father to write the will in the bank's favour? It is worth checking whether the Trust decision is enforceable as it will almost certainly extract significant funds from the estate.

Hopefully Clitheroe Kid or someone with legal knowledge will be along to give a legal view.

regards

Howard

[Howard]

Re - reading your post above, just a couple of thoughts to add.

Assuming that you find that you don't need a discretionary trust and just want independent and impartial advice on a simple ESG investment strategy a company who might be worth contacting is Octopus Wealth https://octopuswealth.com/. I have no relationship with this company other than buying electricity and gas from them. They put themselves forward as very environmentally friendly and would probably be happy to have a no-cost personal chat with you. You would have to assess whether they would be the type of advisor you would trust.

Another alternative is to go to an old-fashioned stockbroker who would give personal service. I'm not recommending this firm over others, but over 30 years I have used the services of Pilling and Co in Manchester. https://www.pilling.co.uk/. They have given me some incredibly valuable advice for free over half a lifetime of investing, just because I'm a customer. They usually answer the phone in seconds. In fact as well as managing a SIPP and ISAs they have set up bare trusts for my grandchildren (very simple) and whilst they let me choose the investments, they would happily advise on ESG funds and handle the administration for what I would consider a modest fee. Other personal stockbrokers are available.

Hope these comments are helpful. They are not meant as advice.

Do let us know what you decide and how it turns out because it will be helpful for other readers.

regards

Howard

[KM01]

Thanks for these suggestions.

Whilst the initial purpose of the Trust, when the Will was written, was IHT avoidance between married couples, which is no longer relevant (for the sum concerned), I understand that a Trust still has the advantage of protecting the sum from IHT in the future. After my mother’s death the funds would become part of her estate and, if not in a Trust, would be added to amount on which IHT is payable.

Is that a reason to go with a Trust despite the acknowledged costs, or have I misunderstood (or been misled by Lloyds?).

Regards

KM01

[Dod101]

Thanks for these suggestions.

Whilst the initial purpose of the Trust, when the Will was written, was IHT avoidance between married couples, which is no longer relevant (for the sum concerned), I understand that a Trust still has the advantage of protecting the sum from IHT in the future. After my mother’s death the funds would become part of her estate and, if not in a Trust, would be added to amount on which IHT is payable.

Is that a reason to go with a Trust despite the acknowledged costs, or have I misunderstood (or been misled by Lloyds?).

Regards

KM01

There are a lot of allowances that you can make use of these days to save IHT and it would be worth your while to take advice and see what your mother's liability to IHT would/will be with and without using a trust. If you do that you can see what you would potentially save by using a trust as you have mentioned. As a blanket comment, I am always very chary about taking advice from a bank on these matters and would suggest that speak to your mother's solicitor or an IFA if you can find one that you are happy with.

Dod

[scrumpyjack]

This summarises the tax position on discretionary trusts vs bare trusts

https://www.jameshay.co.uk/OldCMS/Docum ... entID=2900

I have taken the route of setting up bare trusts for each of my grandchildren. They each have a full personal allowance and cgt allowance, which is worth having for the next 15 years, as compared to perhaps 45% tax in a discretionary trust.

One could invest in ESG Investment trusts. JP Morgan have some apparently good ones.
https://am.jpmorgan.com/gb/en/asset-man ... lsrc=aw.ds

At least you then avoid two levels of fees - the adviser for the trust and the managers of the investment trusts. The former, IMO, is a complete waste of money.

[richfool]

Thanks for these comments.

I don’t have the time, inclination, or knowledge to manage the fund, and as someone has pointed out, it is a requirement of the Will that it is set up, so it can’t be avoided in the short term even if we choose to terminate it fairly soon after. Also, it is my mother’s money, and her decision, although she is looking to me to suggest what might be best. Ultimately the beneficiaries will be me & my sibling + several grandchildren, and I’m not comfortable making investment decisions on their behalf. Presumably the executor has a duty to ensure that the terms of the Will are fulfilled so they will enforce in the short term.

Having decided that a Fund Manager is a necessity for the remainder of my mother’s lifetime, I would like to identify one that offers ESG investment options, and has a transparent fee structure. If I start phoning/emailing round the many potential companies I have found online I imagine I’ll be bombarded with sales pitches. I’d rather do my own research and make a decision based on comprehensible numbers and any recommendations of good customer service (probably more important than investment track record for me, as I would prefer tracker funds, if identifiable ESG funds exist).

Can't you just ask a solicitor to set the trust up (i.e. do the documentation), and do so with you and whoever (maybe your sibling) as trustees. (The Will may well form the basis of the trust). Then you the the other trustee invest the funds in a couple of suitable ESG focused investments, such as IT's like Keystone Positive Change IT (KPC) and Impax Environmental Markets trust (IEM). No fees to pay to banks.

[mc2fool]

When my first wife died quite some tears ago now....

Sweet and endearing typo there Dod (if it was indeed).

[bluedonkey]

Replying to Richfool: that still leaves the annual expense of professional trust admin, submitting trust tax returns etc.

[Dod101]

When my first wife died quite some tears ago now....

Sweet and endearing typo there Dod (if it was indeed).

Indeed. I noticed that but let it go. Seems quite appropriate in the circumstances.

Dod

[richfool]

Replying to Richfool: that still leaves the annual expense of professional trust admin, submitting trust tax returns etc.

Surely it will be cheaper for him to do carry out that role than have a professional carry out the role.

[pje16]

But how can it be avoided if the will mandates it? On the other hand, who exactly could enforce the clause?

Scott.

A deed of variation my help here, it is how a will can be amended after death
https://www.irwinmitchell.com/personal/ ... fter-death
We did this after my mum passed away