Discretionary Trust and IHT
Posted: March 1st, 2023, 3:50 pm
I am unsure which board this belongs to, but after some thought I think this one is the right one.
Background
We have just set up a discretionary trust, with our three offspring the beneficiaries. This is registered with HMRC. Now we are enacting a declaration of trust plus Land Registry restriction on title, so that an investment property sits in this trust. The property value is well within our NRBs. The 7 year alarm clock will soon be set.
Challenge
We are keen not to do anything to benefit from the trust, and as part of this began to explore opening a separate bank account; to receive rent, pay property expenses, pay out net rent to beneficiaries, plus tax payments with trust SA. However, trust bank accounts are a nightmare. Our NatWest: no such facility. Cater Allan: closed to new applicants. etc etc. May be able to have one with Metro Bank....
Legal Questions
(i) Can my wife and I, as trustees, just open an ordinary bank account (separate from our normal one to evidence separation for tax and admin purposes), and run the trust finances through this, without in any way endangering the discretionary trust as a vehicle to reduce IHT after the 7 years?
My thinking is that as trustees we hold legal title, and so long as we act as custodians for our beneficiaries, and take no personal gain, this should pass muster. One uncertainty is contravening any bank regulations.
I would rather have one of these fabled "trust accounts", but they seem to be so hard to find; this puzzles me as there are thousands of such trusts out there!
Can anyone shine a legal light on this, please?
(ii) Could we even just run things through our normal current account?
Uncle
Background
We have just set up a discretionary trust, with our three offspring the beneficiaries. This is registered with HMRC. Now we are enacting a declaration of trust plus Land Registry restriction on title, so that an investment property sits in this trust. The property value is well within our NRBs. The 7 year alarm clock will soon be set.
Challenge
We are keen not to do anything to benefit from the trust, and as part of this began to explore opening a separate bank account; to receive rent, pay property expenses, pay out net rent to beneficiaries, plus tax payments with trust SA. However, trust bank accounts are a nightmare. Our NatWest: no such facility. Cater Allan: closed to new applicants. etc etc. May be able to have one with Metro Bank....
Legal Questions
(i) Can my wife and I, as trustees, just open an ordinary bank account (separate from our normal one to evidence separation for tax and admin purposes), and run the trust finances through this, without in any way endangering the discretionary trust as a vehicle to reduce IHT after the 7 years?
My thinking is that as trustees we hold legal title, and so long as we act as custodians for our beneficiaries, and take no personal gain, this should pass muster. One uncertainty is contravening any bank regulations.
I would rather have one of these fabled "trust accounts", but they seem to be so hard to find; this puzzles me as there are thousands of such trusts out there!
Can anyone shine a legal light on this, please?
(ii) Could we even just run things through our normal current account?
Uncle