If one of the trustees opens the account as though it were a personal account, they would be making declarations on the account opening form for the purposes of compliance with the AML regulations. If the bank suspected that it had been mislead as to the source of the funds it could freeze the account and make a suspicious activity report to the relevant authority. The trustee account holder would then need to expend time and energy in explaining themselves and seeking to justify their position, having already put themselves on the back foot.
Whilst I accept that the position to which SeniorSam80 refers does exist in many instances, it is not one that I believe should be recommended.
I wonder why the banking institutions are reluctant to operate trustee banking accounts. There are substantial funds held within the trust “industry” and, in trusts administered by lay individuals, large balances may be “invested” on bank accounts rather than more widely. Perhaps it I the case that the professional bodies could try and engage the British Bankers Association to encourage at least some of its members to provide an essential (and I would have thought profitable) service.
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals
The problem with bank accounts is that banks like to know what an account is being used for and often ask as part of the opening procedures. For instance the bank where I hold my personal account would not accept me opening an account to be used for business. You could ask how they would know but that is not the point. Trustees opening bank accounts (as trustees) should not be opening accounts that are stated to be for personal use.
If the trust has a stockbroker then they can usually manage the cash and pay tax, professional fees, and beneficiaries directly.
If a trust has an ongoing relationship with a solicitor then eg withdrawals from an investment bond (so usually held via an IFA rather than a stockbroker) can be paid to the solicitors client account and then paid out to beneficiaries, used for fees, etc. I am aware that client accounts should not be used as bank accounts but there is still plenty of scope to use them wholly legitimately for trust transactions. If in doubt go to the source, the Solicitors Accounts Rules, and see how your requirements fit with those. I recall there was a case where someone was done for using a client account as a client’s bank account, but I recall this was where someone was running a car dealing business through it.
Many seem to think if you have a trust it needs a bank account, but this is not so as above. They are administratively costly and opaque. If you can do what you need through client account or the stockbroker then don’t add to admin costs with a bank account.
As for the H&W holding a joint account used for trust purposes, the trust also holding a house, if the house trust is registered I would just show the bank account as being an asset of that trust rather than a separate trust. If it was a separate trust than that would raise the question why it was receiving (presumably) rental payments from the other trust, were distributions being made to the bank account trust etc, as well as halving CGT/IT allowances for the house trust. Presumably all the funds in the account can be shown as having come from the house, and as having been declared as trust income? I would however consider the T&C’s of the bank account as to whether it can be used for a trust. If not, then in my view your advice can only be to move the account.
I agree with what Paul Saunders says in his final paragraph.
I am treasurer of a Town Twinning Association. It has had a trustee bank account for years. The office bearers of the TTA are trustees for it and operate the bank account accordingly. When I was appointed last year, the process of adding me to the authorised signatories was straight forward and easily completed online.
There is no legal difference between an unincorporated association and a trust. Both are governed by trust law. It cannot be beyond the nous of one of the many lawyers that banks employ to tell the powers that be to stop worrying about opening trust accounts. They do it regularly with clubs, associations etc
In answer to Retiree’s point, there are many AML driven considerations for trusts (as we usually think of them) that I don’t think apply to Clubs etc. Perhaps this is why the banks are reluctant to take them on.
Rightly or wrongly the world sees trusts as vehicles for tax evasion until proven otherwise. I don’t think the same view applies to Clubs etc.
Careful what is said. Associations may get the OECD and the EU Commission on the banks’ backs if they say they are the same as trusts. This should be kept “in house”.
The one thing that would help is that HMRC are frequently involved personally in sports associations so they might actually defend the concept this time rather than cowering in the trenches.
First, many banks have lots of red tape to deal with when opening trust bank accounts. Until recently with the low interest rate environment they weren’t making enough money generally from bank accounts to cover their costs. My firm has a trust with a bank account with Handelsbanken and they now charge £50 per month in bank fees to cover the cost of their red tape. I suspect it is a ploy to get us to take our business elsewhere but we are stuck with them and their high charges for the time being.
Secondly, my firm used to have a lot of accounts with the Yorkshire Building Society, but they stopped offering new accounts after the Great Financial Crisis in 2007-09. I complained to their head office at the time and, reading between the lines, the reply was that due to global capital adequacy rules banks had to treat their book of trust bank accounts as high risk and thus hold more regulatory capital. It never helps when the Europeans never understand trusts and think they are used by crooks or money launderers, when in the UK they are often used for routine situations, eg young children, disabled beneficiaries, widows, care fee purposes, etc.
Perhaps STEP head office could raise this with the banking industry and the people who set the global capital adequacy requirements.
The OECD ably assisted by the EU Commission and HMRC have finally managed to undermine the English law of property by making it impossible to administer.
I note that the French quasi-usufruit is flourishing on this side of the Channel as a non registrable property arrangement …
I set out below my enquiry to BEIS of 24 August 2022 withh reminder on September 22. Answer comes there none.
"I write to you about a subject of which you know little and care even less. It may come as a surprise to you but trusts are not only created for money laundering purposes and to avoid tax. When a person dies their will or the intestacy rules may require a trust to be set up. Banks are increasingly refusing to set up bank accounts for trustees. Or asking for a minimum deposit of £500k.
Trustees can execute a declaration of trust over a bank account set up in joint names to hold trust monies but banks are wise to this and may ask for confirmation that the accounts are owned beneficially. Indeed KYC CDD may require them to do so. Why do you think it is a good idea for banks to choose, or be forced by red tape, to refuse to open accounts for trustees or do you think that Strong Customer Verification logically extends to implementation by having no Customers?
When constituents find their estates and trusts cannot be administered because banks are cutting them out of the banking system they will be truly annoyed. There will be a stink in the Daily Mail etc and there may even be VOTES at stake."
A pertinent question is whether our supine pusillanimous subscription-funded professional bodies can tear themselves away from policing section 3 of the PCRT for long enough to ask HMG about its vision for the long-term consequences of a trust bank account desert, given the delights of the Probate Service backlog (to name just one such) and the civil legal aid advice desert spawning those cuddly CPR-lite Litigants in Person.
If you have a UK Statutory Trust and register it with the TRS then Metro should be willing to open an account. If it is a Private Trust (non-statutory) then your going to have to look at Private Banks with £250k+ account opening requirement.
The AML, TRS type red tape seems to have pushed a lot of banks out of the Trustee banking market.
Handelsbanken now would like £500k+ opening deposit with a long term view (10+ year banking relationship requirement).
I am in the process of opening an account for a discretionary will trust, with Metro Bank. I haven’t completed the process yet, but have been given all the documentation and an appointment for finalising it. I have to say it was a struggle to start with - I had three or four promises to call me back, but nothing happened. I had to go into a branch and make a fuss to get things off the ground - you need to find someone who knows what they’re talking about…
This is after finding that none of the other main high street banks now offer this service.
Hope this helps.
Chris
I am not sure that I agree with Neil (28 February).
As part of their AML obligations the bank needs to establish to whom the monies belong. If the account holder declares them to be their own monies, rather than being held as trustee, the account may well be frozen if the bank becomes aware of the true beneficial ownership. This could open the trustee(s) to personal liability should any loss accrue to the trust as a result of the bank’s action.
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals
