I am sure that this topic has been covered before, but I am struggling to find a clear answer on this. Where a Will leaves a small legacy (£5k) to a beneficiary who is under 18 years old when the testator dies, does this need to be registered with the TRS? We intend to make payment of the legacy to the parent of the beneficiary. The parent is one of three executors and trustees and the beneficiary is currently 5 years old. The requirements to keep the trust registered and up to date for the next 13 years seems disproportionate to the legacy amount. Any guidance and clarification on this is much appreciated.
I am not aware that there is any de minimis provision for registration with TRS, so this legacy would be registrable.
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals
Bare Trusts do need to be registered, that was brought in a couple of years ago. Income from BARE Trusts needs to be submitted through SAE. Online submission is not possible for minors so you need to submit paper copy, but first you need to get HMRC to issue a UTR No. It is all a bit of a slog I’m afraid.
If the parent receives the money as parent (rather than a trustee of the will trust) and pays it into a standard cash account for the minor (controlled by the parent but denominated for the child) there is a defensible argument that the arrangement is covered by the exemption under 3A para 6A - see trsm23160
It’s not a perfect argument as the rules are so vague but, given the sums involved, and the fact you won’t need a UTR, (I think) it could be considered a reasonable route to take.
Obviously this will only work if/while the parent keeps the sum in cash.
(Just to add that i don’t think you will need a UTR as any income should be absorbed by the child’s personal allowance)
Hi Paul
Thank you very much for your response.
In a similar scenario where there are three grandchildren all under 18 years receiving legacies of £5k each - would three separate bare trusts need to be registered, one for each of the grandchildren?
Many thanks,
Yes you would need three separate trusts but for that value I don’t think HMRC would expect tax returns. Best to clarify with them though.
Billy
I have tried to register the three trusts today with TRS, however the online portal will not allow me to. They take me through a series of questions and when I confirm that there is no UTR, that the trusts are not express trusts and that because they have no tax liability for 22/23 or for the previous 4 years it states “You do not need to register this trust. When the trust has tax to pay, you will need to come back to this service to register.”
This does not follow the advice and guidance that we have been provided with previously, has anyone else managed to register a bare trust for a minor beneficiary (who is not the deceased’s child) or have HMRC changed their guidance?
Any help with this confusing issue is much appreciated!
If the trust is not a bare trust exactly how did it come into existence? Oral or by operation of law? It seems possible that the trust was only imposed by s31 TA 1925. In that case it would have been excluded (para1Sch 3A) even if express.
Payment to a parent, where a trust permits, causes the parent to hold on a constructive trust which is not express. While the trust fund is cash the parent could make an oral declaration of trust by reading out the draft and for the draft to be witnessed, by a solicitor ideally, noting the date and time of the oral declaration and stating he heard it. An unsigned draft is a legal nullity.
O the Past Joys of Stamp Duty Planning!
Jack Harper
Hi Jack
We are dealing with an estate where there are three minor beneficiaries.
The Will states: “I GIVE to each of my grandchildren alive or en ventre sa mere at the date of my death the sum of FIVE THOUSAND POUNDS (£5,000) absolutely and I DECLARE THAT where such grandchildren have not attained the age of eighteen (18) years the receipt of the parent or parents of each of such grandchildren shall be sufficient discharge for my Trustees”.
Three of the deceased’s grandchildren are under the age of 18 years and we were under the impression that the bare trusts arising for these three legacies would need to be registered with the TRS.
The payments are going to be made to child trust fund accounts and junior ISA accounts that have been set up by the parents for this purpose.
Any clarity on this issue is much appreciated.
Thank you,
I set up two non-taxpaying Bare Trusts and registered them via the TRS .
They issued each a URN (Unique Reference Number) rather than a UTR, and a “certificate of proof of registration” which was required by the Investment Platform in which the assets were invested. I was the settlor of the trusts.
I think the Will as quoted does not create an express trust though s31 does (if not overridden elsewhere which is unlikely) and that is excluded. The payment is clearly for the benefit of the children and paid to the parent only to engage the receipt clause.
The parent then holds the money on a constructive trust which is not express (so, trustees, do not purport to pay it on an express trust).
TRSM10030 and 23160 state clearly: “Child Trust Funds and Junior ISAs are not trusts and therefore are not required to register on TRS”. That is reliable, as it is true provided an over-excited parent does not declare a bare trust in writing.
So no trusts here that are registrable, save by unfortunate and unnecessary additional deliberate action to create one where none is required in law.
Jack Harper
SarahShaw:
I am sure that this topic has been covered before, but I am struggling to find a clear answer on this. Where a Will leaves a small legacy (£5k) to a beneficiary who is under 18 years old when the testator dies, does this need to be registered with the TRS? We intend to make payment of the legacy to the parent of the beneficiary. The parent is one of three executors and trustees and the beneficiary is currently 5 years old. The requirements to keep the trust registered and up to date for the next 13 years seems disproportionate to the legacy amount. Any guidance and clarification on this is much appreciated.
Hi Jack
We are dealing with an estate where there are three minor beneficiaries.
The Will states: “I GIVE to each of my grandchildren alive or en ventre sa mere at the date of my death the sum of FIVE THOUSAND POUNDS (£5,000) absolutely and I DECLARE THAT where such grandchildren have not attained the age of eighteen (18) years the receipt of the parent or parents of each of such grandchildren shall be sufficient discharge for my Trustees”.
Three of the deceased’s grandchildren are under the age of 18 years and we were under the impression that the bare trusts arising for these three legacies would need to be registered with the TRS.
The payments are going to be made to child trust fund accounts and junior ISA accounts that have been set up by the parents for this purpose.
Any clarity on this issue is much appreciated.
Thank you,
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Previous Replies
If the trust is not a bare trust exactly how did it come into existence? Oral or by operation of law? It seems possible that the trust was only imposed by s31 TA 1925. In that case it would have been excluded (para1Sch 3A) even if express.
Payment to a parent, where a trust permits, causes the parent to hold on a constructive trust which is not express. While the trust fund is cash the parent could make an oral declaration of trust by reading out the draft and for the draft to be witnessed, by a solicitor ideally, noting the date and time of the oral declaration and stating he heard it. An unsigned draft is a legal nullity.
O the Past Joys of Stamp Duty Planning!
Jack Harper
Of course it would be obtuse of the Platform to insist on a registration which was not legally required but if business was refused on that basis contact the regulator if it is not in the T&Cs. If it is, the exception for statutorily imposed terms under the CRA 2015 does not apply. If the problem persists after a reasonable time has been taken to convince the obtuse complain. The official guidance is very useful https://assets.publishing.service.gov.uk/media/5a7f8b58ed915d74e33f716e/Unfair_Terms_Main_Guidance.pdf
The CMA and the FCA have powers to extract an undertaking from a financial services provider that it will not use what seems to them to be an apparently unfair term. But what is such is ultimately a question of law for the Court. As it was never my field I am not sure whether it would apply to pre-conditions in a contract before it was signed but it seems as if it might. The mischief is surely as great, especially if it is some kind of cartel term.
Jack Harper
I set up two non-taxpaying Bare Trusts and registered them via the TRS .
They issued each a URN (Unique Reference Number) rather than a UTR, and a “certificate of proof of registration” which was required by the Investment Platform in which the assets were invested. I was the settlor of the trusts.
–
Previous Replies
I am sure that this topic has been covered before, but I am struggling to find a clear answer on this. Where a Will leaves a small legacy (£5k) to a beneficiary who is under 18 years old when the testator dies, does this need to be registered with the TRS? We intend to make payment of the legacy to the parent of the beneficiary. The parent is one of three executors and trustees and the beneficiary is currently 5 years old. The requirements to keep the trust registered and up to date for the next 13 years seems disproportionate to the legacy amount. Any guidance and clarification on this is much appreciated.
Hi Jack
We are dealing with an estate where there are three minor beneficiaries.
The Will states: “I GIVE to each of my grandchildren alive or en ventre sa mere at the date of my death the sum of FIVE THOUSAND POUNDS (£5,000) absolutely and I DECLARE THAT where such grandchildren have not attained the age of eighteen (18) years the receipt of the parent or parents of each of such grandchildren shall be sufficient discharge for my Trustees”.
Three of the deceased’s grandchildren are under the age of 18 years and we were under the impression that the bare trusts arising for these three legacies would need to be registered with the TRS.
The payments are going to be made to child trust fund accounts and junior ISA accounts that have been set up by the parents for this purpose.
Any clarity on this issue is much appreciated.
Thank you,