I am the main beneficiary to a family trust that has about £400,000 invested in bonds and shares and i receive a monthly income from that. My son and 2 grandchildren are also beneficiaries, my son will become the main benficiary when i die.

There are high administrative costs accosiated with the trust and mainly for that reason i am looking to wind it up.

There are three trustess, myself (70) my solicitor and an accountant. My solicitor has replied to my suggestion of winding the trust up as follows:


" The tax consequences of breaking the trust to some extent would depend on who the trust fund were appointed out to. So, for example, if part of the trust fund was appointed to yourself, which i assume may be necessary in order to remove the trusts loan and to replace the income that you are currently drawing from the trust, then the capital sum would form part of your estate and on your death be subject to inheritance tax in all likely hood at 40%.

The same will apply with any monies given to tom (my son) who would presumably receive at the very least the part of the capital which he is already loaned so that he would not have to repay this.

The granchildren (of which there are 2) i assume would be to young to receive large capital sums and therefore any capital that was to be paid to them would have to be held in trust for them and would be subject to the tax regime if it was held on a contingent basis i.e. subject to their reaching a particular age. If it was given to them outright they would be entitled to receive the capital at 18 which may be thought undesirable. Also if they died prior to 18 and therefore were unable to make a will their parents would inherit and this may or may not acceptable.

If assets were disposed of in order that cash could be distributed then capital gains liability may arise in the trust. It should be possible for assetts to be given out to beneficiaries in kind rather than the trust disposing of them and if this was the case then it may be possible to roll over any gains so that the beneficiaries receive the assets at the same acquisition cost which the trust currently holds them. However this may have the advantage of making available the persoanl capital gains tax allowance of the individual with their individual capital gains tax rate applying rather than the trust rate."

I am not very good at this type of thing and don't really understand the context of his letter (namely the last paragraph) or what the best thing to do is.

I am very close to my son and have no hesitation in doing something together with him. We would like to invest in a property together to rent but not sure if or how the best way to do this might be taking the above into account. I already own a flat as well as my main home and my son has his house with about a £130,000 mortage; he also has the loan mentioned above.

Any help or advice of the best thing to do with this trust would be hugely appreciated.

Kind regards

E

Lols,another scam. beware ppl

I do not understand why your administration costs are high unless it is because you choose to have a solicitor & accountant to be trustees instead of your family
or because you hoping to create income by trading shares instead of holding shares for dividends.
Your solicitor is warning you if you wind up the trust you will pay capital gains tax and 2 lots of Inheritance Tax before your grand children benefit unless you transfer ownership to your Grand Children) Are your family using their annual capital gains allowance every year?

You should be able to use your trust to buy properties (including yours) for the benefit of your family even if you have to sell the shares first. However you need to check the terms of the trust with a different solicitor who is a trust specialist. Also get independent tax advise.