Lizzie, I know how you feel because I have exactly the same worry.
I'm getting ready to consult a lawyer by writing a list of questions and concerns to discuss. So what folllows is not legally informed and maybe not factually correct - just my thoughts.
I understand that setting up a Trust managed by one or more Trustees is usual. I'll be asking about:
- The cost of establishing a Trust and the ongoing management fees (for example, whether they need to be audited each year).
- If the amount in the Trust is small, could it mostly be chewed up in management fees?
- Should I set up a Trust for my daughter while I'm still alive?
- How will it affect my daughter's disability pension?
- What's the alternative to a Trust?
A friend of mine manages his brother's inheritance simply by having it in a high interest bearing bank account in his own (my friend's) name because then it doesn't affect his brother's pension. That takes a lot of small-t trust, of course, and is not secure legally.
But Trustees for legally-established Trusts also have a lot of power over how and when the money is spent. So it must be really important to pick the right mix of people to be Trustees - who will have my daughter's best interests at heart and have good judgement, but also people who can be impartial - not have any self-interest in the money, and not be swayed into bad decisions by my strong willed daughter.
My other (financially sensible) daughter would be an obvious choice, but I'm worried about creating a situation where their loving relationship as sisters is damaged by one being a Trustee. Also, however much we don't want to think one of our own kids would abuse their financial power over a sibling, it happens in some families and trusted children can be pushed into bad decisions by greedy partners.
I understand that legal firms and the government State Trustees can be nominated as Trustees, but charge ongoing management fees.
I realise not everyone will have this choice, but I'm looking at whether I could give my daughter her inheritance as a house or apartment, instead of money. If she lived in it, I don't think it would affect her disability payment. And if the house was owned jointly (not necessarily 50:50) with her sister, it couldn't be sold without both agreeing.
Best wishes, and you're doing the right thing by thinking about this question.
