The Hidden Challenges Of Trusts For Minor Beneficiaries In Wills

When putting a Will in place, many people understandably want to ensure that children or grandchildren are protected financially. A common solution is to include a trust, allowing funds to be held and managed until a child reaches a suitable age.

While this can be a very sensible approach, there are some practical challenges that are becoming increasingly apparent, particularly where the amounts involved are more modest.

The growing difficulty of opening trust accounts

One of the biggest issues facing trustees today is simply being able to open an appropriate bank account for a trust.

Historically, this was relatively straightforward, with several banks offering dedicated trust accounts. However, over recent years, many providers have withdrawn from this space entirely, leaving trustees with far fewer options.

This is not just anecdotal. Reports in the press highlight how a number of UK banks have scaled back or closed trust account services, often citing rising compliance costs and operational complexity as the reason. This has created real challenges for families trying to manage funds on behalf of younger or vulnerable beneficiaries.

Why have banks stepped back?

From a banking perspective, trusts are no longer seen as simple arrangements.

They typically involve:

As a result, some providers have concluded that the cost and complexity of offering trust accounts outweighs the commercial benefit, leading to reduced availability across the market, see here.

The practical impact on trustees

For trustees, who are often family members or friends, this creates a number of real-world difficulties:

In some cases, trusts can effectively be “on hold” while suitable banking arrangements are put in place, delaying the ability to use funds for the child’s benefit.

Added complexity: linked accounts

Even where accounts are available, the structure required can be more complicated than expected.

Many providers now require:

This can mean setting up multiple accounts just to manage one fund, adding to the administrative burden and increasing the likelihood of delays or errors.

Why this matters for smaller trusts

These issues are particularly significant where the trust fund is relatively modest.

What was intended to be a simple, protective measure can become:

Clients are often unaware of these practical challenges at the point a Will is drafted. The focus is understandably on protecting beneficiaries, but how that structure works in practice is just as important.

Are there simpler alternatives?

In some cases, it may be worth considering alternative approaches that achieve similar aims with less complexity.

Lifetime Gifting

Making gifts during one’s lifetime can allow funds to be invested into:

• Junior ISAs (JISAs)
• Other straightforward savings arrangements

Junior ISAs, for example, offer a tax-efficient wrapper with no ongoing trust administration required, and funds are automatically transferred to the child at age 18.

Leaving funds to parents

Depending on family circumstances, it may be appropriate to leave assets to a child’s parents (supported by a letter of wishes). This can significantly reduce administrative friction, although it naturally involves a different level of control.

Keeping structures proportionate

For smaller estates, simplicity can often lead to better outcomes:

A balanced view

Trusts remain an important and valuable planning tool. They can provide:

However, they are not always the most practical solution in every case, particularly where the administrative framework needed to support them has become more constrained.

Final thoughts

Good estate planning isn’t just about the legal structure, it’s about ensuring things work efficiently and realistically for those who will carry them out.

With banks continuing to step back from trust accounts and administrative requirements increasing, it’s more important than ever to:

Taking a step back and looking at the full picture can help ensure that a well-intentioned plan doesn’t become an unnecessary burden in the future.

Comment

If you’re reviewing a Will, advising clients, or thinking about putting plans in place, it can be helpful to sense-check how a proposed structure will work in practice, not just in theory.

We’re always happy to have an informal discussion at an early stage, whether that’s:

Getting this right early on can save significant time, cost and complexity for families later.