The Lemon Fool

Long story short is that two nephews both in their early twenties benefitted from a bare trust invested in Witan units. Neither is interested in taking control of their investment yet or getting their hands on the money, which is no bad thing until they mature a bit more.

The youngest nephew still lives at home with his mum and so last year an ISA was opened in his name and the cash value was transferred into and used to purchase Witan units. Job done I can forget about that now until the day he asks for the password to the account.

Poor timing that as this was being put in hand the elder nephew announced that he was being relocated to work in Dublin. He's having a grand time and isn't aware of any intention to relocate him back to the UK in the foreseeable and so his Witan units are languishing in an unsheltered account. Witan hasn't done spectacularly well over the last 12 months which means it's grown from about £27k to £29k. However it's likely that next year's £3k CGT allowance will be breached pretty soon.

Options I suppose are :-

- Sell the units now and buy them back in 30 days and risk having to buy them back for a higher amount.
- Sell the units now and buy something similar which is unlikely to perform very differently either way, then rebuy Witan at some point after 30 days has elapsed.
- Do nothing and what will be will be.
- Something else, if something else exists as an option.

The choice of Witan is a historical one not of my choosing and, as happy as I am to make choices for myself, I'm not very keen to change choices for them or to have the nephews invested in different funds which may perform very differently.

Any wise thoughts will be gratefully received.

Your nephews don't require any income from the trust now, so I suggest that the holdings should be something that produces less income that WTAN. Look at its performance against FCIT or even VWRL; it's a laggard over 1,3,5 and 10 years.

I oversee bare trusts, j/SIPPs, jISA and CTF for a few relatives. These are my choices, dependent on the beneficiary's age:

FCIT - global growth
SMT - riskier global growth
MWY - global growth
MYI - international income
FAS - Asian
MNKS - global growth
BRSC - smaller Cos

rhys wrote:Your nephews don't require any income from the trust now, so I suggest that the holdings should be something that produces less income that WTAN. Look at its performance against FCIT or even VWRL; it's a laggard over 1,3,5 and 10 years.

I oversee bare trusts, j/SIPPs, jISA and CTF for a few relatives. These are my choices, dependent on the beneficiary's age:

FCIT - global growth
SMT - riskier global growth
MWY - global growth
MYI - international income
FAS - Asian
MNKS - global growth
BRSC - smaller Cos

And you should not forget Alliance which has done very well over the last year or two, better than at least some of those mentioned.

It is not though answering the op’s question. Is the second nephew still allowed to open an ISA even although he is now non resident in the UK? If not, might as well leave things as they are. If so, if you want to maintain parity then open ISA and buy Witan units as for the other nephew.

Dod

I agree with the suggestions above.

Having set up bare trusts for grandchildren at different times but with the same starting amounts, the portfolios are worth different amounts now. This isn't bothering me because they will almost certainly realise the values at different times.

For each trust I chose the same amount invested in Fundsmith, FCIT and Scottish Equitable. The first two have done well, Scottish Equity was purchased before its fall in each case so has caused divergence but it will probably recover. I'm intending to top them up with a Vanguard World tracker and then just maintain/increase the four investments to keep things simple.

As suggested, I would consider setting up an ISA for the nephew if this is possible given his possible temporary stay in Ireland.

regards

Howard

I'd actually got as far as opening ISAs for both nephew's this time last year, subscribing the minimum amount of £100, but then at short notice nephew no.2 was despatched to Dublin and so because he is no longer domiciled in the UK funds cannot be added to his ISA, hence the reason that one has £29k in an ISA while the other has £29k unsheltered.
So I'm just considering ways to mitigate the impact of the CGT changes.

If you want an investment trust that behaves as close as possible to Witan, with the idea of swapping back to Witan at some point , I would say it is Bankers Investment Trust; it has a similar international split:

https://www.theaic.co.uk/aic/find-compa ... desc=false
https://www.trustnet.com/factsheets/t/h ... -trust-ord
https://www.trustnet.com/factsheets/t/h ... plc-ord-5p

However, you might make a case for selecting an IT in the same sector, but with a lower "risk" score but a better long term growth record, eg Alliance:

https://www.trustnet.com/fund/price-per ... ector=T:IG

But buying another IT, and then switching back to Witan again, costs 1% in stamp duty, plus transaction costs, on the whole value. Might it be better to stick with Witan, and let your nephew decide how to treat capital gains when he comes to want the cash (or to switch it to something else?) He might be willing to do that over 2 tax years to keep the gain small.

Dod101 wrote:

rhys wrote:Your nephews don't require any income from the trust now, so I suggest that the holdings should be something that produces less income that WTAN. Look at its performance against FCIT or even VWRL; it's a laggard over 1,3,5 and 10 years.

I oversee bare trusts, j/SIPPs, jISA and CTF for a few relatives. These are my choices, dependent on the beneficiary's age:

FCIT - global growth
SMT - riskier global growth
MWY - global growth
MYI - international income
FAS - Asian
MNKS - global growth
BRSC - smaller Cos

And you should not forget Alliance which has done very well over the last year or two, better than at least some of those mentioned.

It is not though answering the op’s question. Is the second nephew still allowed to open an ISA even although he is now non resident in the UK? If not, might as well leave things as they are. If so, if you want to maintain parity then open ISA and buy Witan units as for the other nephew.

Dod

Not forgetting that the nephew has to be living in the ROI for at least 186 days of the year to be tax resident. If he still has his address in the UK, even his parents, then it may not be too late to open an ssISA. But as soon as he officially becomes tax resident in ROI, he cannot add to it.

After that, he should be squeaky clean with tax laws, but he can hold onto his UK address forever. Most brokers require a UK address for correspondence.


Steve

stevensfo wrote:Not forgetting that the nephew has to be living in the ROI for at least 186 days of the year to be tax resident. If he still has his address in the UK, even his parents, then it may not be too late to open an ssISA. But as soon as he officially becomes tax resident in ROI, he cannot add to it.

And you should also note that EVEN if he can use an ISA, ROI may not recognise it, and may ask for tax on that income/gains regardless. This can be very difficult for foreign residents because brokers do not produce Consolidated Tax Certificates for ISAs, so he/you will have to work out all the tax implications for yourself. (Which is another good argument for sticking with just one investment)

Gryff