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How is money looked after for children inheriting under a Will?

06 Aug 2021

A child is not able to inherit under your Will until they are legally old enough to receive the funds. Until that point, their inheritance is looked after by whoever you appoint to keep the money safe (‘your Trustees’). When money or property is looked after for some else’s benefit, this is a Trust.

A Trust for a minor beneficiary arises when a person under 18 inherits under a Will. Indeed you can express in your Will that you do not want a minor beneficiary to receive their inheritance until they are older (and perhaps more responsible) such as aged 21 or 25. Until that age is reached, their inheritance would be held in a Trust.

When it comes to drafting your Will, it is important to give some thought to how you would like such a Trust to operate and how you would like your Trustees to look after the minor beneficiary’s inheritance (‘the Trust Fund’). It may be, for instance, that if your child is under 18 when you die you would be happy for the Trust Fund to be paid to their parent or guardian. However, it may be that you would be concerned about a parent or guardian receiving the Trust Fund and you would prefer for your Trustees to look after the money (possibly investing the fund) until your child is old enough to receive it themselves.

If your Trustees are going to invest the Trust Fund, do you want them to be responsible for any loss? It may be that you would consider it fairer for your Trustees to only be held responsible for losses to the Trust Fund if they have acted dishonestly. Again, this is the type of provision you would include in your Will.

The Trustee Act 1925 provides that in certain circumstances, capital from a Trust Fund may be advanced for the benefit, maintenance and education of a minor beneficiary before they reach the age of entitlement. There are also statutory powers to advance income in similar circumstances. Your Will can be the tool in which such powers are adapted.

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There are a number of other provisions which can be explored when drafting your Will to ensure that any Trust arising under it fits with your circumstances and wishes.

People use different types of Trusts in their Will for lots of different reasons – sometimes without knowing it. Tailoring your Trustees’ powers and responsibilities around your own circumstances is key to ensuring that everything operates how you would expect after your death. Without a Will or without giving some thought to what you would like to happen to any money held in Trust, it may be that your Trustees do not have the powers you would like them to have or perhaps have powers you would rather they didn’t!

If you would like advice about including a Trust in your Will or about the provisions already included in it, please contact Alice Clewes, Partner in our Private Client team for further information.

Call: 0191 232 8345

Email: Alice.Clewes@hay-kilner.co.uk