Can a minor be a beneficiary?
A minor (a person under 18 years old), whilst being unable to receive a gift outright from a Will as they do not have legal capacity to accept a gift until they are 18 years old, can be named as a beneficiary in a Will. Therefore, if a testator or testatrix (person making a Will) passes away whilst a beneficiary under their Will is still a minor, a trust will automatically arise.
Where a trust occurs for a minor, two adults must be appointed as trustees to manage the trust. The trustees may already be named as the testator’s ‘executors and trustees’ in their Will however, if there is only one executor and trustee appointed under a person’s Will, a second trustee can be appointed later following the death of the testator.
A bare trust or a contingent trust?
When gifting money to a minor beneficiary in a Will, it is important to consider at what age you would like for the beneficiary to be able to receive their inheritance. You should therefore decide whether you would like for them to receive their inheritance at 18 years old or whether you think that an older age is appropriate. Depending on the sum of money that you may leave to a minor beneficiary, it is quite common for an older age to be included in a Will to ensure that the beneficiary does not misuse their inheritance if they are not financially mature enough.
If no age is stipulated for a minor beneficiary to receive the money in your Will, then this means that if the testator or testatrix were to pass away, the minor beneficiary’s entitlement has ‘vested’. This means that if the minor beneficiary were to survive the testator or testatrix but then pass away before reaching the age of 18, the minor’s inheritance would then pass in accordance with the intestacy rules (an order of inheritance when someone dies without a Will). This may result in the inheritance going to a family member which the original testator or testatrix may not have intended.
However, if a conditional age of inheritance is included in a Will, for example 21 or 23, the beneficiary’s entitlement is contingent on them reaching that age. This is a contingent trust and if the beneficiary were to pass away before reaching the contingent age of inheritance stipulated in a Will, their inheritance will not fall into their estate but either to a substitute beneficiary mentioned in the Will or into the testator or testatrix’s residuary estate.
Powers to make payments to minor beneficiaries
Regardless of whether you include a contingent age of inheritance for a minor beneficiary or not in your Will, if your Will includes administrative provisions, your trustees have power to pay income and capital to the minor beneficiaries before their age of inheritance.
Your trustees have statutory powers to pay income to a minor beneficiary in relation to their maintenance, education or benefit. Trustees can apply as much income to minor beneficiaries as they believe is necessary.
In addition, your trustees have statutory powers to distribute capital to beneficiaries earlier than their contingent age of inheritance. If the trustees believe it appropriate, they can even distribute the whole of a beneficiary’s entitlement to them earlier than their contingent age. For example, the trustees could pay the whole of a beneficiary’s entitlement to them in advance of their age of inheritance to use for a deposit on a property.
If you are considering reviewing your Will and wish to include minor beneficiaries, one of our lawyers in our Wills, Probate and Estate Planning team will be able to advise you as to how to provide greater protection for your minor beneficiaries and the implications. Contact Isobel Dawkins-Stean or one of the team here.