As we all know, in England and Wales anyone under the age of 18 is considered to be a minor. Because of this, any inheritance that a minor has been left from an estate be held on trust until they have reached adulthood at the age of 18. In this edition of Did You Know? we will be looking at the reasons a minor may receive their inheritance early.
S31 and s32 of the Trustee Act 1925 deal with the power of accumulation and advancement of income and capital respectively. Each respective section details the restrictions of these powers and when they are applied and when they are excluded. An example of an exclusion in both sections is a potential beneficiary of a Discretionary Trust, however it should be noted that the terms of a Discretionary Trust allows the trustees to advance income and capital. Both sections apply to a Bereaved Minors/Young Persons Trust.
Any trusts s32 is applied to that were created before 1 October 2014 were restricted to no more than half of the trust assets being available to advance to the child. This was lifted by the Inheritance and Trustees’ Powers Act 2014. Before October 2014 it was common for wills to exclude s32. Even today, it is possible to exclude or vary the terms of s31 and s32.
Upkeep and maintenance
While the child remains a minor, the most common reason for the trustees to benefit that child is to provide for their basic needs, i.e. upkeep and maintenance. While a child is under the age of 16, the trustees can apply the child’s inheritance to their parents or guardians to contribute to their upkeep. The trust assets could be used to buy items for the child’s benefit. As an example, this can be applied as regular payments for generic upkeep, or to pay for school uniforms.
Marriage and Civil Partnership
If a child is to inherit by means of intestacy, from the age of 16 if the child forms either a marriage or civil partnership, they will be entitled to their inheritance absolutely.
Apart from the exclusions stated in s31 and s32, the trustees have absolute discretion whether or not to exercise their power of advancement. From the age of 16, the trustees may apply income and capital directly to the child if they see fit. The STEP Provisions (second edition) included in all wills WillPack prepare also allow the trustees the power of advancement, although these can be excluded if this is required by the clients.