Wills – when will the kids get it?
Posted by Simon Palmer on 3rd January 2012
It was said by Oscar Wilde of the youth that they know the price of everything but the value of nothing. Is this advice on when children should inherit under a parent’s will?
Over the years I have pondered this issue and have drawn a number of conclusions which I will share with you. At the same time a recent case in the high court Wright v Gater 2011 let us have the view from the bench.
Let us start with the official view. If a person does not leave a will and his estate passes to his children under what are known as the intestacy provisions they take outright at the age of 18. In the case of Wright v Gater the judge was invited to decide when a child should take under a Variation of Trusts Act action and he thought that income should be passed out at 18, 10% of capital at 21 and the rest at 25.
Well, I rather agree with Oscar Wilde. On the whole, a person aged 18 is just leaving school, at 21 is just leaving university, and at 25 is just starting his career. I think that I probably reached a stage of maturity at the age of 40 when I really began to understand how money worked. I meet a lot of people who are older than that for whom money management and the concept of spending and saving are still foreign.
I think there are two facts that need to be confronted. The first is that the date when a person dies is unknown. The second is that you cannot predict how the young person will develop, the challenges they may face and the relationships they may enter into. These two unknowns have an impact on how you should write your will.
It seems to me therefore that stating a specific age at which a child will take absolutely is unwise. More than that it makes no sense.
Take a step back. The purpose of writing a will is to make provision for those you wish to benefit and I think it requires you to act after careful reflection. This is money which you have acquired over a what I hope has been a long and successful life. It has the opportunity of doing some real good at a time when your children may be very unhappy and in need of help. The money therefore should be doing some good and should be helping younger beneficiaries in achieving their potential.
The danger is that if a young person receives unfettered funds at a young and impressionable age that they could do the exact opposite – tremendous harm, and extinguish the flame of ambition and appreciation of the benefits that money can bring.
If a young beneficiary is left by his parents then on the face of it the timing has gone wrong. The parents have died too soon. Ordinarily, they would have been around to give guidance to their children and to nurture them in the ways of prudent finance. Additionally, the funds would not be readily available in any event as they would be retained by the parents for their own benefit. So, not only are the children inheriting young but they are also taking additional funds, and furthermore they are taking without the guidance of their parents.
So, on the basis that you have died at an inconvenient time, and your children are at an indeterminate age, my advice is that you need to at least start off with the funds being held by wise trustees who share your values and are prepared to step into your shoes and provide the kind of advice which you would have given.
Of course, the funds should be made available for your children. If a child needs help with housing, tuition fees, and training costs then this is doubtless where the trustees would wish to step in. However, they may wish to resist the urgent request for two Ferraris’, (one white and one red) or £20,000 for a hot weekend in Monte Carlo.
On the other hand it may be that the child is no longer a child at the time you pass on but a well established adult with a mortgage and a young family of his or her own. In these circumstances it might be perfectly appropriate to bring the trust to an immediate end and pass the funds out.
Even with adults sometimes there are issues. If a person is in a difficult and deteriorating relationship, has health issues, particularly mental health issues, or is in bankruptcy, then the existence of the trust could save the funds from being lost almost immediately, providing no benefit to the child. This example highlights the perils of the two unknown factors, of not knowing when you will die and not knowing the circumstances of your children at that time.
Sometimes I hear people say that they do not really care much about what will happen because “I will not be there”. However, when you have loved ones who are going to feel the loss and you have spent a lifetime building up your hard earned fortune it must surely be a good idea to reflect on how that might best achieve a secure and better future for your children?
-192x126.jpg)