Minor beneficiaries inheriting under intestacy rules

Children under the age of 18 are unable to give the personal representatives of an intestate’s estate valid receipt for any entitlement they may be due. Therefore, the intestacy rules require the creation of statutory trusts to hold the trust assets until the child beneficiary attains the age of 18.

The children of the deceased will be taken to include any legitimate, illegitimate and adopted children, but will not include any stepchildren.

Who can be a trustee of the child’s share?

The trustees of statutory trusts are usually, but not always, the personal representatives responsible for administering the deceased’s estate. Any surviving spouse is first entitled to grant of an intestate estate and will therefore usually be one of the trustees of the child beneficiary’s share. There are, however, various other appointments that could be made to the role of trustee, including:

• Any surviving parent of the child
• The child’s guardian
• Other close family members
• A professional trustee (e.g. a solicitor or a trust corporation).

How many trustees must there be?

Where an intestate dies and there is a minor beneficiary entitled to a part or all of the estate, section 114 of the Senior Courts Act 1981 requires that any grant of administration must be made either to a trust corporation or to a minimum of two individuals. This is to help ensure that the trust fund is safeguarded for the child beneficiary. The general statutory framework limits the number of trustees to a maximum of four (section 34 Trustee Act 1925).

What are the trustees’ powers over income and capital?

The general law gives powers to trustees under sections 31 and 32 of the Trustee Act 1925 (as amended by the Inheritance and Trustees’ Powers Act 2014 (the 2014 Act) for trusts arising after 1 October 2014).

Section 31 – Income during a minority

Under this section, the trustees may apply as much of the income from the trust for the child’s maintenance, education or benefit during their minority as they in their discretion think fit. Any income that is not applied for the beneficiary’s maintenance, education of benefit is accumulated and reinvested.

The 2014 Act reformed the provisions to remove requirements for reasonableness and removed the requirement for trustees to consider certain circumstances. The amended provisions are now expressly broad.

Section 32 – Power of Advancement

Trustees are permitted to advance capital for the advancement or benefit of a beneficiary. The trustees can, in their discretion, advance the whole of the beneficiary’s presumptive share (previously a 50% cap prior to the introduction of the 2014 Act).

Trustees may also make advancements in specie by applying specific property (e.g. land or shares) as well as capital money (thus codifying the pre-existing common law position).

What happens when the beneficiary turns 18?

On their 18th birthday, the beneficiaries interested is said to ‘vest’. This means that the beneficiary is now absolutely entitled to the trust property. The beneficiary becomes the absolute legal and beneficial owner of the trust property and is entitled to call for the transfer of the assets into their own name, thus bringing the trust to an end.

What if the beneficiary dies before turning 18?

Sometimes, it may be the case the child beneficiary dies before their interest vests. Where this is the case, it is important to note that the trust property will not form part of their estate, as the beneficiary never became absolutely entitled to the assets. The trust’s assets will therefore revert to the deceased intestate’s estate and be distributed in accordance with the laws of intestacy.