Nominating a Beneficiary’s prescribed age
People often leave their wealth to family members when they reach a certain age, typically an age at which they are responsible for the wealth that passes to them. We call this the “prescribed age”.
People often leave their wealth to family members when they reach a certain age, typically an age at which they are responsible for the wealth that passes to them. We call this the “prescribed age”.
Legally, a person can receive an inheritance when they reach the “age of majority” at 18 years of age, being the age at which they have legal capacity. For many people, this age is regarded as too young for potentially significant wealth that may pass to a child, and so many clients will nominate a prescribed age between 21 and 30 years of age.
Sometimes, it may be appropriate to “step” a prescribed age. For example, a child may receive 40% of their share of an estate at age 21 and 60% of the remaining share when they reach age 25.
Fixing a prescribed age is important because if the child does not reach the prescribed age, they are regarded as having predeceased the client, and it will be important for the client to decide what happens to that gift and who is to receive it- usually another sibling.
Alternatively, if a child reaches a prescribed age, and then they pass away, the gift is effective and will form part of the child’s estate that must be managed through their own Will.
The nominated prescribed age usually applies to all beneficiaries, meaning that they will receive their share of the estate when they each reach that nominated age; however, this can vary based on the circumstances of the beneficiary. This approach may create issues between beneficiaries and an administrative burden to the executor, particularly if there are lumpy assets such as real estate that have to be held on trust. To address this issue, some clients decide on a single prescribed age, at which point all beneficiaries will benefit simultaneously. For example, when the youngest of the children reaches the age of 21 years or when all beneficiaries reach the age of 25 years.
To balance the importance of a gift being delayed to a child beneficiary and the needs of that child, it is possible for a Will to include what is described as a “maintenance and advancement clause”. This means that the executor can release money that is held in trust until the beneficiary reaches their prescribed age for their “maintenance, education and benefit”. For example, paying for school fees, a motor vehicle or housing and accommodation costs for a child until they reach their prescribed age.
A client may want to push out the prescribed age to a later date, sometimes beyond the age of 30, because of concerns about the child’s ability to manage significant wealth. If this is sought, it is likely that the inherit panel lawyer will advise the client of the principle of law called “the rule in Saunders -v- Vautier”. This is an 18th-century English law case that has stated that if all of the beneficiaries of an estate are of adult age with full legal competence, they may jointly force the trustee/executor to transfer the estate to them and terminate the trust estate.
Fortunately, Inherits legal bot will assist you in asking and navigating these issues with questions that are relevant to the client’s circumstances