Can children aged under 18 inherit under a will?

Children aged under 18 lack the legal capacity to inherit a gift under a Will. This means that if they are left something in a Will, arrangements must be made to look after the asset on their behalf until they are old enough to inherit it.

When you write your Will, you should name a trustee or trustees to administer the money or property that you wish to leave to your minor children.

The assets will then be placed into a trust in the care of the trustees until your children reach the age at which you would like them to inherit. This does not need to be 18 if you believe they might not be mature enough to look after a substantial sum of money at that age. Instead, you can choose any age you wish, such as 21 or 25.

Using your Will to set up a trust

You will need to consider what type of trust to set up. You could choose to simply have the money held by the trustee until the age at which the children are to inherit, at which point it would be paid over to them.

Or you could give the trustees the discretion to invest the trust funds and also to pay money out for any expenses that the child may have, such as education, to buy a car or towards a deposit to buy a property.

Your Will can include the powers that you wish to give the trustees and details such as whether they are to be liable for any losses that the trust incurs. 

You can also leave a letter of wishes for the trustees, giving them some guidance as to how you would like the trust money spent on your children.

What happens if you have not set up a trust?

If you have not set up a trust for your children or you have not left a Will, then an automatic trust will be put into place if they are aged under 18. This means that your executor or administrator will be responsible for looking after the funds until your child reaches 18, at which time the money and/or property will be transferred to your children.

Tax considerations

Different trust structures attract different tax liabilities, so it is always recommended that you seek professional advice to ensure that you choose the type of trust that will be most tax-efficient to your beneficiaries and your estate.

A trust made by parents where property is held in trust until children are aged between 18 and 25 will attract some exit charges for funds left in the trust beyond the age of 18, along with Capital Gains Tax, although holdover relief (postponing the taxable gain) is available, meaning the child will not have to pay the tax until they sell the asset.

A bare trust, where money belongs to the minor but is not available to them until they are 18, will not attract exit charges or Capital Gains Tax, but with this type of trust the minor has a right to the money/property at age 18, even if they might not be mature enough to manage it.

It is possible to set up a trust that is not discretionary and where the child does not have a right to the assets until a specified age is reached, but Capital Gains Tax will be payable and no holdover relief is available.

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