Hello, first time posting and grateful for any help.
I have young clients who are cohabiting with 3 children between them but no children together. They are adamant that they want their wills to be the same as those of a married couple who share children together. I have discussed all the pitfalls including that the survivor could marry and intentionally, or just by not remembering to update a will, disinherit the deceased’s children. My advice has not been taken and they are adamant they want to leave property directly to each other, or if not, then to all 3 children at the age of 25.
My issue is that in passing the residue into trust for the 3 children at 25, the children cannot be treated the same as they are some are children and the others are technically no relation to the testator (not counting legally as step children).
For example in the female partner’s will, I have two 18-25 trusts for her own two natural children. Then a separate immediate post death interest (excluding s31TA) for the other child who is technically no relation. However, the client also wanted to ensure that if the child did not reach 25, the interest would be split between the other remaining children whereas the IPD would pass the interest to him on the death albeit that he is not fully entitled until 25.
Is there a better way of facilitating what the client actually wants? They are not interested in any kind of life interest to the partner etc. I think they just feel they should be treated the same as married couples and are struggling to accept that is not the case.
Hi Iain,
Thanks for taking the time to reply. Reading back, I don’t think I have explained well. I have named each of the three children. 2 are 18-25 trusts and quite basic. The other child is not legally a step child so I have set up an immediate post death interest and he will receive entitlement to all the remaining capital at 25. I just want to make sure that if he dies before 25, his interest goes to the other children on the terms of their 18-25 trust. Perhaps I am overcomplicating the situation? Thanks again for your reply.
Don’t mix up the tax treatment of a trust with the mechanics of it - you can get what you want…
A trust will qualify for an 18-25 trust if it meets certain criteria - it doesn’t need to contain any particular wording.
You therefore don’t need to create separate trusts.
On this basis why not just leave the residue on trust to A, B and C at 25 (using typical 18-25 wording)?
The part of the trust fund relating to the deceased’s children will be taxed as an 18-25 trust and the part relating to the other child will be taxed as a normal relevant property trust.
Hopefully others will quickly correct me if I have missed something obvious!
In addition, you could give the trustees the power to grant the beneficiary an IIP and, if done within two years of death (assuming the beneficiary is under 25), s144 IHTA would apply to convert it to an IPDI. If the beneficiary is 23 or over by the date of death, the trust will come to an end within 2 years anyway and, again, s144 will apply. I recall that Butterworths had a good precedent clause (NB the Will could provide that the trustees are able to make the change in respect of any of the three shares, independently of the others), but no doubt other books have similar clauses these days).
This also has the advantage that the trustees can wait and see whether:-
it is appropriate for the beneficiary to have an IIP and
whether it is particularly advantageous to convert the RPT/18-25 to an IPDI.