I have an estate where there are various cash legacies to minors. The wording is ’ I give to x the sum of x subject to his surviving me and attaining 25 years of age’.
Step 2nd Edition included.
Two questions:
Can the legacies of £5,000 each be paid to parent or guardian now or must the Trustees invest?
Are the residuary beneficiaries (charities) entitled to the income in the meantime? I believe so but on current rates would at best be minimal.
Would a Deed of Variation be possible whereby the charities surrender their right to income and the legacies could then be paid out to minors parent/guardian? . The youngest cash legatee is 4 years old…
I believe the power to pay leagcies to parent/guardians applies only to vested legacies, not contingent legacies
In the circumstances, I would be wary of paying the legacies over to the parents or guardians of the intended beneficiaries.
The charities may also be wary of agreeing to assign their entitlement to the beneficiaries. However, if the costs of maintain the trusts until the beneficiaries attain age 25 is explained, it may be commercially viable for them to step aside.
In general, unless the testator stood in loco parentis to any of the beneficiaries, all that they are entitled to upon attaining age 25 is the specified sum. The costs of administering the legacies up until that time fall on the residuary gift. Although residue will be entitled to the income during this period, such income may be unlikely to cover the trustee’s annual costs.
In response to the actual questions posed:
No, the trustees have a duty to invest, and
Other than where the testator was in loco parentis to any particular beneficiary, yes, together with any capital appreciation.
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals
A practical solution may be to advance the legacies to the children absolutely under s 32 Trustee Act or powers under the Will (if any). If under s 32 you would have to be able to justify it as a benefit to the beneficiary, but I would have though one could argue that there is a benefit in simplifying the arrangement in light of the relatively modest amount. An advance would remove the income problem, and would also allow the trustees to pay to the parents, thereby avoiding the necessity for investment by the trustees.
Sorry Diana I have only just realised you responded to this one almost a year ago!
Do you think your solution works to override a contingent legacy please?
Its a rather large estate with 10 charities as residuary beneficiaries. They have confirmed they will give up their right to income as the costs of running a trust with circa £40,000 by way of assets would be disproportionate.
I am trying to deal with it in the best way possible.
Yes I don’t see why it wouldn’t work. The question of whether or not you need the written consent of the charities will depend on whether you are relying the statutory power of advancement in s32 or a wider power in the Will, but it sounds as though you may already have their consent anyway.
Whilst the charities may have agreed to give up their rights to the income, should any of the beneficiaries fail to attain the specified age their legacy will lapse and pass to the charities. You might also want to obtain the charities’ confirmation that they understand and accept they will not have any entitlement should the funds be advanced and any of the beneficiaries fail to attain the specified age.
By merely looking at the income situation, you could be open to a challenge for not drawing to the charities’ attention all relevant implications.
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals