Will trust for minors


#1

I am the executor of a will and am confused.

The will states:

I give the following free of Inheritance tax: -

The sum of XXXXXXXXX to each of my grandchildren, A, B and C on attaining the age of eighteeen absolutely.

So far, so good.

The profile of achieving the age of 18 is 2 years 6 months, 6 years 2 months and 8 years 6 months.

We are looking for suitable investments, and understand the tax treatment varies depending upon the nature of the trust.

Question, is this a bare trust, or some other type of trust?

On one hand I can see why it is a bare trust, but on the other there is no right to the capital or income if the grandchild does not reach 18, and is therefore contingent.

Jeremy Sampson


(Paul Saunders) #2

The wording indicates a contingent legacy, with the grandchildren receiving the specified sum on their eighteenth birthday.

Essentially the residue of the estate is given to the residuary beneficiaries subject to payment of the specified cash sums to the grandchildren at the specified age.

Unless the will provides otherwise, the income and any capital appreciation (over and above the specified sum) will belong to the residuary beneficiaries, who will also be liable for income tax and CGT on all income and gains.

Depending upon the amount in question, and their relationship to the deceased’s grandchildren, the residuary beneficiaries might consider entering into a deed of variation by which they gift to the grandchildren the right to income and capital appreciation, effectively causing the legacies to become vested. However, before considering such a route, they should obtain specific legal advice so as both to verify that it would be appropriate and to properly understand the implications thereof.

Paul Saunders


(Julian Cohen) #3

I believe that the words “on attaining” imply that the legacy is not contingent but is now vested. That would make this a bare trust.

Julian Cohen, Solicitor


(Simon James Northcott) #4

Alternatively, use s32 Trustee Act to advance now on bare trusts

Simon Northcott


(Graeme Lindop) #5

This is an example of woolly drafting. There are 2 possibilities: either the legacy is contingent “on attaining” 18 or the legacy is vested with a deferred payment date “on attaining” 18. I believe that, for the latter to apply, there should be a clear separation between the gift itself and the payment date and I doubt if the words “on attaining” provide sufficient separation. Therefore, the safer option for the executors is that the legacy is contingent in case the legatee fails to attain the specified age. Unfortunately, unless there is a specific reference to the intermediate income being carried, this means that the income will not be carried and that the executors are only required to pay the amount of the legacy on each legatee’s 18th birthday.

Graeme Lindop
Coles Miller Solicitors LLP


(Paul Saunders) #6

Contrary to my earlier posting, I have now come to the view that the legacies to the grandchildren, as expressed in the will, are more likely to be vested, and not contingent.

Why have I changed my mind is down to the little words – “on” or “if”

“If” clearly makes a gift conditional, so that a gift “if they attain 18” cannot vest until the condition is met.

“On” can impose a condition, especially if you read into the clause a “missing” word, such as “conditional/contingent” before it. However, before rectification was allowed under s.20 Administration of Justice Act 1982, whilst courts could omit words, they could not add words. Accordingly, to treat “on” as imposing a condition required the gift to be construed in the context of the will generally. I therefore feel that a gift “on attaining age 18” should be treated as vested unless there is anything to suggest otherwise.

Since s.20 AJA came into effect, one can now look to the will instructions to help resolve any uncertainty and, if necessary, the courts will decide if it is merely a question of construction, or if rectification would be required.

In the case in point, I suspect the will was not drafted by the firm now looking at the issue. It is not altogether unusual for the last several pages of a will to include what are essentially administrative provisions. However, too often they also include provisions such as: that all gifts are subject to the attainment of a specified age. If the will in question also includes such provision, “on” would need to be read in context with that further (semi-hidden?) requirement despite what “on” might naturally mean. There are times when we like to make life difficult for ourselves!

Paul Saunders