What age do you want your children to receive inheritance?

Inheritance. You may or may not wish to leave an inheritance for your children or loved ones, but if you do, there are factors to be aware of and consider. 

Deciding whether to leave an inheritance for your children impacts the amount you save, the retirement plans you choose and how you take qualified retirement plan distributions.

Then there’s the consideration about providing for your children in case you die prematurely. This consideration takes more than picking someone to raise them (legal guardianship – this is something we have covered in a previous blog). You should also consider what will happen to any money or property your children inherit from you. Who will manage it for them until they became adults? When should they receive it? 

You can leave these instructions in your will or living trust.

You will need to decide who you wish to appoint to administer and manage the estate, particularly if your children are under 18 and as a result are not yet legally old enough to receive their inheritance. These are known as your Executors/Trustees.

One of the most important things to consider and decisions for you to take, is the question of “at what age should your children inherit?” 

What happens if I do not choose an age for my children to receive their inheritance?

If you do not include an age, your children will receive all of your estate on reaching the age of 18. 

Before they reach 18, the estate will be held in something called a “Bereaved Minors Trust (BMT)”.  

Even if the value of the estate exceeds the Inheritance Tax (IHT) allowances available at death, there is no additional IHT payable.

What ages can I choose for my child to inherit?

The straight forward answer to this is from the age of 18, up to 125 years from your death. Meaning you can decide exactly what age you wish your children or loved ones to receive their inheritance. There are varying types of Trusts, to suit your needs and requirements; of which we state below. 

Before you decide how and when you wish your children to inherit, it is always worth taking specialist advice on the merits of each option, and which is the most appropriate for your circumstances. We offer a FREE, no obligation meeting which will provide you with specialist advice across all options. 

“18-25 Trust”

You may decide that 18 is too young for a child to inherit the whole estate outright, and would wish to delay their inheritance until the age of say 21, or 25. 

The assets are then held in a “18-25 Trust” but is only available for a parent inheriting their children, and not for grandparents for their grandchildren. 

Unlike the Bereaved Minors Trust, additional IHT may apply. If the assets are held in trust until the age of 25 an additional 4.2% will be payable.

That said, parents may feel that paying a small % of additional inheritance tax is worth paying, to protect the estate for their children at a slightly older age.

“Discretionary Trust”

Some parents may feel that even the age of 25 may still be too young for some children. If parents wish to delay their inheritance beyond that, a final option is to transfer all assets of the estate into a “Discretionary Trust (DT)”.  

In our experience, some people wish to delay inheritance based upon multiple factors. This could be protecting against future divorce, bankruptcy, or a the personal circumstances which may mean a child would be better protected receiving money at a later stage of life. 

This trust can last for up to 125 years from the death of the parent, during which time the appointed Trustees will be guided by written advice provided by the deceased parent, as to when income and capital can be paid to a child. 

A Discretionary Trust can also be useful with potential IHT saving on their own future deaths. 

A Discretionary Trust does have it’s own IHT charges. These are known as “periodic charges” and payable every 10 years, if the value of the DT exceeds the IHT allowances.

Protect your wealth!

MT Legal Services will ensure that your money, your property and your Will are all structured to manage any inheritance tax issues that may arise. We can also provide support for Executors/Administrators who are having issues reporting an estate to HM Revenue & Customs where IHT is payable. Please contact us for your FREE consultation.

T: 01604 591242

E: mark@mtls.co.uk