For many parents and grandparents, the thought of using the wealth they have accumulated throughout their lives to help their children and grandchildren is a comforting one. Here, we discuss the three main methods through which you can pass your estate to your loved ones and continue to support them when you are gone: An outright gift, gifting money at a specified age, and through a discretionary trust.
Outright gift
When you leave money or assets to a child or grandchild as an outright gift, they will receive their inheritance as soon as you pass away or, in reality, as soon as the estate administration process has been completed. Since children under 18 cannot legally own property, any gifts made to those individuals will be held in trust for them until they reach that age.
Money gifted at a specified age
If you’re concerned about your children or grandchildren receiving significant sums of money or assets at a young age, you can delay their gift until they are mature enough to deal with their inheritance responsibly. The ages parents typically choose are 21 or 25, but, ultimately, the decision is yours to make based on what you feel would be best for the individual beneficiary.
Discretionary trust
When you set up a discretionary trust for your children or grandchildren, you leave the parts of your estate you wish to gift to them to a trust. You specify the categories of beneficiaries, which can include people who have not yet been born and appoint trustees to manage the trust on their behalf. The trustees have complete discretion as to how to invest the trust’s funds, who will inherit and when. That’s why it’s called a ‘discretionary trust’.
The concept of handing over complete power to trustees to decide who should inherit your estate may seem a little odd. However, discretionary trusts can be an ideal way to leave gifts to grandchildren who are yet to be born, or if circumstances exist that mean you’re not yet sure how to divide your estate. For example, you may have a child or grandchild who currently struggles to manage their finances but who may mature enough to do so in the future. A discretionary trust is an effective way of deferring that individual’s inheritance until the trustees consider it appropriate for them to receive their gifts.
It’s essential to note that gifting money and assets to children or grandchildren through your Will can have some unexpected and unwanted tax consequences. Therefore, you should take estate planning advice from experienced probate solicitors to minimise any tax implications and ensure that as much of your estate as possible goes to the ones you love.
