Bereaved Minor’s Trust
A bereaved minor’s trust is a trust that is created if a gift is made to the testators’ children on the condition that the children attain the age of 18.
It is important to note that these trusts can only be created for the testator’s own children or stepchildren. A grandparent, for example, cannot include this trust in their Will for their grandchildren. Therefore, any money left to grandchildren or nieces as an example will create either a bare trust or a relevant property trust.
The following conditions must be satisfied in order for the trust to be treated as a bereaved minor’s trust:
On the death of the parent, the trust is created and assets are held in the trust. Whilst the child is a minor, the money can either be accumulated or alternatively used towards the child’s maintenance, education or other benefit as the trustees see fit. Whilst the child is under 18, the trustees can apply the income and capital directly for the benefit of the child or by paying the capital to the child’s surviving parent or guardian. Once the child attains the age of 18, they will become absolutely entitled to inherit the assets contained within the trust.
Taxation for Bereaved Minors Trust
Trusts for bereaved minors are not subject to the IHT charges that apply to relevant property trusts or to those that apply to qualifying interest in possession trusts.
In particular, there is no IHT charge when the minor becomes absolutely entitled to capital or dies before becoming entitled to it.
As this is not classed as a relevant property trust, no anniversary or exit charges apply. There is also no IHT charge when trust assets are advanced on new trusts for the benefit of the minor However, the new trusts will be relevant property trusts unless they qualify for a different status in their own right (for example, they may qualify as 18 to 25 trusts).
If a qualifying residential interest is left in this type of trust, the RNRB will apply.
I am an experienced Estate Planner & Financial Advisor. During my career I gained experience in assisting both individual and corporate clients.
Post articles and opinions on Manchester Professionals
to attract new clients and referrals. Feature in newsletters.
Join for free today and upload your articles for new contacts to read and enquire further.