Leaving A Bequest To A Minor Child (WA)
Most people expect to live to old age when their children will be middle-aged adults. A testator will typically draft their will on this assumption, leaving cash, property and heirlooms to their children. However, a parent might pass away before their child reaches the age of eighteen. This presents a legal difficulty because, in Western Australia, a minor cannot inherit a bequest in their own right. Until the child is 18, someone must act as caretaker for the inheritance. A testator has several options for choosing a caretaker for a child’s bequest. This article explains what happens when a testator leaves a bequest to a minor child in Western Australia.
Wording A Bequest To A Minor Child In Western Australia
In Western Australia, a testator can leave a bequest to a child identifying them by name and relationship (“my daughter Elizabeth Marie Bennett”) or by parentage (“any of my surviving children”, “any child of my daughter Elizabeth Marie Bennett”). When the testator identifies the beneficiary by parentage, the will should also define what is meant by “child”. The Family Law Act 1975 (Cth) defines a child as a biological or adopted person under 18. The testator should specify whether the term child also extends to stepchildren and foster children.
Can I Leave A Bequest To A Minor Child In Western Australia?
A testator can leave a bequest in their will to a minor child. However, if the beneficiary is still a minor when the executor probates the will, they cannot legally transfer the gift to the child until they turn 18.
A testator sometimes specifies that a beneficiary can only receive a substantial bequest when they reach 21, 25 or 30, to ensure that the child is sufficiently mature to handle the gift responsibly. However, the English High Court case of Saunders v Vautier (1841) established the common law rule that beneficiaries can terminate an unwanted trust once they reach majority if they are legally capable of taking control of their inheritance.
Executor Holds Bequest In Trust
A will can stipulate that the executor hold the bequest in trust until the child reaches the specified age. This means that the choice of executor is of critical importance. This person must protect and preserve the bequest for as long as necessary, which may require them to invest the capital. The executor trustee may also need to authorise advances against the bequest to provide for the child’s needs, such as education, housing and medical care. The testator may leave guidelines for the trustee on when the child should receive their inheritance, what ratio and any other conditions attached to the bequest. These guidelines are not binding on the trustee but can help the trustee make decisions going forward. A testator should take advice and consider the potential tax implications of leaving a large estate in trust for an extended period.
Parent/Guardian Receives Bequest On Behalf of Minor
Alternatively, a testator can specify that a child’s bequest is passed to the child’s parent or guardian. This is a sensible option if the bequest is small, such as a piece of jewellery, because the parent can keep the item safe while the child enjoys a memento of their loved one. This is also an option for a larger bequest. Still, the testator should consider the parent’s character and capacity to protect the asset before passing it intact to the child at the appropriate time. Once the parent receives the gift, there is usually no safeguard to preserve the gift intact or only use it for the child’s needs.
Trustee Holds The Bequest
There is a third alternative with large deceased estates, especially for a bequest shared amongst multiple young beneficiaries. The testator can establish a discretionary trust in the will to hold the assets until each beneficiary reaches the required age. The benefit of this approach is that the trustee will protect the bequest and have the discretion to dispense from the income or capital to meet the beneficiaries’ needs during their minority.
A testamentary trust incurs annual running costs (including the professional fees of accounts and potentially legal advice) which are drawn from the trust’s income or capital. There are also tax implications with a testamentary trust. A testator should seek specific advice from a qualified accountant or financial advisor to determine if this is the right option in the circumstances.
The friendly team here at Armstrong Legal can offer expert assistance on all wills and estates matters. If you are planning a bequest to a minor child in Western Australia, or you are the recipient of a bequest held in trust, you can get in touch online or call 1300 038 223 for a confidential discussion.