Let's say I wanted to leave some of my estate - e.g. 100k - to be shared among all my grandchildren.
At the moment I have only one, but what if I wanted to write my will in such a way such that any grandchildren that arrived after my death would be included as equal beneficiaries.
Is such an arrangement possible? And what are the tax implications if so?
I doubt it would be possible. In order to do this the money would not be able to be split until your children died to ensure no further grandchildren would be born. It doesn't make sense.
I'm not sure if that's legally possible, as "future" grandchildren would not exist at the time of your death and so would not have a claim to your estate.
The problem is that the number of grandchildren is an open-ended question. How do you split up the estate when you have no idea how many times to split it?
Logistically however, it might be possible to set up a trust fund (or whatever they're called over here). The aim of the trust fund would be to hold onto to the money until all of the grandchildren have probably been born and then split it up.
You could set it up so that the money is held in trust until a certain date (say the 40th birthday of your eldest child). Until that date, all grandchildren are automatically trustees of the fund when they're born. Grandchildren born after that date lose out. Remember that if you have any sons, they could father children up to the day they die.
At that date, the fund matures and you can either split it there and then, or choose to only give each grandchild's share to them at 18 (or whatever).
It's something you'd definitely need to talk to a solicitor about as there would be a lot of technicalities to iron out - e.g. could a parent withdraw funds from the trust after the maturity date but before the child has turned 18?
I see your point
But I'm wondering if I can insert a clause that defers the splitting of the 100k until a defined date. e.g. until June 1st 2020, at which point the inheritance is split between all existing grandchildren.
Thanks. That's the kind of thing I had in mind.
If I went down the "trust" route, am I right to believe that I can empower the trustee to manage the trust in whatever way he/she thinks best until the designated "maturity" date.
e.g. the trustee invests in shares/property/gold
ianal but as we have a right to life clause in our constitution and all the hysteria about unborn children I wonder what would happen if you could prove you were pregnant with a grandchild at the time that the grandfather died?
Interesting question. I would foresee a problem with what's called the Fertile Octogenarian rule in law. To de-personalise this so as not to cause any offence, I'll refer to the person making the will as the testator, T. If T dies, leaving two daughters, aged 30 and 50. The 50-yr-old isn't married or in a relationship with a male, and has lived with another woman for many years. The 30-yr old is a nun in an enclosed order. Common sense might say there isn't much likelihood of a grandchild appearing any time soon there.
However, the law still upholds the fertile octogenarian rule, under which the estate won't be distributed until both those daughters have died childless, maybe in their 90's. In effect, the law considers it possible that an 88-yr-old woman, or man, could still become a parent. That's the traditional view.
In consideration of modern medical advances in things like frozen embryos and semen banks etc, the possibilities become open-ended - none of that has yet been tested in court as far as I know.
You can see the dilemma facing a judge if he's asked to interpret the will you want to make, with all those ancient and modern arguments to be considered. I'm sorry that I can't give you any better answer than to consult a solicitor with extensive probate experience, and don't be surprised if the solicitor pulls in a barrister to give a formal opinion and/or to draft the will to ensure it gives effect to your wishes as closely as the law will allow.
Thanks for your detailed reply.
So if I'm understanding you here (and I'm not really ), you believe it is not possible to enforce a stipulation in the will that it is only grandchildren born before a certain date that will be the beneficiaries?
Generally speaking, wills are said to "speak from death". Therefore, only the grandchildren that exist upon the execution of your will would fall to be considered under it. One sees this when gifts to beneficiaries who have predeceased the testator occur usually, but the principle equally prevents you making an anticipatory gift of the legal ownership in the way that you outline above. It is also a principle of law that property not be suspended in a sort of ownerless limbo at any given time; therefore, your property needs to have certain legal owners on execution of your will.
As has been mentioned, the best way to do achieve what you are talking about is to confer the legal ownership on someone through your will, while reserving the equitable/beneficial ownership for another class of persons (in this case, grandchildren). This is essentially what a trust is. You ask if you can confer a wide discretion on trustees in how they exercise the trust: the answer is yes, but trusts should be carefully drafted and you should absolutely seek the assistance of a legal professional in this regard. However, I do not think (though I may be subject to correction!) that there should be any problem in theory relating to you creating a trust for a named class of persons (grandchildren) which may expand in the future and thus become entitled as beneficiaries under the trust.
This is a very simplistic overview of your issue, and I'm afraid I can't offer any opinion on the taxation issues which may arise out of any of this. Still, I hope I have provided some small amount of guidance. Nevertheless, do certainly seek out a legal professional if you are contemplating having such a trust drafted.
OP, if you want to do something complicated like this, do talk to a solicitor. I think a reasonable position would be to provide for those living at the time of your passing or who are born within a short fixed period of time, e.g. 1 month.
However, it might be unwise to encourage your children to have children solely for the reason so they can benefit from an inheritance. For example, if you won the Euromillions (fingers crossed ) and you stipulated that each child should have one share of half (or whatever proportion you decide) your estate and that each grandchild should have one share of the other half your estate and you put an open ended / long term in which people could have children, then someone might have (more) children, solely so they could have more control over the estate or to deprive others of part of the estate. Imagine a womanising son getting 23 different women pregnant ...
Note that it is most tax efficient to provide for your spouse and children, not grandchildren.
Like the last couple of posters said the best option would be to set up a trust. It is a complicated issue and one best dealt with by a legal professional. There are issues to be considered like the womanising son fathering loads of kids. What about if one of your children had an affair and fathered or got pregnant with another child, would you want that child to benefit? What if one of their marriages broke up and they had more children with another man/woman, would you want those children included?
At what point to you want money to be distributed? Like a poster said a man can father a child possibly in to his eighties, do you want the grandchildren to wait that long? What about a grandchild that dies leaving dependants without having benefitted yet, will the money go to his/her dependants or be distributed among the remaining grandchildren?
And of course the tax implications need to be considered.
You can give the trustees discretion to distribute/invest the money as they see fit. For eg say the eldest grandchild is 18 and wants to go to college. There are 2 other grandchildren and unlikey to be any more. Would you want the trustees in this situation to give some money to enable the grandchild to go to college?
What about a drug addict/gambling grandchild who is going to squander the money, do you want them to have the full share?
There are lots of possibilites to consider. Plus the fact you would need to choose the trustees wisely.
You could use words such as "born" to clearly specify at what stage someone becomes a beneficiary to the estate. I've seen the term "all persons born at X date" to distinguish a person from a child in utero.
There is also a legal oddity in that an in utero child is not recognised in law as a legal person until 24 weeks' gestation. Although the constitution recognises the right to life of the unborn, it does not confer full human rights on that unborn. That does not happen until 24 weeks. So such an argument would (IMO) hinge on whether the in utero child was over 24 weeks at the time of the testator's death.
As far as I know a child doesnt become a legal person until they are born. I have not heard of "full human rights" being conferred on a fetus over 24 weeks gestation. If you have a miscarriage after 24 weeks its considered a stillbirth, giving the entitlement to a death cert and maternity leave/benefit. The baby is considered a human then, but this right, afaik comes form the fact the baby has been born (dead or alive).
Just kicking a football about though, I don't know if such a thing has been argued in court.