Bereaved minor's trust

What is a bereaved minor’s trust?

A bereaved minor’s trust is a will trust that is created for a child under 18, at least one of whose parents has died. The child needs to become absolutely entitled to the trust property on or before reaching the age of 18.

A bereaved minor’s trust benefits from favourable inheritance tax treatment. It is not automatically created if you simply leave your estate outright to your children. If you do this, a bare trust arrangement could be established. Instead, your will needs to state that your estate should pass to such of your children as survive you and attain the age of 18.

For example, ‘The Trustees shall hold the Trust Fund for such of my children as survive me and attain the age of 18 and if more than one in equal shares absolutely.

A beneficiary of a bereaved minor’s trust can call for the capital in the trust at the age of 18. So if you want to defer your children’s inheritance beyond this age, you should consider a different sort of trust, such as an 18 to 25 trust or a discretionary trust. Before the child is 18, capital or income can be used by the trustees for the child’s maintenance.

Taxation of bereaved minor’s trusts

The assets of a bereaved minor’s trust are not deemed to be in the beneficiary’s estate for inheritance tax purposes. This means that if the beneficiary dies before they are 18, while the trust exists, there is no inheritance tax charge. The assets will pass under your will rather than as if they belonged to your child (as is the case with a bare trust arrangement).

There are no inheritance tax charges when assets leave the trust or when the child becomes entitled to the capital at age 18.

Bereaved minor’s trusts are treated differently from bare trusts when it comes to income tax and capital gains tax. The usual trust rates and annual exemptions apply for a bereaved minor’s trust so there may be more tax to pay than if the assets were in a bare trust.

You should consider using a bereaved minor’s trust in your will if:

  • you are, or expect to be, the parent or step-parent of a minor child; and
  • you do not mind your child or children becoming entitled to your estate at age 18.