When making a gift to a child in a Will it is rarely appropriate to give the gift to the child outright before they reach adulthood. Many people prefer the gift to be held by the Executors until the child has reached 18, 21 or 25 years. Usually the larger the gift, you might want a higher age before the child has complete access to the funds.
In all but the most unusual circumstances, a provision is included in the Will which allows the Executors to pay some, or even the entire amount to the child before they reach the nominated age, if the Executors feel that the payment is for the education, maintenance or other benefit of the child. Clearly the choice of Executors is extremely important and you should choose people who would reflect your own standards and beliefs. If funds are being held for a child, it is my strong preference that at least two Executors are chosen and that they are not from the same household.
Why do people prefer 25 years?
More and more people prefer that the beneficiary reaches 25 years before having total access to the money. The majority of young people will complete, not only secondary schooling, but go on to complete a tertiary course. The vast majority of tertiary courses are at least four years. This means that a University graduate is likely to be 22 or 23 years old.
Many people hold the belief that it is not until you are working full time and are fully supporting yourself from your own income, that you truly develop a sense of the value of money. Having to budget for payment of accommodation, food, utilities, car and transport, health insurance, etc is a great learning opportunity. The vast majority of our grandparents left school at 15 years and commenced employment receiving less than the adult wage. A large chunk was retained by their own parents for board and your grandparents had to be rather thrifty with the balance remaining. By the time your grandparents reached 21 years, they had been managing their own funds for five or six years.
Is 30 years or higher appropriate?
Occasionally it is appropriate to place a higher age upon the child receiving the money. But you must be careful that this restriction does not become unreasonable. The role of the Executors in managing the money for infant children is an onerous and very important task. Looking after money until the child reaches 21 years is very different to looking after those funds for a further nine years until the child reaches 30. You must ask yourself is the potential beneficiary going to change their behaviour substantially between the ages of 25 to 30 years.
A number of clients have been well aware that the child will be financially very comfortable during early adulthood and there is no need for funds to be made available before 30 years.
Very occasionally I have clients who wish the benefit for a child to be held until the child reaches 35 or 40 years. The reasons have to be carefully examined. I have never met anyone yet who can persuade me that an age restriction higher than 40 years is ever appropriate. If the question is simply about when the child will be mature enough to manage the funds independently, then an age restriction is the best method to use. If there are other concerns about the child’s ability to manage the money then Protective Trusts should be used and this is a different and more complex topic.