Leaving Money in a Will: Passing on inheritance wisely

We take a look at leaving money in a will and passing on inheritance. Parents usually wish to leave their money in their Will to children and grandchildren. There are different ways to pass on wealth and we discuss how to leave money in a Will, looking at the options and implications.

It is important to think carefully about how you want to leave your money when making a Will. In some cases, passing on money can cause difficulties that were not foreseen. By speaking to an expert, you will have the chance to talk through your situation and ensure you make the best possible choices for your family.

How to pass on money to your chosen beneficiaries

There are three main ways of passing money to your loved ones:

• an outright gift
• a gift that will be received when they reach a certain age
• money that is put into a trust.

Outright gift of money

An outright gift in a Will means that a beneficiary would be given the money you leave them after your death. This is once the estate administration has been concluded. The only exception would be if the beneficiary was not yet 18. In this case the money would be placed in trust until they reach that age.

There can be some drawbacks to this. There is a risk that a fairly young person could inherit a very large sum of money. This is before they have the maturity to appreciate it and manage it well.

It could also be the case that an individual who inherits money could lose it in a divorce. It will be considered a matrimonial asset and shared with the other spouse. Similarly, if the beneficiary has been made bankrupt, then a trustee in bankruptcy can use the inherited money to pay off creditors.

Money gifted at a specified age

It is open to you to specify the age at which you would like a beneficiary to inherit money from your estate. This is particularly helpful for those wishing to leave money to grandchildren. You can choose the age you believe is right for your family, such as 21 or 25. You can choose the option of leaving money in a trust in a Will. The money left to them will be held in trust until they reach the set age.

This can prevent money from being spent unwisely by a young person who has not built up the experience to deal with it responsibly. It is open to the trustees looking after the money to release funds in the interim. This is only if they believe that it is needed and will be well spent.

Discretionary trust

A discretionary trust can be set up in a Will to hold money that is to be spent for the benefit of loved ones, usually children and grandchildren. The trustees will manage the trust fund, to include investing it as they see fit. The person making the Will can leave a letter of wishes with guidelines for how the trust is to be run. For example which investments they prefer and what they want the money to be released to the beneficiaries for. These may include such things as education, a car or a deposit for a home.

This protects the money from being spent unwisely. It also means that it cannot be lost in a divorce or bankruptcy.

Estate planning

Deciding where and how to leave your money can be complicated and you are always advised to take expert advice before making a Will. By carefully planning how you will pass on your estate, you may be able to mitigate Inheritance Tax. Thus ensuring that future generations have the support they need. By way of example, if your children have sufficient wealth, you may decide to leave the bulk of your estate to your grandchildren. The advantage of doing this is that Inheritance Tax would only be payable once on the money. If you were to leave it to your children and they subsequently left it to their children, the tax would be payable a second time.

Contact Us

If you would like to speak to one of our experts call us FREE on 0800 781 6658 or email us at enquiries@estplan.co.uk

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