When is an “adult”? I only want my kids to inherit when they can make good decisions!

Many of our customers prefer to ensure that inheritance doesn’t go to a child before they’ve “grown up”.

Imagine: how long would £1,000, £10,000 or £250,000 last with an 19-year-old kidult? Queue mental images of Justin Beiber in a graffitied Lamborghini, a “The Hangover” style trip to Vegas, or the more prosaic but less explosive chain of poor decisions, gullability and frittering of funds leading to years of your work and toil – used up in (potentially) moments. 

The logical thought is that inheritance should therefore happen when the child becomes an “adult”.  However: that’s no clear-cut thing.  What is “adulthood”?  There are all sorts of markers: legal adulthood, the age for the front door-key, finishing education (or further education, perhaps), taking on “adult” responsibility (by which we mean a mortgage/ marriage/ firstborn etc). It’s important to stress there is no right or wrong answer.

It’s up to you to find something that will deal properly with societal and biological norms: as well as your knowledge of the nature of your intended beneficiaries. 

The legal perspective:

Basically: what’s being asked here is “when does adolescence end”. If you read the letter of the law a child reaches his or her “majority” when they are 18. They can vote, drink, join the army, and enjoy other rights that an adult does: including inheriting property and money.  However, if you look at prevalent scientific thought at the age of 18 most people are still firmly in the throes of adolescence. 

Young male and expensive car
Photo credit: Banter Snaps

The biological argument:

Adolescence is typified by emotional parts of the brain having sway over the critical and analytical parts.  Robert Sapolsky has written extensively on the development of the brain.  In his book “Behave” (which we highly recommend) he charts the development of the human brain and explains why he considers adolescence can last into the late twenties.  Throughout their development a human will be at the mercy of the more primal and animal parts of their brain.  Without passing judgement on whether this is a good thing or bad thing, we can say “it’s just a phase” – however, that phase last longer than lots of us realise!

So what does that mean for a child inheriting money from you?  Well: if you make a will that’s entirely up to you. Anyone with a will wanting to leave a gift to their children (or anyone else for that matter) to say when they want someone to inherit money.  Common ages for people to come into their inheritance are 18 (default), 21 and 25.  However, you could say 30 or even 50 if you wanted.  Chances are if you stretch it too far the executors might raise an eyebrow, or the beneficiaries might join together and use their rights to change this – which could lead to unnecessary expenses against the estate so your beneficiaries get less than hey would otherwise.

The presumption (if you don’t have a will):

If you don’t have a will though: the legal presumption of 18 years old will kick in. 

There is another problem to do with inheritance tax. If your estate includes residential property that you’ll pass to the beneficiaries if they don’t inherit it straight after you die, then they could end up paying tax out of the estate where they might not otherwise have to.  Basically: if they don’t inherit straight off then the executors have to look after the property till they’re old enough. That means that the primary residential property allowance (worth over a hundred thousand pounds) may not apply.  If in doubt: make sure that the property goes to the beneficiary directly.

What else can you do?

Photo credit: Alice Alinari
Photo credit: Alice Alinari

As we all know: cash is the easiest thing to fritter away.  If an adolescent inherits a lot of money, that can be quickly spent. However, if they inherit a property, or an investment that pays out over time: liquidating that would put an administrative barrier in their way.  That would give them time to consider their next moves and the analytical part of their forebrain might wrestle the decision making away from the more emotional hindbrain.  There’s a big difference between drawing £100 out of a cash point and signing mortgage papers to release capital from a property. Same goes for speaking with an IFA in order to work out how and whether to release cash early from a fund or an investment.

To summarise: whilst someone may reach legal “adulthood” at 18, there is strong evidence to say that they are still an adolescent at this age.  Without a will the default will be that inheritance will happen at 18.  There are legal and practical ways to extend the age at which they will inherit.  You can set down an older age for them to inherit when you make your will, or you can ensure they receive property, assets, or investments that would be difficult for them to easily transfer into cash.