Writing A Will: How To Leave Money ‘With Strings Attached’

Writing a will involves making some tough decisions.

One of the most difficult decisions you may face is deciding if a beneficiary is ready to receive full control over their inheritance.

You may decide that a beneficiary currently lacks the judgement necessary to manage a large amount of money, so you will need to delay payment.

There may also be certain conditions that you wish to add, which ensure the beneficiary is still deserving of their inheritance.

This article will identify a few of the reasons why individuals might wish to add conditions to the eligibility of the beneficiaries in their will.

Following that, we’ll share the options that are available for leaving money with strings attached.

Before acting on any of the suggestions below, please make sure you understand the inheritance or death taxes which may apply and the fiscal consequences of your decision.

For example, many people put a condition that a child must attain the age of 25 when hopefully they will be responsible enough to receive a large inheritance.

However, in 2006, the UK government decided that all 18 year olds were mature enough and changed what had previously been a preferential regime for trusts vesting up to the age of 25.

Why would you wish to leave money ‘with strings attached’?

The most common reasons why people add specific conditions to a beneficiary’s eligibility for inheritance include:

The beneficiary is too young

In most cases, it is not a good idea to leave a vast amount of money to a child or teenager.

They will lack the sound judgement and life experience to manage a large sum of money appropriately.

A teenager or young adult receiving a large inheritance might decide to spend their money on an expensive sports car or other frivolous purchases.

Not only is this a waste of money, it may significantly disrupt their lives, interfere with their schooling and prevent them from having a well-rounded life.

Many people will add conditions to a will stating that young beneficiaries cannot receive their inheritance until they are 21 years of age (or older).

By then, the beneficiary should have a better understanding of how to use an inheritance in a way that improves their life in the long run.

Conditions to encourage good behaviour

Many will writers add conditions on an inheritance that encourage someone to achieve a specific goal.

Some common conditions that encourage good behaviour include:

Completing a university degree

It’s very common for individuals to require young beneficiaries to complete a university degree before being eligible to receive an inheritance.

Continue to fulfil an obligation within the family

Inheritances are often tied to a person continuing to fulfil some obligation within their family.

This might be looking after an elderly relative, running the family business, or staying married.

Staying clean and sober

If a beneficiary has a history of drug abuse or alcoholism, it is often a good idea to only grant them an inheritance if they manage to get clean and sober.

This will prevent them from squandering their inheritance on drugs or alcohol.

Conditions to discourage certain actions

It is also possible to discourage certain actions by placing restrictions on an inheritance.

Some of the common conditions that are added to discourage certain actions include:

Marrying within the faith

Some devoutly religious people will add requirements that a beneficiary must marry within the faith to receive an inheritance.

Getting divorced

Some wills will include conditions saying that a beneficiary can only receive an inheritance if they are remain married to the same person.

A will writer might decide to give an inheritance to a beneficiary’s children if the beneficiary gets divorced.

This prevents any portion of the inheritance flowing to the divorced spouse.

Not marrying someone of a certain faith

Religious will writers may also add conditions saying that a beneficiary is ineligible to receive an inheritance if they marry a person of a certain faith.

What options are available for a ‘strings attached’ will?

There are four primary options for creating a will with string attached.

They are:

Place specific conditions on receiving the entire inheritance

The beneficiary’s funds are placed into a trust.

They not released until the trustee has determined that the beneficiary is in compliance with each condition on the will.

Once the conditions are met, they will receive their entire inheritance.

There may be certain rules attached to each condition as well.

For example, you may have a condition stating that a recipient can only receive their inheritance at a young age if they complete college.

However, if they do not attend college, you might give them the entire inheritance when they reach 40 years of age.

It is also possible to set a date for when the trust should end.

At this point, all remaining assets will be allocated to beneficiaries, regardless of any conditions.

When using placing conditions on the beneficiaries of a will, it is important to use a trustee who has the time and resources necessary to determine that each condition has been met.

Pay the inheritance in installments

A beneficiary’s inheritance can also be released in installments instead of as a lump sum.

Each installment can be paid at a certain date or when a beneficiary reaches a certain age.

The installments can also be dependent upon conditions such as getting married or buying a property.

Paying an inheritance in installments can be a useful option if you wish to ensure that a beneficiary is still living up to their responsibilities.

Again, the trustee must manage the funds in the estate and ensure that they are paid out appropriately.

These kinds of trusts can also be designed to last in perpetuity.

A so-called “Dynasty Trust” is designed to never run out of money and to provide benefit to a beneficiary’s descendants.

This type of arrangement is useful for very large estates as it protects the estate from a beneficiary’s bad judgement and any debt problems they run into.

It also protects the estate if the beneficiary divorces their partner.

Pay incentive payments (Incentive Trust)

A beneficiary’s inheritance can also be attached to achieving specific goals in their life.

This might include completing a drug and alcohol rehabilitation program, completing university or getting a job.

As each event is completed, they will either receive another portion of their inheritance or the remainder of their inheritance.

It is up to the trustee to determine if the beneficiary is in compliance with the conditions laid out in the will.

They may need to investigate behaviour and challenge the beneficiary’s assertions, which can be a difficult task.

It is important to use very clear wording in the will when using incentive payments.

Thanks for reading Writing A Will: How To Leave Money ‘With Strings Attached’.

For more information on writing a will, contact us today.

author: Stephen Coleclough

Stephen Coleclough is a leading international and domestic tax consultant who specialises in solving complex problems. As well as advising on tax matters, Stephen also enjoys exploring topics relating to physical and mental wellbeing. You can follow him on Twitter at SColeclough.


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