Learning Outcomes
After studying this article, you will be able to identify when statutory trusts arise for minors and life interests under the intestacy rules, explain the structure and operation of these trusts, describe the duties and powers of trustees, and apply the relevant legal principles to SQE1-style scenarios. You will also be able to spot common exam pitfalls and distinguish between vested and contingent interests in intestacy.
SQE1 Syllabus
For SQE1, you are required to understand the statutory trusts that arise for minors and life interests under the intestacy rules. In your revision, focus on:
- the circumstances in which statutory trusts for minors arise under the Administration of Estates Act 1925
- the structure and effect of statutory trusts for minors and life interests in intestacy
- the duties and powers of trustees managing assets for minors and life tenants
- the distinction between vested and contingent interests in intestacy
- the practical implications for distribution, including when minors or life tenants become absolutely entitled
Test Your Knowledge
Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.
- When does a statutory trust for a minor arise under the intestacy rules?
- What is the difference between a vested and a contingent interest for a minor inheriting under intestacy?
- Who manages the assets held on statutory trust for a minor, and what powers do they have?
- What happens to the capital of a life interest under intestacy when the life tenant dies?
Introduction
When a person dies intestate (without a valid will), the law imposes a strict order of entitlement and a trust structure to protect certain beneficiaries. Statutory trusts for minors and life interests are central features of the intestacy rules in England and Wales. These mechanisms ensure that minors do not receive outright control of significant assets before adulthood, and that surviving spouses or civil partners may be supported through a life interest in part of the estate. For SQE1, you must be able to identify when these trusts arise, how they operate, and the duties of those managing the assets.
Statutory Trusts for Minors under Intestacy
When do statutory trusts arise?
A statutory trust for a minor arises under the intestacy rules whenever a beneficiary entitled to a share of the estate is under 18 and their entitlement is not vested absolutely. This most commonly occurs when the deceased is survived by children or remoter issue (such as grandchildren) who are minors.
Key Term: statutory trust A trust imposed automatically by law under the Administration of Estates Act 1925, holding assets for a minor beneficiary until they reach a specified age or satisfy a contingency.
Structure and effect
Under the statutory trust, the minor’s share is held by the personal representatives (PRs) as trustees. The minor does not become absolutely entitled to their share until they reach 18 or marry or form a civil partnership under that age.
Key Term: contingent interest An interest that will only vest if a specified condition is met (e.g., attaining age 18 or marrying earlier). The beneficiary has no absolute right until the condition is satisfied.
Key Term: vested interest An interest that is absolute and not subject to any condition precedent. The beneficiary is immediately entitled, subject only to the administration of the estate.
Trustees’ powers and duties
The PRs, as trustees, have wide powers under the Trustee Act 2000 and the Administration of Estates Act 1925. Their main duties include:
- investing the trust assets prudently
- applying income for the minor’s maintenance, education, or benefit (the power of maintenance)
- advancing capital for the minor’s benefit, within statutory limits (the power of advancement)
- preserving the capital for the minor until the contingency is satisfied
Key Term: power of maintenance The statutory power to apply trust income for the maintenance, education, or benefit of a minor beneficiary.
Key Term: power of advancement The statutory power to advance part of the trust capital to or for the benefit of a beneficiary before they become absolutely entitled.
What happens when the minor reaches 18?
When the minor attains 18 (or marries or forms a civil partnership before 18), their interest vests absolutely. The trustees must then transfer the capital and any accumulated income to the beneficiary.
Failure to attain the contingency
If a minor beneficiary dies before reaching 18 (and before marrying or forming a civil partnership), their interest fails. The share is then redistributed according to the statutory trusts, often passing to siblings or other issue per stirpes.
Worked Example 1.1
A dies intestate, survived by two children: Ben (20) and Cara (15). How is the estate divided?
Answer: Ben, being over 18, takes his share outright (vested interest). Cara’s share is held on statutory trust until she reaches 18. The PRs manage Cara’s share as trustees, applying income for her benefit and investing capital. When Cara turns 18, she becomes absolutely entitled to her share.
Life Interests under Intestacy
When does a life interest arise?
For deaths before 1 October 2014, if the deceased was survived by a spouse or civil partner and issue, the spouse/civil partner was entitled to a statutory legacy, personal chattels, and a life interest in half the residue. For deaths on or after 1 October 2014, the spouse/civil partner receives the statutory legacy, personal chattels, and half the residue absolutely; the other half passes to issue on statutory trusts.
Key Term: life interest The right to receive income from a fund or asset for life, without ownership of the capital.
Duties of the life tenant and trustees
The life tenant (usually the spouse/civil partner) is entitled to the income generated by the life interest fund during their lifetime. The trustees (PRs) must:
- invest the fund to provide income for the life tenant
- preserve the capital for the ultimate beneficiaries (the issue)
- ensure fair balance between income and capital growth
When the life tenant dies, the capital passes to the issue (children or remoter descendants) absolutely or, if they are minors, on statutory trust until they reach 18.
Worked Example 1.2
D died intestate in 2013, survived by spouse E and two children, both over 18. What does E receive?
Answer: E receives the statutory legacy, personal chattels, and a life interest in half the residue. The children receive the other half of the residue outright. On E’s death, the capital of the life interest fund passes to the children absolutely.
Trustees’ Powers and Practical Issues
Trustees managing statutory trusts for minors or life interests must comply with statutory duties of care and act impartially between beneficiaries. They may need to make investment decisions, apply income for maintenance, and decide whether to advance capital. Trustees must also keep proper accounts and provide information to beneficiaries on request.
Worked Example 1.3
A minor beneficiary’s share is invested in shares and property. The trustees wish to sell the property to diversify investments. Can they do so?
Answer: Yes. Trustees have statutory powers to sell and reinvest trust assets, provided they act in the best interests of the beneficiary and comply with their duty of care.
Exam Warning
In SQE1, always check whether a minor’s interest is vested or contingent. Do not assume a child is entitled outright unless the contingency (usually age 18) is satisfied. Also, remember that for deaths on or after 1 October 2014, the life interest for spouses/civil partners no longer applies; instead, they receive half the residue absolutely.
Revision Tip
When answering SQE1 questions, always identify: (1) the date of death (to determine which intestacy rules apply); (2) the age and relationship of each beneficiary; (3) whether the interest is vested or contingent; and (4) who holds the assets and in what capacity.
Key Point Checklist
This article has covered the following key knowledge points:
- Statutory trusts for minors arise under intestacy when a beneficiary is under 18 and not absolutely entitled.
- The PRs act as trustees, managing the minor’s share until the contingency is met.
- Trustees have powers of investment, maintenance, and advancement, but must preserve capital for the minor.
- Life interests for spouses/civil partners only apply to deaths before 1 October 2014; for later deaths, the spouse/civil partner takes half the residue absolutely.
- Always distinguish between vested and contingent interests for minors.
- On the minor reaching 18 (or marrying earlier), their interest vests and the trustees must transfer assets to them.
Key Terms and Concepts
- statutory trust
- contingent interest
- vested interest
- power of maintenance
- power of advancement
- life interest
