Intestacy rules - Statutory trusts for minors and life inter...

Learning Outcomes

This article outlines statutory trusts for minors and life interests under intestacy, including:

• the circumstances in which statutory trusts arise for minors and life tenants under intestacy, and how these trusts are triggered in exam scenarios
• the structure, operation and effect of statutory trusts and statutory life interests on the division of residue between spouses/civil partners and issue
• the distinction between vested and contingent interests, including when minors’ interests vest, fail or are redistributed per stirpes across generations
• the duties and powers of personal representatives and trustees managing assets for minors and life tenants, with reference to TA 1925 and TA 2000
• the impact of the date of death on spouse/civil partner entitlement, contrasting the pre‑ and post‑1 October 2014 intestacy regimes
• the trustees’ income and capital powers for minors (maintenance and advancement), and how these powers are exercised and limited in practice
• the inheritance tax consequences of statutory life interests, including IPDIs, and of statutory trusts for minors created on death
• common SQE1 exam pitfalls, such as misidentifying the relevant class of beneficiaries, overlooking representation, or assuming minors take outright
• how to apply the statutory rules and trustee powers methodically to SQE1‑style problem questions involving intestacy, minors and life interests

SQE1 Syllabus

For SQE1, you are required to understand the statutory trusts that arise for minors and life interests under the intestacy rules, with a focus on the following syllabus points:

• 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
• the post-1 October 2014 changes to spouse/civil partner entitlements, including statutory legacy, personal chattels and residue
• representation and per stirpes distribution across generations under statutory trusts
• the interaction with Trustee Act 1925 ss 31–32 (maintenance and advancement) and Trustee Act 2000 duties of care and investment
• the inheritance tax treatment of statutory life interests and statutory trusts for minors created on death

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.

1. When does a statutory trust for a minor arise under the intestacy rules?
2. What is the difference between a vested and a contingent interest for a minor inheriting under intestacy?
3. Who manages the assets held on statutory trust for a minor, and what powers do they have?
4. 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 (for deaths before 1 October 2014) or outright shares (for later deaths). Correct analysis starts with the date of death, because spouse/civil partner entitlements changed from 1 October 2014 under the Inheritance and Trustees’ Powers Act 2014. It also requires careful identification of the family tree, because under the statutory trusts issue take per stirpes with representation across generations, and minors’ interests are contingent until they satisfy the statutory contingency (typically age 18 or earlier marriage/civil partnership).

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.

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. Where the intestate is not survived by a spouse/civil partner, or where only part of the residue goes to issue (for deaths on or after 1 October 2014), the share passing to issue is held on statutory trusts. Under these trusts, members of the specified class take equally subject to representation; minors take contingently on attaining 18 or marrying or forming a civil partnership earlier.

Key Term: per stirpes
A method of distribution whereby descendants take the share their deceased ancestor would have taken. If a child of the intestate predeceases, that child’s issue collectively take the parent’s share, subject to statutory contingencies.

Structure and effect

Under the statutory trust, the minor’s share is held by the personal representatives (PRs) as trustees. The PRs hold the residue (or part of it) until beneficiaries are absolutely entitled. Under the statutory trusts for issue:

• each living child of the intestate takes an equal share,
• the share which a deceased child would have taken is held for their issue per stirpes,
• any share for a minor is contingent upon that minor attaining 18 or marrying/entering a civil partnership earlier.

The minor does not become absolutely entitled to their share until they reach 18 or marry or form a civil partnership under that age. Until the contingency is met, the PRs hold legal title and administer the trust.

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 duties and powers under the Trustee Act 1925 and Trustee Act 2000. Their main duties include:

• investing the trust assets prudently (TA 2000 s 3), with a duty of care (TA 2000 s 1), taking advice where appropriate (TA 2000 s 5), and keeping investments under review (TA 2000 s 4)
• acting impartially as between beneficiaries and preserving capital for the contingent beneficiaries
• applying income for the minor’s maintenance, education, or benefit (the power of maintenance: TA 1925 s 31)
• advancing capital for the minor’s benefit within statutory limits (the power of advancement: TA 1925 s 32)
• keeping proper accounts and providing information on request
• taking reasonable protective steps against unknown claimants (e.g., placing statutory advertisements under Trustee Act 1925 s 27)

The power of maintenance allows trustees, at their discretion, to apply income for the minor’s maintenance, education or benefit during minority. The power of advancement permits trustees to advance capital to a beneficiary with an interest in capital, up to the amount of their presumptive share. For trusts created on or after 1 October 2014, the Inheritance and Trustees’ Powers Act 2014 widened the default advancement power (removing the old one-half cap unless excluded), so trustees of statutory trusts created after that date may advance up to the whole of a beneficiary’s presumptive share if justified.

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 (or, post‑2014, potentially up to all) of the beneficiary’s presumptive capital share to or for the beneficiary’s benefit before they become absolutely entitled.

Trustees must balance short-term needs and long-term protection of capital. For example, they may use income to fund a minor’s school fees, while advancing capital only where necessary and proportionate to the beneficiary’s advancement in life (education, training, housing, etc.). Trustees must also be mindful of equality between different branches of the family where multiple minors have contingent interests.

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. If several minors become entitled at different times, trustees will administer and distribute shares as each beneficiary satisfies the contingency. The rule in Saunders v Vautier applies: once beneficiaries are adult, of full capacity, and together absolutely entitled to the trust property, they may collectively require trustees to transfer the trust assets to them and terminate the trust.

Failure to attain the contingency

If a minor beneficiary dies before reaching 18 (and before marrying or forming a civil partnership), their contingent interest fails. The share is then redistributed according to the statutory trusts, often passing to siblings or other issue per stirpes. Representation operates at each generational level: where a contingent beneficiary dies leaving their own living issue at the intestate’s death, those issue may take the ancestor’s share per stirpes under the statutory trusts, subject to their own contingencies. Adoption and legitimacy rules apply as follows:

• adopted children are treated as the children of their adoptive parents for intestacy; however, there is a statutory exception preserving any contingent entitlement an adopted person had immediately before adoption in the estate of a deceased natural parent (the exception does not extend to other relatives)
• entitlement is unaffected by the marital status of the parents; issue born outside marriage can inherit under the statutory trusts (subject to proof of paternity where relevant)
• half‑blood relatives take lower priority than whole‑blood relatives where the rules look beyond issue, but within the issue class the per stirpes method applies regardless of half/whole blood

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.

Worked Example 1.2

E dies intestate, leaving three children: Fiona (deceased), Greg (17), and Hiba (22). Fiona died before E, leaving twins Ian (12) and Jade (19). How are shares held and when do they vest?

Answer:
E’s issue take per stirpes: Hiba and Greg each take one-third; Fiona’s one-third passes to Ian and Jade equally (one-sixth each). Hiba’s one-third is vested and payable. Greg’s one-third is contingent and held on statutory trust until 18 (or earlier marriage/civil partnership). Jade’s one-sixth is vested and payable; Ian’s one-sixth is contingent and held on statutory trust until 18 (or earlier marriage/civil partnership). Trustees manage contingent shares under TA 1925 ss 31–32.

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 the 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.

The pre‑2014 statutory life interest arises automatically and is an interest in possession created on death. For inheritance tax purposes, it is treated as an immediate post‑death interest (IPDI): there are no ten‑year charges or exit charges on the trust during the life tenant’s lifetime; instead, the trust capital is aggregated with the life tenant’s estate on their death.

Key Term: life interest
The right to receive income from a fund or asset for life, without ownership of the capital.

Key Term: statutory legacy
A fixed sum payable to the surviving spouse/civil partner on intestacy where the deceased also leaves issue; the amount is set by statutory instrument and periodically updated.

Key Term: immediate post-death interest (IPDI)
An interest in possession arising on death that qualifies for special inheritance tax treatment: trust capital is treated as part of the life tenant’s estate on death; no relevant property ten‑year charges apply while the interest subsists.

Key Term: personal chattels
Tangible movable property owned for personal use (e.g., furniture, jewellery), defined in AEA 1925 and relevant for spouse/civil partner entitlements on intestacy.

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 a reasonable income stream for the life tenant (TA 2000 ss 1–4)
• preserve the capital for the ultimate beneficiaries (the issue) and act impartially between income and capital
• consider suitability and diversification of investments, taking appropriate advice (TA 2000 s 5)
• avoid conflicts and self-dealing; manage and review the fund periodically
• ensure fair balance between income production and capital growth, recognising the remaindermen’s expectations

When the life tenant dies, the capital passes to the issue absolutely or, if they are minors, on statutory trust until they reach 18 (or marry/enter a civil partnership earlier). Because a pre‑2014 intestacy life interest is an IPDI, the capital is aggregated with the life tenant’s estate for inheritance tax purposes at their death; trustees and advisors should account for this when planning distributions and tax compliance.

A pre‑2014 spouse/civil partner could elect within prescribed time limits to capitalise (redeem) the statutory life interest into a lump sum (previously under AEA 1925 s 47A), using prescribed tables to determine the capital value. The election affected administration timing but did not change the ultimate entitlement of the issue to the remainder.

Worked Example 1.3

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 (the life interest is an IPDI; the fund is aggregated with E’s estate for inheritance tax on E’s death).

Worked Example 1.4

F died intestate in 2019, survived by civil partner K and three children (two minors). Outline the distribution and resulting trusts.

Answer:
K receives the statutory legacy (current amount set by SI), personal chattels, and half of any residue absolutely. The other half of the residue passes to F’s issue on statutory trusts: equal shares to each child, with minors’ shares contingent on 18 (or earlier marriage/civil partnership). The PRs hold minors’ shares as trustees under TA 1925 ss 31–32, applying income for maintenance/education and advancing capital appropriately. No life interest arises for K due to the post‑2014 regime.

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. In estates comprising land, the trust of residue may be, or become, a trust of land. Where trustees hold land, they can:

• acquire UK land for investment or occupation by a beneficiary (TA 2000 s 8), and manage it with the powers of an absolute owner
• consider beneficiaries’ occupation rights under TLATA 1996 s 12, and may restrict or exclude occupation subject to reasonableness (s 13); they must balance all beneficiaries’ interests, including the need to sell

Where minors are contingent beneficiaries, trustees should be cautious about advancing capital and record their reasons (e.g., education, housing, health). Post‑2014 default powers allow full advancement of presumptive shares if justified and not excluded. For income, trustees may apply reasonable amounts during minority and, for trusts created before 1 October 2014, must pay income to a beneficiary on attaining 18 even if capital remains contingent; for later trusts, the amended s 31 facilitates payments aligned to modern practice.

Trustees and PRs should also consider administrative protections:

• placing s 27 Trustee Act advertisements early in the administration to protect against unknown claimants
• delaying final distribution until six months from the grant to protect against Inheritance (Provision for Family and Dependants) Act 1975 claims
• using Benjamin orders or appropriate insurance where a known beneficiary cannot be traced

Worked Example 1.5

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. Where the trust includes land, trustees act with the powers of an absolute owner (TA 2000 s 8), subject to TLATA duties and any rights of occupation. They must consider suitability, diversification, obtain advice where appropriate, and record their decision.

Worked Example 1.6

L is 17 and holds a one-quarter contingent share under the statutory trusts. L marries at 17. What is the effect on L’s entitlement?

Answer:
Marriage or civil partnership before 18 satisfies the statutory contingency. L’s one-quarter share vests absolutely on the marriage, and trustees must transfer capital (and any accumulated income) to L, subject to the estate’s administration timetable. Trustees should verify the marriage/civil partnership and update their distribution schedule.

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. Ensure you identify the date of death to determine the correct regime. For pre‑2014 statutory life interests, remember the IPDI inheritance tax treatment and that the capital ultimately passes to issue on the life tenant’s death. Watch for per stirpes distribution and representation: a deceased child’s issue take their parent’s share, with minors’ interests contingent. Finally, remember survivorship and qualification points: a spouse/civil partner must survive the intestate for 28 days to take; adopted children are treated as children of their adoptive parents (with a limited exception for pre‑adoption contingent rights in a deceased natural parent’s estate).

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. Cross‑check whether a spouse/civil partner qualifies (including the 28‑day survival rule) and note if any minors’ shares are on statutory trusts. For trusts of land, consider TLATA occupation rights and trustees’ ability to restrict them. Where life interests arise (pre‑2014), note the life interest fund’s investment approach and IPDI inheritance tax treatment.

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; minors’ interests are contingent upon attaining 18 or earlier marriage/civil partnership.
• The PRs act as trustees, managing the minor’s share until the contingency is met; equal shares are taken per stirpes with representation across generations.
• Trustees have powers of investment, maintenance, and advancement (TA 1925 ss 31–32; TA 2000), must act impartially and preserve capital, and can advance capital up to the presumptive share (post‑2014 default).
• Life interests for spouses/civil partners apply only to deaths before 1 October 2014; they create an IPDI for inheritance tax, with capital passing to issue on the life tenant’s death.
• 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.
• Distinguish vested and contingent interests for minors and recognise events that vest (age 18 or earlier marriage/civil partnership).
• Trustees must consider TLATA powers and occupation rights where land is held and take protective steps under TA 1925 s 27 and the Inheritance (Provision for Family and Dependants) Act 1975.
• The rule in Saunders v Vautier permits adult, absolutely entitled beneficiaries to terminate the trust by unanimous agreement.

Key Terms and Concepts

• statutory trust
• contingent interest
• vested interest
• power of maintenance
• power of advancement
• life interest
• statutory legacy
• per stirpes
• immediate post-death interest (IPDI)
• personal chattels