The High Court has recently given its judgment on whether Rory, a three year old child, should be entitled to £750,000 on his 18th birthday in the case of Wright v Gater  EWGC 2881 (Ch). The case demonstrates the problems of the intestacy rules, which apply where a person dies without a Will, and the costs of resolving any unintended consequences that arise under them.
Rory's grandfather (Edward) died in 2009 with no Will. Under the intestacy rules, Edward's estate passed to his son Kieran. Kieran died soon after his father, again leaving no Will. His estate and his father's estate were together worth around £750,000. Under the intestacy rules, Kieran's estate (including Edward's estate) passed to Rory. The Administration of Estates Act 1925 (''AEA 1925'') which governs estates where there is no Will provided that Edward's and Kieran's estates should be held for Rory on statutory trust until he reached the age of 18. When Rory turned 18, under the intestacy rules he would be entitled to a substantial sum of money with no restrictions.
Unsurprisingly Rory's mother thought that it would not be right for an 18 year old to inherit £750,000, and amongst other things made an application to Court that the trusts set out in the AEA 1925 be varied so that Rory would only be entitled to the money on reaching the age of 30. Whilst Rory was under 30, the people holding the purse strings would be close family members.
There were also inheritance tax issues. If both estates passed to Rory through Kieran's administrators, then inheritance tax of £89,000 would be owed to the taxman. However, if the Court could be persuaded to make Rory a beneficiary of Edward's estate, then there would be no inheritance tax owed.
In reaching his decision, Mr Justice Norris considered the ''benefit'' of holding the money for Rory until he was 30. ''Benefit'' would take into account include both financial and moral benefit. Norris J accepted that if the intestacy rules were left unaltered, then Rory would have unrestricted access to capital at 18, and that any reasonable person would see that this posed risks for any young adult, especially one ''being brought up in a family not accustomed to significant wealth''.
However, the judge said that it was wrong to impose a long term trust where close family members were in control. Rory had the right to have his independence as a young adult and there was nothing to indicate that he would be incapable of dealing with the money before reaching 30.
Mr Justice Norris did approve a variation of the statutory trusts, however not to the complete satisfaction of Rory's mother. Instead, Rory would be entitled to the income on £750,000 at age 18, 10% of the capital at 21 and all of the remaining money at 25.
The judge also ruled that it was acceptable to make Rory a beneficiary of Edward's estate so that a substantial inheritance tax saving was made.
The case shows that the intestacy rules can lead to young adults inheriting large amounts of money when they are still, perhaps, quite immature. Here Rory's mother was forced to make an application the court at substantial expense (which depleted Rory's inheritance) to avoid this happening, and even then the Court did not make the desired Order.
How could this have been avoided?
If Edward had made a Will which included a discretionary trust for all his family, then his estate could have passed directly to his executors who would hold it for Rory until he reached 25 or 30 thereby skipping Kieran. The intestacy rules do not allow this sort of flexibility.
Even if Edward had not made a Will, Kieran could have made a Will leaving his estate to his executors to hold for Rory until he reached the age of 25 or 30. To allow even more flexibility, Kieran could have made a Will leaving his estate on full discretionary trust giving his executors the power to decide when to pass money to Rory.