Wills, Probate and Trusts

Introduction to Maintenance And Advancement

Maintenance

Maintenance is the power to give part of the trust income to the beneficiary before a beneficiary acquires the trust property on the fulfillment of the condition set up in the trust. For example, attaining a certain age, getting marrying, or any other condition

Example

Term of Simon’s will

I leave £25000 to Mark when he attains 18’ or on his 18th Birthday

I leave £50,000 to my daughter Elisa when she marries

My house to my wife for her life and then to my Son Mark absolutely

A trust often contains beneficiaries who will be entitled to a trust property at a later stage or some distant date in the future. A well-drafted trust provides powers to trustees to help the beneficiary financially before they take the control or possession of the property.

Maintenance and advancement are often used to reduce tax liability. 40% Inheritance tax is due on the inheritance of over £325,000 or in the case of a married couple the threshold is £650,000. Many people choose to transfer the property to their children 7 years or more before death (a minimum of 7 years are required). One way of doing so is setting up a Maintenance and Accumulation Trust, the properties would be invested and profits will be accumulated.

Under maintenance and advancement, trustees are allowed or given powers to pay maintenance to the children but in 2006 the UK government stipulated the age to be 18 at maximum.

  • Under maintenance, trustees hold powers to provide for the daily needs of the beneficiaries out of the trust income
  • Payment is made from the income of the trust
  • Maintenance is not possible in discretionary trusts (please refer to types of Trusts)
  • Trustees have the discretion to pay maintenance to the child’s parents or guardian to provide the child with the education, living expenses and any other thing which would benefit the child
  • Trustees can pay directly to the child for maintenance
  • Courts do not interfere with the discretionary decisions of trustees unless trustees misuse their powers
  • Trustees do not have to pay all the income; however, any amount must be provided by considering the child’s circumstances
  • For maintenance to be possible there must be income available from which to maintain
  • Beneficiaries are allowed to seek assistance from the court on the issue of maintenance
  • Courts have the discretion to order a maintenance

Contingent Pecuniary Legacies

Generally, maintenance is not mentioned in a Will or the trust instrument. The presumed intention of the testator is to provide the beneficiary with a lump sum amount or other property in a lump sum if they meet the condition.

However, where the will is made by parents, it is assumed that the parent would want to maintain their child

Where the property is left in a will by somebody else, for example, a relative or a friend, no maintenance is available.

Example
  1. I leave £50,000 to Mike if he attains the age of 30 (no maintenance unless expressly stated in the will)
  2. I leave £50,000 to my Son Kiran if he attains the age of 30 (Maintenance automatically available due to the relationship of Father/Mother and Son, unless expressly exclude maintenance)

Advancement

Sometimes the beneficiaries have to wait for a long time before they are entitled to the trust property, in such cases trust often contain a power of advancement to let the beneficiary have some of their shares before the date they become entitled

  • Advancement is meant to improve the material position of the beneficiary
  • There must be a good reason for an advancement
  • The payment is made from the capital of the trust
  • Trustees are allowed to advance money to any beneficiary of the trust, no matter how unlikely it is that he/she might inherit.
  • Trustees must not advance more than half of the beneficiary’s eventual share
  • The advancement does not require to be made directly to the beneficiary, their parent or guardian can be provided with the advancement
  • Courts have the power to authorize any advancement and a beneficiary is allowed to seek the assistance of the court
  • Trustees must ensure, as far as they reasonably can, that any advancement money does go for the benefit of the beneficiary and guard against any misuse of the money
  • Trustees are also required to ensure that there is no conflict of interest and duty.
Example
  • MY house and Shares to my friend Adam for life, remainder to his children that attain the age of 22. The children are entitled to an advancement

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Disclaimer​

While every effort has been made to ensure the accuracy of the information provided in this article, it does not constitute legal advice and cannot be relied upon as such. Each legal case and issue may have unique facts and circumstances, as a result legallex does not accept any responsibility for liabilities arising as a result of reliance upon the information provided. For further help and guidance, you can always rely on and seek advice from our experienced lawyers.

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