When Is Someone Too Young to Inherit?

When parents or grandparents think about leaving an inheritance to a child, the first question is often, “How much will they receive?” But another question can be just as important, When should they receive it?

In Ontario, turning eighteen makes someone legally an adult, but that does not necessarily mean they are ready to manage a significant inheritance. A young adult may be starting university, moving away from home, beginning their first job, or simply learning how to manage money. Receiving a large inheritance all at once can create opportunities, but it can also come with challenges.

Estate planning for young beneficiaries is about looking beyond the age of majority and considering how an inheritance can support someone as they become financially independent.

While age is an important consideration, maturity, financial experience, and personal circumstances can be just as important when deciding how and when an inheritance should be received.

An Inheritance Does Not Have to Be All or Nothing

Many people assume that a beneficiary either receives their inheritance immediately or has to wait until a specific age. However, there is much more flexibility.

A testamentary trust can allow assets to be held and managed for a beneficiary rather than distributed outright at eighteen. Testamentary trusts are often used as part of broader planning for young beneficiaries and minor children. For a more detailed discussion of these considerations for minors, see our earlier blog Estate Planning for Minor Children.

For example, a parent might decide that a child should receive part of their inheritance at twenty-one, another portion at twenty-five, and the remainder at thirty. Another family may prefer to give the trustee discretion to provide funds when they are needed rather than following a fixed schedule.

There is no single age that is right for every family. The important thing is that the estate plan reflects the family's circumstances and the support they want to provide.

What Can a Trust Provide?

Depending on its terms, a trust can give the trustee (the person who oversees and administers the trusts assets) authority to make distributions for education, housing, health-related expenses, or other significant needs. This can allow a young beneficiary to benefit from an inheritance without necessarily receiving all of the funds at once.

Trusts can also help protect assets while a beneficiary is developing financial independence. Rather than requiring decisions about a substantial inheritance at a young age, the trust can provide support over time as circumstances evolve.

This approach recognizes that major milestones do not always occur according to a fixed timeline. The trustee can make decisions within the framework established by the trust, taking into account the beneficiary's circumstances and needs as they arise.

Choosing the Right Trustee

If you establish a trust for a young beneficiary, choosing the right trustee is an important part of the plan. The trustee will manage the trust assets and make decisions about distributions according to the terms of the Will. That can be a significant responsibility, particularly if the trust is intended to continue for many years.

Depending on the terms of the trust, the trustee may be responsible for overseeing investments, maintaining records, communicating with beneficiaries, and balancing short-term needs with the long-term objectives of the trust. It is important to select someone who is capable of managing those responsibilities and exercising good judgment.

Some people choose a family member or close friend who understands the beneficiary and the family's circumstances. Others prefer a professional trustee who can provide experience and impartiality when managing the trust.

The right choice will depend on the size and complexity of the estate, the relationship between the trustee and beneficiary, and the type of trust being created.

What About Investments and Other Beneficiary Designations?

A trust established under a Will may form an important part of the plan for a young beneficiary, but it is not the only consideration. Life insurance policies, pensions, and registered assets such as TFSAs, RRSPs, and RRIFs often pass through beneficiary designations rather than through the estate.

A beneficiary designation that appears straightforward can create complications when the beneficiary is young, particularly if there is no appropriate trust structure in place. In some cases, assets that pass directly to a named beneficiary may not be distributed in the same manner as assets governed by the Will.

Reviewing beneficiary designations alongside the Will can help ensure that all parts of the estate plan work together and reflect the intended level of oversight, support, and structure for the beneficiary. It is also important that your financial institution is aware whenever a minor is named as a beneficiary for registered assets.

Building in Flexibility

One of the challenges of estate planning for young beneficiaries is that you cannot predict exactly what their circumstances will look like years from now. Someone who is eighteen when a Will is written may have a very different financial situation at twenty-five or thirty. They may pursue university, start a business, buy a home, travel, or take an entirely different path.

A well-designed trust can provide room to respond to those changes. The person creating the Will may also leave a letter of wishes to help the trustee understand the goals and thinking behind the estate plan. While the trust provides the legal framework for managing and distributing assets, a letter of wishes can offer insight into the person's values, priorities, and hopes for how the inheritance may benefit the beneficiary.

This can be particularly helpful when a beneficiary's circumstances change in ways that could not have been predicted when the Will was prepared. Rather than prescribing specific outcomes, the letter can provide context that helps the trustee exercise their discretion thoughtfully.

The Right Estate Plan Can Grow With Your Family

Estate planning for young beneficiaries is not about assuming that a young person cannot be trusted with money. Rather, it is about considering how and when an inheritance can provide the greatest benefit.

There is no universal age at which someone is ready to manage an inheritance. Factors such as maturity, financial experience, personal circumstances, and the nature of the assets involved may all play a role. A thoughtfully designed estate plan can take those factors into account and create a structure that supports beneficiaries at different stages of life.

The goal is to ensure that an inheritance provides meaningful support and opportunities at a time and in a manner that reflects your intentions and your family's unique circumstances.

If you have young beneficiaries in your estate plan, consider reviewing not only who will inherit, but how and when they will receive their inheritance. E is for Estates can help you build an estate plan that considers your family's needs today while allowing room for the future.

This article is intended for informational purposes only. For personalized advice tailored to your specific circumstances, please reach out to the E is for Estates team.

Erin L. Watson, B.A., JD

Lawyer & Notary Public

E is for Estates