Children inheriting significant ££ at 18 - WWYD?(78 Posts)
Firstly, I know they are incredibly fortunate.
My two DC, 17 & 15, were left about £300k in trust when my parents died.
My sis and I are trustees. She doesn't have kids and is very much a 'sleeping' trustee, in that she is happy to go along with what I suggest we do with the trust fund.
The trust was set up about 3 years ago and we invested £200k in a property which is now rented out and returns a healthy income.
The remaining £100k is in a variety of bank accounts/bonds. (So c. £50k each)
Income from the property is paid into Junior ISAs each year, which we'd also paid into previously, so each is worth around £30k.
At the moment neither of my DCs know about this trust fund or ISAs etc, although I have made vague references in the past to 'savings we have put aside for your education and future'.
DH and I took the view that we didn't want our kids to think that they didn't have to work hard for their future, and we didn't want them to badger us for money for x-boxes/computers/phones saying 'we know you can afford it from 'our' money'.
Thing is, DS will turn 18 later this year and so we will need to talk to him about this and begin to help him manage his own finances in the future.
I can't decide about the following:
- How to tell him e.g. begin to drip feed now about the various 'savings for education' etc or take him out for dinner when he's turned 18 and give him the 'whole picture'!
He will start to get all the statements and need to be named on the Land Registry Deeds for the property as soon as he turns 18, so he will soon work it all out anyway.
- Can't decide if I should move some of the easily accessible cash savings into more difficult to access investments as a means of safeguarding against him blowing large sums of money on a whim!
e.g. it's easier to go into a bank and withdraw cash from an ISA than it is to sell shares/investments through a broker!
He's pretty level headed, and I don't think he would do anything rash, but you just never know .
I also feel like I want to make a big thing about how lucky he is/ how grateful he should be to his grandparents and how they wanted him to use the money for his education/future deposit on a house etc.
Has anyone had to have similar discussions with kids? What did you, or would you do?
I think he should already have the full picture!
I think you should give him the full picture but also make it quite difficult to access. Maybe steer him towards the money saving expert forums as most on there are very sensible. I would also be tempted to give him 2k or so to splurge on - it might be a good lesson in how quickly it goes.
Mrscog - yes, good idea to give him a bit of lump sum on his 18th.
I also need to think about how this will affect DS2, and whether we ask, and can trust DS1 not to say anything.
At the moment DS2 is going through a rebellious, angry, lazy phase and I'm sure he would just 'give up' if he thought he was going to have access to lots of cash when he turned 18 !!
Similar situation here, not quite so much money. DS knows about his share however I've tied his share up in the home we live in. The trust that was set up was dissolved by my father - trustee and given to me to do as I saw fit.
I've told DS that it remains under my control until he's 25 which is what the solicitor suggested. I really cannot fathom letting an 18yr old loose with that amount of money (mine is 18 in a few months)
I won't go in to detail but a lot of experience with this.
Give him £5k on his 18th birthday and see how he behaves with it.
On the basis of that, decide whether he gets the balance at 21 or 25. At 25, no magger how he behaves, it's his.
Please do not give him the full picture at 18. It will skew his attitude towards money at a critical point.
I think they should know already! It's their money and at 18 your DS should be given the respect of not being treated like he's a feckless child. Even if he was feckless with it it's still his money. Your job was to raise them to be sensible and understand how finances work, not hide their money from them because you don't trust them to behave well with it. Hopefully the things you've taught them about life will stand to them. But it is their money!
Myself and my siblings all inherited money from grandparents at 18 and not one (out of 5 of us) splurged. It paid for university and whatever was left we all had a healthy deposit for a place to live. I have one brother who dropped out of college and has never found his niche work wise and my parents worried themselves sick that he would splurge and he was (and is) one of the most careful (tight!) people with money I know.
You have most of their money tied up in a house which is not liquid. And like everyone they need to learn to manage money so if I were you I'd trust them and their upbringing and help them as much as you can but fully disclose. Talk to them about their long term objectives for the money and support them to invest appropriatey etc.
If they are 18 and it is actually their money then it's not yours to control. Like all parenting at this age your role is to support.
I've seen something farmilar happen and it was written into the trust that a high % could only be used for property to protect the majority of the money
jaxing if that were the best approach, there would be no need for trustees, would there?
I would take him to a bank and sit down with a financial advisor and let the financial advisor layout what he has and what his best course of action is. Show him how serious it is and let the 'this is important' chat come from someone unbiased and independent.
For additional info on my opinion, my two cousins inherited £300k each on the death of their grandparents. They were 15 and 18 at the time and of course were told immediately as it was their money. Both have taken independent financial advice, guided (but not controlled!) by their father. Both have got stuck into their careers now and not touched any of it to live on. As they say themselves, it's a gift and a luxury but they have a life to set up first. I personally would be trusting my kids.
OP to clarify, is the money / part ownership of the house legally your son's anyway at 18? You mention he will start to get papers and statements in his name.
I don't understand those saying wait until 25 etc.
Very limited experience here, but my trust was released at 25, which I truly truly appreciated - id always known a sum was there but only in the vaguest sense.
Used it to buy a house.
I received a far smaller amount at 18 which my mum insists i wasted, but i got gear for my hobby, a haircut and paid for a training certificate. (She really hated that haircut!)
Id definately give a fuller picture, but keep the bulk back until 25, releasing smaller sums.
Dh brother got a significant sum at 18, blew the lot in under 2 weeks - so some control I think is warranted.
Don't give them the full picture. I had money at 18, I also had depression. A very bad mix.
Is there an income from it? I would simply give them the annual income from the dividends (£4000 or so?) and tell them they will keep getting their dividend income as long as they don't spend too muck of the principal. They can get their reports showing the growth of the funds. Then if they want to spend their principal, that's their decision. Worked for me!
Why is it set up for when he's 18? My children all also inherit significant amounts and our finances are set up so that if we dies they'll also inherit a significant amount and we have set it at 25, as felt 18 was too young. Can it be changed to come in instalments?
Thanks - some useful thoughts here.
It's in trust until they are 18, and then it is theirs, so I can't suddenly tie it up until 21/25 etc - that just isn't possible.
The reason we bought the property was to make most of it difficult to access, and also to generate an income. It has turned out to be a good decision - the house will give my son a £500/month income.
My son will find out about the same time he is applying to university, so it should be easy to present it as 'you are extremely fortunate - this means you won't leave university with a huge debt' conversation.
The trust was set up in my father's will and he specified 18, so it's not my decision to change.
Oh, I would also suggest that you don't think of it as / tell them that it's a lot of money. It's not enough to support them without working, for example (I would imagine). It will help them buy a house, and take them through uni. It's not going to allow them to live as trust fund kids, or to work without a reliable income.
I set up Junior ISAs for my kids, when first one was turning 18 the building society wrote to him to tell him about it before I had a chance to!
I and some family members have large private incomes - while there are obviously major advantages, DSis and I agree that we have done better for working in ordinary jobs all our lives, as opposed to DBro who floats around the world being an artist. We are cautious about how much the kids get as teens (so they have ordinary Saturday jobs) but they will eventually inherit large sums.
In that case OP I think you can tell him any time now. Would you tell your youngest at the same time too? I imagine he will find out!
Definitely presented as 'for your future', and a great opportunity to really explain how grandparents intended the investment to be used. In fact your decision to invest in property was absolutely the most prudent you could have made so you recommend the house is kept as a source of income and have a discussion about best use of the ISA funds. A ready made set up to spend a bit and save a bit.
Could you pitch it to him that it's really important he sets a good example to his younger brother who is struggling a little bit?
18 year olds tend to be more savvy these days about financial matters than I was (am 40 this year) at that age. Though I did buy a house at 18 so not too reckless (that came later when I discovered party drugs and all night raves).
Thinking about this, I may tell him about his co-share in the property first as I'd like to get him involved in the management of it too.
I think Tonkinese is right - not to make out that it is 'life-changing' amounts, rather that it is a comfortable amount to set them off in life.
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