Children inheriting significant ££ at 18 - WWYD?

[Gameboy]

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 agree with Tonkinese- and actually it's not a 'life changing amount' really. It is in that there will be quite a few burdens in life he won't have to think about - uni loan, saving for a deposit etc. and he is clearly hugely fortunate but he's still going to need to work and be quite careful etc.

Why not involve him in deciding how much to tell your 15yo? He might have some useful insights into it and by having that ownership with the decision will be much more likely to keep his mouth shut if you decide to keep it quiet.

I have kids of the same ages and similarly there is money available to them at 18, though the largest amount is not released until age 25. I think you should tell them both asap. It isn't right that the elder should get a fanfare at 18 when the younger will inevitably find out at a younger age.

George what do you mean by
It isn't right that the elder should get a fanfare at 18 when the younger will inevitably find out at a younger age. ?

I really don't think it would be good for my younger DS to know the full details of his inheritance at this stage. He is still very immature and volatile. I think it would cause endless arguments as he will just see it as a big lump sum of money and won't listen to any discussions about investing for the future etc.

To be fair, surely I should tell each of them as they approach 18, when they are more independently thinking about/planning their future?

DS1 is really quite mature and trustworthy I think and if I asked him to keep details private I think he would.

Oh no, don't even think of telling your younger son! He'll be planning the biggest gap year of all time!

Indeed. This is the son who still thinks his future career is as a YouTuber....

Yes I think you have to make the younger one wait until he is rising 18 - as the eldest sibling one of my biggest bugbears is that my sister got to do things earlier that I had to wait for - adult toothbrush, ear piercings etc. It always felt really annoying and led to a lot of resentment. You've made your oldest wait (rightly I think) so now you need to make it at least fairly equitable.

I think if your younger DS kicks off about your elder one getting some money etc. around the time of his birthday (if you are thinking of giving him a 'splurge' amount) you can just say, don't worry we've got the same arranged for you.

I think I would tie the remainder up as tightly as possible in a way that gives an income through dividends etc. Particularly for your youngest it should take a lot of time to liquidate any more than a couple of thousand at a time. Then it can be presented as here is £500 a month for the next 5 years or whatever. Whatabout a fixed ISA?

I would set aside an amount for him to blow on fun things as a birthday gift and then get him some budgeting software and show him how to manage his money. Induct him into the running of his property and then let him take the reins.If he knows, you are best off telling them together.

What I mean is - I think the information is bound to leak out to DS2 at some stage in the next two years, so then he will have the information earlier than Ds1 and be able to make plans on the basis on the money being available.

I am the eldest of three children and my parents have been very generous with all of us. But it's quite different to learn that your sons can have part of their school fees paid when one has already passed the entrance exam and you have accepted the place on the assumption that you will be paying for it, than it is to know from the time your first child starts reception that that will be the case. I'm seeing it from the pint of view of the eldest, I guess.

I have told my two that money will be available, but they will "only" have about £18k given to them at age 18. More could be available, but only through me, not directly in their names.

Secondary school fees, to be clearer.

I remember your son! He's the one who doesn't need to be taught, isn't he?!

Has he looked at any university courses to see what he might fancy doing? There are some great ones for computer games, for example.

One thing I'd add is to give them both a clear understanding that financial advice is not to be taken lightly.
A friend's son had a similar amount on his 18th, and while he hasn't completely frittered it, he has taken poor investment advice from mates and people down the pub. He won't discuss it with his DPs as 'it's his money', and so they just have to sit back and see the opportunities wasted.

The steep learning curve of first owning property would be an excellent lesson in how to manage his money.

I received a decent inheritance at 18, & as much as I was a "head screwed on" type, I blew the lot! I wish it was put in trust until I was 25. 18 & 21 is far too you d to deal with the reality of that amount of money.

Young*

I think tying it up so that although you have to hand over the reins, it is not easily and quickly accessible is very sensible.

I would start talking to your eldest about it soon, rather than a big dramatic announcement. Also, his attitude to his will affect your younger son when he comes to hear about his own trust fund, so it is good that eldest is sensible.

I'm allowed to use my children's trusts (from paternal grandparents) for educational purposes in the meantime. It's been useful to dip into for my child who decided to go to private school, and I wanted them to be part of the desicion as they will end up with less aged 25 than siblings.

Imperial - I remember the thread you're referring to, but I wasn't the OP on that, although I did contribute. My son is the one who is already making himself an income from YouTube advertising. Perhaps by then he will be a wealthy YT celeb and won't need his inheritance!

My ex had a similar situation with his daughter and her cousins.

They were told the trust had bee set up with specific conditions for what the money could be used for, and things had to be 'an investment in their future'. This was only half true, but there was a line in the will from the relative who left the money saying they hoped this would be used for their future.

They then had to do an application to the trustees for money, saying what it was for and why they believed it was an investment in their future.
Everything to do with university was funded (including a car for one of them), house deposits etc, but they didn't touch it for their day to day spending

They were also quite close in age, and when the youngest turned 25, they both got the balance
But it had ingrained a thoughtful approach to spending it by then so the rest wasn't pissed against the wall

Sparechange - you see, I had wondered about doing something similar, and just saying that the trust had specified that it had to be used for education etc, but once the DC turn 18 it will be their signature that is needed to withdraw money, not mine!
Having said that, at 18 I would have been quite clueless about Trust rules and regulations and if a parent told me it was still in trust and I had to get approval before signing for/using it I probably would have believed them!

i would have the conversation sooner rather than later with your eldest, partly so that it doesn't feel like a birthday 'present', more a responsibility that just means occasional paperwork in future. You also have some time to feel out his reaction - once he's 18, there's not much you can do to put the brakes on.

Also, knowing he has potential to access #500 a month could seriously impact his choice of studies, so actually I might have been really pissed off if I was planning my future without knowing this as it might well have informed everythign from A-level choice onwards (I remember dismissing a 3 year undergrad course in London as even an option because of how much it would cost 20 years ago, and obviously London rentals are a far crazier situation now).

I agree about keeping it from him . I had a privileged childhood and I expected to be looked after because of it . I hadn't turned out like this for various reasons but I gave up trying with anything because of it . I would never tell me dd if it eve gets to her .

It is a legal requirement for trustees to take appropriate advice. You really should get some proper INDEPENDENT financial advice (not the bloody bank or St James's place) in the mix.

don'tcallme- yes, trustees need to get independent financial advice, but that tends to be BEFORE they invest, not at the point at which it ceases to be in the trust!

We had independent advice when the will created the trust and that's what led to the setting up of the property/accounts/bonds structure, together with the income from the property (which does not fall under the trust) going into ISAs.

I've met with IFAs at various points in my life and to be honest I've found them most to be quite poor, or hung up on their 'favourite' types of investment. DH and I are fairly investment savvy (Economist & Accountancy careers) so probably expect more than someone who is coming to it with little or no knowledge.
However I'm glad we didn't take the advice of the IFA who suggested we invest ALL (and I mean ALL!) our savings in Commercial Property just before it crashed.
When I met an IFA to discuss long term care funding for my parents, she asked me to send her information afterwards because my knowledge was more up to date than hers.
So, needless to say, I don't think IFAs necessarily add much value. Or perhaps we've just been unlucky?

Point taken, that's the problem I suppose, which IFA. Personally anyone that's not Chartered I'd ignore, but I may be a little biased.

The legal requirement is to take advice, for the life of the trust in their capacity as trustees, unless suitably qualified (it's a bit more protracted, but that's the nub of it).

Removing or maintaining, switching objectives, or handing on investments would be a critical point in an investment cycle. I'd take advice.

Are you an IFA? If so, what sort of options would you be discussing with someone in my position?

All the IFAs we've seen have been Chartered. I remember discussing the issue about the type and extent of financial advice required with our STEP lawyer. She was very sensible about it all and pointed out that some of what you're doing by seeking independent advice is protecting yourself from being sued by the beneficiaries in the future. She said this is much less likely when the trustee/beneficiary relationship is parent/child.

In the event our Trust is a very simple one giving very broad-ranging power for the trustees to act in the best interests of the beneficiaries, with few, if any, other stipulations.

The only thing I have wondered recently would be whether it might be possible to dissolve the current trust (with my sister's agreement, obviously) then pass the funds to DH & I as parents for us to re-invest in another trust with a later entitlement date e.g. 21 or 25 years old?

Op, my 2 DC inherited just under 100k from a cousin, with the estate finalised last Feb. DS had just turned 18, so got his interim payment early Jan and the final amount wiht other beneficiaries in Feb. (DD16.5 money was handed over to DH and I, as trustees in place of solicitors, a couple of months ago)

Slightly different with our 2, as cousins solicitor didnt know age of any beneficiaries (9 in total, only my 2 under 18 at time of death) so all correspondence regarding will, estate etc was addressed to them. So they knew everything, including the extent of the estate (much larger than anyone expected) and therefore approx value of their %, from a few weeks after death.

We talked a lot to both of them, 17 & 14 at the time, about how very lucky they were, esp as they hardly knew my cousin. We discussed how it wouldn't replace a regular salary, so they would still need good jobs, but it would get them on the housing ladder at an early age. Fortunately they were also able to see another cousin's daughters' use their money to buy houses. One had never owned, one had owned with DH but not been able to get back on ladder since divorce.

Both are very sensible and seem to have no intention of blowing it! DS got a weekend job just after cousin died, and only left to go to uni, but is keen to start working again at uni.

Our 2 had already got a Stocks and shares junior ISA that we were paying into, so DS has his money saved into various bonds (1,2,3 yr) with the intent that each year one of the bonds will provide the 15K to drip feed into his ISA over the following 12mths. He does the monthly transfer from savings into current account himself, in time for his ISA direct debit to come out.

He is in first year uni, but the inheritance is being kept as his house deposit, he has loans as usual for fees and some maintenance, we are giving him rest of maintenance. We can afford to support them through uni and prefer them to keep the money for a house deposit, which would otherwise take a long time to save up. Yes he will be paying interest on his loans, but I am hoping that will be outweighed by the growth of his investments (he has his ISA split between 7 funds and all are growing well).

A friend whose DC will inherit a large amount at 25, told me that my two shouldn't have found out about their money (she is the only person locally I spoke to, as I knew about her kids inheritances). I pointed out we didn't have much choice - as all solicitors correspondence was addressed to them!!

Whilst inheriting at 18 could be a burden for some, I do think that with the correct support from parents, it can also allow the DC to gain some financial acumen at a young age. That has certainly happened with my DS and hopefully will continue as they both get older and more aware of their investments.