Children inheriting significant ££ at 18 - WWYD?

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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?

kath - thanks for sharing your experience - v. helpful. I'm interested to know what sort of bond is returning a 15% rate to provide the £15k for an ISA? Or did you mean that each year as his bond matures he puts the returned capital + interest into an ISA?

We haven't started researching university finance yet, but do student loans start to accrue interest charges from Day1, or only after graduation?
If from Day1, then presumably there is a trade off to consider between the interest on the loan vs. the likely possibly return on an investment?

Ha, 15% - I wish! No he will invest the capital and interest into his ISA from each bond. He basically 'separated' it into portions of 15K with would become his annual ISA allowance (even though from April that will go up to 20K).

I think they do pay interest immediately on a loan, but we never seriously considered him not getting a loan. Over 3/4yrs, it could use up 60k, which would reduce his pot considerably. Even without loan repayments, it would take years to re-build that pot, especially considering rents can be high.

We both are of the generation who bought property almost straight from uni and have been mortgage free for 20yrs. Although we know the DC will never be as lucky (since we didn't have loans to repay), we think that buying a house, rather than the uncertainty of renting, is a big positive.

We did consider them buying a house together or separately to rent out - maybe even as their uni house (DS at uni in a Northern city) but decided against it.

I dont know the answer re--telling your younger DS, as we were never in that position. We planted the seed from day 1 that this was a house deposit and they would be foolish to blow it (& if they do, we wont then help them onto the ladder, which we could and maybe would have done), which has helped them have a 'that money is not for touching at this time' mindset.

Feel free to PM me if you want.

Sorry to jump in but can I ask where do you go to set up a trust account? Is it a bank, solicitor or financial adviser? We are managing to save significant amounts for our kids in regular savings accounts but want to change to some type of trust and our current bank the halifax said they couldn't help us...

From the outside it seems as though you are worried that your DCs will run through the money as they are immature, irresponsible. Yet you are treating them in a manner that guarantees they will continue to be so!

You are now even suggesting that you gain an even tighter grip on money that is not yours, rather than simply doing your job as a parent

Why? What has led to you designing such a self fulfilling issue?

I think you've left it a bit late - by surprising them at 18 you are not giving yourself time to manage the message. Don't make the same mistake with the 15 year old! I'm very old, however when I was a small child, I was aware there was £2k in an account that was for me that I couldn't access until I was a grown up. I was always told it was to pay for a wedding or a house deposit. Because I was always told this, when I turned 18, it didn't occur to me to access it, even though it wasn't tied up in a way I couldn't get at it, finally closing the account when we bought our first home.

I was technically given the money at 18, but the prep-work my parents had done meant it didn't occur to me that I had a choice about how it was spent!

I would sit him down now, before he turns 18, and say that your Dad left £300k to both him and his DB, which has been invested for them both, that it's currently in property and shares, the property should give an income of £500 (each?), there's also £X in shares, and £X that is held in cash that can be accessed if need be at short notice, obviously he's only entitled to half of all this (keep stressing that), but as his Grandad wanted it used for education, you felt it was important to keep enough in cash to pay for uni fees/hall fees or any other course fees he wanted to do other than university.

That you wanted him to know early so he knows that uni/other course options aren't limited by costs. That once he turns 18 it'll be his choice, you really think the best is keeping the money in property and the shares as they are well invested until he's ready to decide where he wants to settle down long term and buy his own home.

Then tell your 15 year old, there's money invested, some for his education costs, then there's going to be some money he can access for house deposit/purchase.

Can you suggest to your 18 year old that it's best you do nothing fast, but once he's decided where he wants to go to uni/if he wants to persue other courses, and has an idea about how much of the money he'll need to access, you book an appointment with a financial advisor for him to talk through his options.

I think you've left it a bit late - by surprising them at 18 you are not giving yourself time to manage the message. Don't make the same mistake with the 15 year old! I'm very old, however when I was a small child, I was aware there was £2k in an account that was for me that I couldn't access until I was a grown up. I was always told it was to pay for a wedding or a house deposit. Because I was always told this, when I turned 18, it didn't occur to me to access it, even though it wasn't tied up in a way I couldn't get at it, finally closing the account when we bought our first home.

I was technically given the money at 18, but the prep-work my parents had done meant it didn't occur to me that I had a choice about how it was spent!

I would sit him down now, before he turns 18, and say that your Dad left £300k to both him and his DB, which has been invested for them both, that it's currently in property and shares, the property should give an income of £500 (each?), there's also £X in shares, and £X that is held in cash that can be accessed if need be at short notice, obviously he's only entitled to half of all this (keep stressing that), but as his Grandad wanted it used for education, you felt it was important to keep enough in cash to pay for uni fees/hall fees or any other course fees he wanted to do other than university.

That you wanted him to know early so he knows that uni/other course options aren't limited by costs. That once he turns 18 it'll be his choice, you really think the best is keeping the money in property and the shares as they are well invested until he's ready to decide where he wants to settle down long term and buy his own home.

Then tell your 15 year old, there's money invested, some for his education costs, then there's going to be some money he can access for house deposit/purchase.

Can you suggest to your 18 year old that it's best you do nothing fast, but once he's decided where he wants to go to uni/if he wants to persue other courses, and has an idea about how much of the money he'll need to access, you book an appointment with a financial advisor for him to talk through his options.

I think you've left it a bit late - by surprising them at 18 you are not giving yourself time to manage the message. Don't make the same mistake with the 15 year old! I'm very old, however when I was a small child, I was aware there was £2k in an account that was for me that I couldn't access until I was a grown up. I was always told it was to pay for a wedding or a house deposit. Because I was always told this, when I turned 18, it didn't occur to me to access it, even though it wasn't tied up in a way I couldn't get at it, finally closing the account when we bought our first home.

I was technically given the money at 18, but the prep-work my parents had done meant it didn't occur to me that I had a choice about how it was spent!

I would sit him down now, before he turns 18, and say that your Dad left £300k to both him and his DB, which has been invested for them both, that it's currently in property and shares, the property should give an income of £500 (each?), there's also £X in shares, and £X that is held in cash that can be accessed if need be at short notice, obviously he's only entitled to half of all this (keep stressing that), but as his Grandad wanted it used for education, you felt it was important to keep enough in cash to pay for uni fees/hall fees or any other course fees he wanted to do other than university.

That you wanted him to know early so he knows that uni/other course options aren't limited by costs. That once he turns 18 it'll be his choice, you really think the best is keeping the money in property and the shares as they are well invested until he's ready to decide where he wants to settle down long term and buy his own home.

Then tell your 15 year old, there's money invested, some for his education costs, then there's going to be some money he can access for house deposit/purchase.

Can you suggest to your 18 year old that it's best you do nothing fast, but once he's decided where he wants to go to uni/if he wants to persue other courses, and has an idea about how much of the money he'll need to access, you book an appointment with a financial advisor for him to talk through his options.

DB and I got 30k each and had pissed it away by 21. Invest it for them!!!

So interesting to see the different POVs here.

Just to answer a few questions:

OurBlanche A bit harsh I feel...
I didn't actually say I was going to 'gain an even tighter grip' on their inheritance - was simply musing over possible options...
And as others have pointed out, it's actually my duty as one of the trustees to act in what we consider to be the best interests of the beneficiaries. If we felt that there was a risk of them blowing it at 18 and regretting it at 21 when they face a debt of £55k after university then it would be perfectly sensible and reasonable to do we can to prevent that.

InvisibleKitten - to be fair, as I said, we have already been doing some of what you suggest. We've told DS1 that his Uni choices shouldn't be constrained by the fear of the cost as we've invested money for him for Uni fees.He also knows that we have 'savings' in his name for when he turns 18 and we've talked about education cost/ first house etc.
We just haven't told him that the bulk of that came from his grandparents' estate yet. And we've never laid out exactly how much is in each place.
I think you're absolutely right about how you 'position' it with them affecting whether they even consider that they could access it for another purpose. Even 'naming' accounts things like 'Uni fees' or 'House Deposit' !

LittleOysters - did you get it in cash? What did you spend it on?

I think giving a lump sum of what 'seems a lot' to an 18 year old e.g. £3k-£5k is a good idea though.

Is it not written under discretionary rules, or is it an absolute/bare trust?

I didn't actually say I was going to 'gain an even tighter grip' on their inheritance You did!

Your DF left it to them at 18, you and your DSis have invested it as you see fit and now you want to lock it away from them for another few years.

That they apparently don't know about it is down to you.

That they supposedly won't deal well with it is also down to you.

That you are trying to circumvent your DF will is also down to you.

Why are you doing all you can to keep it from the rather than doing what a parent should - preparing them for their real lives?

You have had 3 years to parent your kids for this money. But you have chosen to hide it, tie it up in property, etc, and now, as one becomes legally entitled to receive his money you are wondering how you can lock it away from him.

Why? it's actually my duty as one of the trustees to act in what we consider to be the best interests of the beneficiaries. To be honest I would have said that included teaching them what to expect, helping them make good decisions about the money.

If we felt that there was a risk of them blowing it at 18 and regretting it at 21 when they face a debt of £55k after university then it would be perfectly sensible and reasonable to do we can to prevent that. Again, that should have included educating them about it.

But you chose to tie it up and hide it. Why?

I think giving a lump sum of what 'seems a lot' to an 18 year old e.g. £3k-£5k is a good idea though. Except by your DFs will he is legally entitled to all of his share... and you lose your trusteeship of it. So why are you trying to work out ways of preventing the legal outcome?

Why?

We've told DS1 that his Uni choices shouldn't be constrained by the fear of the cost as we've invested money for him for Uni fees.He also knows that we have 'savings' in his name for when he turns 18 and we've talked about education cost/ first house etc. How do you think he will feel when he works out that all of that is a lie?

A friends 4 children inherited money from a relative. To be used to set them up similarly education/house. Eldest DS had the mum to son talk about how luck he was etc etc. Mum said she would still keep hold of the bank book still if he liked which he was fine with. He was in his first year at Uni and doing ok then he packed it in about 19/20 went off the rails got the building Society book from the house and blew the lot!! He went through thousands got into alcohol and drugs, family arguments, he moved out he hasn't got a bean to his name now and in a dead end job. Her slightly younger DD has used part of her money for a deposit on a house and the younger two are still under 18.

OurBlanche - you sound terribly angry about this - has something happened in your own life where money was kept in trust when you wanted access to it?

We haven't told our son any lies.
We've told him we've invested money for him for Uni fees and that there are savings in his name for when he turns 18. None of that is a lie. The only information that he doesn't yet have is that 80% of that came from an inheritance from his grandparents. There are some reasons about that which I don't feel I want to share here, but they were to do with other members of the family kicking off when they thought they were entitled to a greater share of the inheritance than they received, and I didn't want my DC dragged into that.

We didn't 'tie up and hide' this money, we just acted in accordance with the will trust and to invest for their future. And in fact, it was our solicitor’s recommendation that we didn’t start talking to the kids about it until they were older – based on her experiences with other clients!
The reason some of it is 'tied up' (or ‘invested’?) in property, is because that yields a much better return than your average fund and helps to meet the requirement to diversify the portfolio.

Parenting is all about making a judgment call about what's an appropriate level of information at any age. My kids are already reasonably money savvy thanks- they have bank accounts & bank cards, monthly allowances. They have to budget and save for things they want and we often discuss the cost of things e.g. the rapid devaluation of new technology.
I just don’t agree that we need to talk to them about such large sums of money until it becomes more meaningful and relevant to them – such as in the context of planning university.
I went to Uni with a lot of ‘Trust Fund Kids’ and I don’t think it had helped them during their school and higher education to know that they had a wodge of cash to fall back on if they decided not to work hard.

I also think there are enough stories on here to demonstrate why it's prudent to not just hand over a bank book at 18.

celeryisnotasuperfood - a solicitor/STEP practitioner can help you draw up the correct trust documents for bigger, more complicated trusts (often as part of a will and inheritance planning) but if all you want is a simple trust savings account then there are some banks and building societies which will set them up. I think we found some at Nationwide. Unfortunately they often pay very poor rates of interest and you’d be better just contributing to a Junior ISA where the money is locked in until the child is 18 anyway.

Our four DC have a lot of their own money that we have transferred to them over the years. I wouldn't have dreamt of keeping it secret from them. That would have felt wrong to me. They are all now at Uni and are hard working and responsible. I think the fact they know they have enough money to buy houses etc means an awful lot to them. It gives them peace of mind that a lot of other students and young people don't have. It means they can concentrate on their studies. Outwardly you would never be able to guess that they are well off, they have part time jobs and live frugally. I can't see any negatives with them knowing that they have savings. We have always made it clear that we have given them the money with no conditions. We don't want for there to be any thought that we might be trying to control them. It's their money and they can do what they like with it. Obviously we would much prefer it if they used it for houses etc rather than blowing it on trips to las Vegas but it's their choice.

I would not try and keep any information from you DS1 - once he is 18 the money is his and you will no longer be a trustee. I think trying to hide this would be wrong. You can't 'give' him £5k or whatever when he is 18 . It will already be his money.

Sorry for typos and crappy grammar.

Thanks game boy

OurBlanche - you sound terribly angry about this - has something happened in your own life where money was kept in trust when you wanted access to it? No... never had any money left to me.

I am simply stating that I find your reasoning baffling, and don't believe any solicitor would/could advise you to keep teenagers totally in the dark about their prospects.

I know I am not giving you the response you wanted. No stories of having wasted large sums of money in my youth, horror stories of trust fund kids etc. Your responses show that you are 100% certain that what you have planned is right, so I can only assume that you came here to get that golden glow from strangers congratulating your common sense.

I don't agree. I think you could and should have done more for your DC to fully prepare them for the change in their lives their inheritance will bring.

I also think that you apparent need to control their money once they have every legal right to receive it is very illuminating, in many ways.

But I understand why you can't see that and prefer to think I am angry!

Op the problem with your approach is you've left him thinking it's your money that you will give him for uni, the reality is it's his money and if he wants to spend it on something else, he's welcome to. If he was aware of the scale of the money then options like studying abroad, or following a non-uni path (that you might not approve of!) are an option.

He should be told the reality ASAP. The sooner he knows the less likely he'll see it as a windfall.

You need to trust him with the truth.

I’m not sure why other posters are getting so het up OP – from what you’ve told us, I think you’ve managed this fine so far. Sounds like you’ve fulfilled the requirements of the trust by investing wisely.
I don’t think people always understand the basis of trusts. If it’s a discretionary trust then it ISN’T the beneficiary’s money until they meet the terms of the trust (usually by age). Useful definitions here: www.gov.uk/trusts-taxes/types-of-trust Trusts are set up precisely to make sure large sums of money are looked after until beneficiaries are deemed capable of looking after it themselves.

You said that your parents wanted the money to be used for education/future deposit on a house, so you’re in a good position now to discuss this with your eldest, in the context of his planning for university. It doesn’t sound to me that he’s been restricted in his thinking about this since you’ve told him that there will be money available to help him with his education. I’m sure you/his school will discuss the various options about overseas (which may be cheaper anyway) and direct entry apprenticeships as an alternative to university.

DH & I have been trustees for a trust for nieces and nephews and it’s a bit of a thankless task to be honest with all the paperwork and tax returns. The kids are never going to say, ‘oh look, you’ve grown my pot by 12% every year for the last 10 years, well done and thank you’ I’m sure your son will be very happy and grateful for your efforts

I’m not sure why other posters are getting so het up OP

Het up = disagree with you, perhaps?

I can't see any negatives with them knowing that they have savings

Really? You can't think of a single example of a teen or young adult going off the rails, making bad life choices or just being a bit lazy because they have inherited money and think they are no set up for life? Not one?

Mmm! Some... yes. But all?

That's partly a parenting thing... as I said!

Let's ask every single person who ever inherited money and see if we can correlate the two

No? OK! Let's just treat everyone according to the lowest common denominator then!

PAH!

Sparechange. There is no need to be so sarcastic. Disagree with me by all means to be fair your point is valid but there is no need to be unpleasant. Anyhow, I guess I should have said there have been no downsides at all to our kids knowing that they are in the very fortunate position to have savings, however I can see for other kids that might not be the case.

I still don't think the OP can hide it from her once they are adults as it is their money and the OP would no longer be a trustee. She can offer advice but you shouldn't try to control the once they are adults.

Sorry for typos