has anyone grown up independently rich or received a big inheritance in teens or 20s?

[trustfundkids]

My dc have just inherited a lot of money - in theory to be theirs when they reach 25, but in practice they will probably have to be told about it when they are 18/16 respectively.
I am really troubled by this as I feel it could be really damaging to their motivation at a critical stage in their lives and have a really negative impact on their relationship with us. I have no idea whether they will be troubled teenagers, into drink and drugs, or fine responsible young people. Even if they are the latter, the temptation of such a large amount of money might prove irresistable compared with going out and getting a job. They could easily use it to bum around for 10 or more years.
We as trustees could try to spend some of it before they get it, or put it into a form it will be less easy for them to access (house each??). However, I feel terribly uneasy about this as do not want to sow the seeds of conflict with them in their teenage years - what if they feel we have tried to control their access to the money, squandered their rightful inheritance, or used it in other ways they are unhappy with? After all it is not our money but theirs.

Its a complete minefield and I feel very upset that dh and I have essentially had very big decisions about our dcs completely taken away from us. What on earth can we do??

First - the answer is 'no' I am not in the situation! But, i have some (limited) knowledge of this.

While you still have some influence (and control), think about how/what you teach your children about money - earning, saving, spending, giving. Think about how to teach them to handle the impulse to spend, rather than waiting a bit to see if the item is something you really need/want. When money is no object, it is very easy to spend without thinking.

Am in America currently, and there are (as you might expect), seminars and programs designed specifically for the children of 'high net worth' individuals. These purport to teach/prepare the children for the time when a significant amount of money will be theirs.

There are basics about money in general : finance courses, accountancy etc , along with basics like how to read a balance sheet, etc. Then there are lessons in personal planning: options for investing/managing the money, how to work with a financial planner/accountant, how to budget, pension/retirement planning, different sorts of mortgages, etc.

If you google 'prepare your children to handle an inheritance' (and similar phrases), you'll find a wealth of information that will help you begin to explore options.

Lastly, there are ways to provide a regular income stream from the money, rather than it coming in a big lump sum. There are also ways to protect the money from 'creditors, predators and themselves'. I'd look into those options - for instance, what happens if they invest in a dodgy business/business that goes bankrupt, what if they marry and divorce, etc. But, all this could be tricky as they may not wish to have the money 'tied up' where they can't get to it. And, we all know that a person's priorities and life experience at 50 is very different to that of a person of 25.

You've got alot of thinking to do! Good luck

Not myself, but members of my family became independently wealthy on their 18 birthdays to the level of not needing mortgages to buy homes in Hampstead and never needing to work ever.

Their parents now feel that allowing them access to the money at 18 was a huge mistake and they should have tied it up until they were at least 25. Both individuals were very intelligent (both have Oxbridge double firsts) neither have ever gone on to have a proper job or ever achieved their potential. Their parents wish they had made things so that the individuals would have had to support themselves for several years before they got the money.
Not a solution, but for me I would live with the strife of not allowing them access to allow them to learn the value of the money.

A friend of mine is very wealthy through inheritance. Her parents brought her a flat in central London when she went to university and she has income that has allowed her to be a permanent student for over 10 years - now doing a PhD. You could consider that a waste of time and talent. But if it makes her happy? Incidentally she has worked, and is very good with money. Just her idea of a bargain is obviously on a different scale!

My brother and I also inherited some money when he was just 18 and I was about 20. Not enough to live on, but enough for a house deposit, so in that way it was life changing. I kept it in the bank, and two years later spent it on a house with my partner. My brother spent it all. No assets to show for it, no studying, no once in a life time holidays. He just frittered it away. This was about personality more than age though, as I think nearly ten years later he would still do the same, and he is over 25.

I think if it is their money they should have it at the age stated in the will, as they are adults thrn. If they choose to squander it that is their lookout I don't see how tying it up will help tbh but they may resent you for doing so. I don't really see it as your decision unless say they had a really serious illness & you needed to unlock the money for pioneering surgery before they reached the age of inheritance.

thanks, its very interesting to hear of others experiences.
Lizcat, despite not having 'fulfilled their potential' (whatever that means!), are those individuals happy and responsible people? (by that i would mean, productively involved in something, even if not income generating, with solid relationships and being committed parents themselves?) Personally I think if they achieved firsts at Oxford that would be something in itself!
Did they know they were going to get the money or was it a surprise at age 18?

DH and I are largely constrained about what we can or can't do about access to the money. The money is an inheritance from a member of DH's family. We were not told of the contents of the will beforehand and had no opportunity to influence how the terms were written. Essentially this has come completely out of the blue. We cannot prevent absolute access at age 25. I believe, we probably cannot prevent access to the income or knowedge of the money from age 18, and that troubles me most.
It is not enough for them never to need to work, but it would be enough for a pretty substantial and crazy blow-out.

vj32, I am like you - I would have been hugely sensible about the money and used it to good ends. My older dc is likely to be similar. however we do also have personalities like your brother in our family. My brother was always a complete spendthrift - but, luckily, seems to have learnt how to keep himself solvent and live within his means - I am amazed actually that he does so well given his personality - perhaps I should ask him how he has developed enough skill to keep out of money troubles (he does not have a family to support, I suspect this might have been a difficulty for him). My younger dc seems to have a similar disposition. He can barely keep 50p for a week without having to 'go shopping' to spend it! He worries me more as he is a pleasure and thrill-seeker. We will have to educate him carefully I think. Is your brother generally happy and productive, despite not being able to save??

RedHelenB, do you have any experience of this directly? In theory, what you say is fine, and I agree that essentially it is their money and not ours.
In practice, could you as a parent look on while your dc destroyed their life? I am not too bothered about 'frittering' the money, though that would be a shame when it could be very useful in terms of setting them up with a house or with training or with investment into a business. it is more about trying to guard against potentiallly self destructive outcomes.

I think you're worrying too much about something you can't realistically affect. All any of us can do, regardless of whether or not they are going to inherit large sums, is pass on what we know about money management, encourage hard work, etc. As parents we also try to steer them away from bad relationships, gambling, drink and drugs. How they turn out age 18 or 25 (and I would say 25 is rather safer) is as much good luck as good guidance. So if you cover off the good guidance part best you can the rest is down to luck.

I would concern yourself with the present, prepare a little for the future, pass on the values you want to pass on, but don't obsess about the inheritance and certainly don't think the worst is going to happen.

You don't say how old your children are now? I inherited money from my Grandmother when I was 16 - it was enough for a deposit on a house which would have taken me years to earn so a substantial amount.

My Dad took me to see a Financial Advisor when I inherited the money and while he stayed at the appointment with me it was made clear that my opinion on how the money should be kept/invested mattered too. We discussed there and then what the money was for, and my Dad made clear my Gran intended it as a house deposit mainly. I spent some of the money on a travelling gap year and a car (but funded some of both of these myself too) With my agreement, in what was a rather serious and grown up meeting, the money was invested in a 5 year plan with penalties if removed before then.

I was a real spendthrift when younger, and always wanted 'stuff' new clothes, what other people had etc, but I never spent any of my Gran's inheritance because it was 'house money' so not accessible.

I did. My parents both died when I was in my 20s and I inherited around £300k over about 8 years.

I didn't blow it all on booze and coke. I bought a flat, invested some etc. Am happily married and had a good career.

However, what it did mean, is that I never really had to take responsbility for the money that I earned. I just spent it . Never had to budget, never struggled for anything or had to think about it. My DH (we have been together since our teens) has also kind of taken for granted that we don't have to struggle the way others do.

My siblings were all much older and already had saved for deposits, bought houses and were well into their thirties. I think they have actually done better in the long run from the money.

Will be back after school run with some suggestions.

Thanks. Kids are 10 and 8. One idea dh and I have had is to ask the surviving family members who were closest to the benefactor to put something in writing about how they think this person would have wanted the money to be used. I think this will be helpful in making it not solely mine and dh's responsibility and removing the potential for it interfering too much in our parental relationship. Unfortunately the dc are a bit young to really remember much about the benefactor, certainly by the time they are 18/25 they will have fairly hazy memories.
cogito, you are right that we should not fret too much about what we can't influence. But I am still concerned.

incompletesentence, thanks for your thoughts - look forward to more.
Do you think you COULD budget if you had to? Do you feel you make your money work for you? If so, does it matter that you don't have to struggle (or is it just that you feel out of touch with contempories who have less?)

I already feel that I don't have to think too hard about money - I have always earned well enough (and dh too) that we can afford all we need and want (and certainly more than we have time to spend!). We have fairly modest desires though, and I also feel that I am well capable of living within whatever means we have.

Your concern is already motivating you to spend the next 8 - 10 years drumming 'sensible money management' and 'sensible ambitions' into their heads and I think that is all you can reasonably do as a parent.

My own DS was left a sum of money by my late grandmother. Not house-size :) So far, age 11, he's totally on board with my idea that it's his 'college fund'. But by the time he hits 18 I have no idea what kind of young man he'll be. And, whilst I will still care about how he behaves and will probably express an opinion on what he does, I really don't think it's my place to spend the rest of my life micromanaging another adult's spending decisions. I have parents that have tried to do it to me... wanting me to pay off the mortgage when I'd rather go travelling... and, if it's your relationship that worries you, trust me - that kind of interference doesn't help.

cogito I totally agree that it is not my place to micromanage their decisions when they are old enough to manage them themselves. I just really wish the amount was something a bit less mindblowing (still I suppose it is all relative). I was very fortunate that my parents never attached strings to any money they gave us (they never even asked what we had done with it) and ideally I
would like to adopt a similar approach with my children (dh's family slightly different though) We will definitely need to make them aware that they have a 'college fund' way before they are 18 so that they know they can make choices without worrying about paying back tuition fees or living somewhere expensive or doing a long course. Which is a great privilege I know (oh how lucky we were to be able to take these things for granted for our own education...)

One thing that does worry me though is if they question what we do (or don't do) with the money on their behalf (and we do have to manage it for them for the next several years). But perhaps if we respect their decisions when they can make them, they will respect ours...
Perhaps I just need to have more confidence in them and in myself

Yes I think you do need to have more confidence. Large sums of money need very careful management so you'll need to get proper financial advice about how to invest it wisely on their behalf etc. In fact, your children have an advantage over you and, say, a lottery winner who suddenly finds themselves wealthy overnight, because they have between now and when they are 18, 21 or 25 to get the necessary financial & personal skills themselves to take over when the time comes. As soon as they are old enough to grasp the basics, they're old enough to get involved in some of the decisions. My DS has been fascinated by the idea of interest ever since we went along to his building society with the pass book and they added extra cash onto his account 'just because I let them look after my money??!!!' and even a game of Monopoly can turn into an impromptu lesson about profit, loss, mortgages, charitable donations etc.

Just don't blame yourself if, after all the careful preparation, one of them gets a rush of blood to the head and puts it all on the metaphorical turn of a card. There's only so much you can do.

cogito I have yet to meet a financial adviser who has told me anything I didn't already know (or couldn't find out in a book or on the internet). The time I have wasted with these people. Unfortunately I think I will have to keep on sorting the wheat from the chaff - it may take some time...

We have sorted our legal and tax advice though.

Agree re financial advisers, they are useless about this sort of thing. But you sound like you'd be capable of putting together a balanced portfolio with a bit of reading and research.

I had a university friend with a trust fund and it was the worst thing for him, he was really irresponsible with it (but very childish anyway). So quite understand your worries. I inherited in my early 30s, but only enough to help out with buying a flat (though I could have frittered it away on crap if I'd wanted).

One thing worth remembering is that however carefully invested the fund's value in real terms may fall between now and 2026, because the global economy and specifically Western countries are not in great shape. And university costs will probably increase. So you could play it down to your kids - 'there's enough to put you through university and help out with buying your first property, but don't rely on any more'.

The other thing is just to help them to realise that the important values in life are non-monetary - having an interesting job which makes a difference is more satisfying than owning a Jag, etc. So you could sell the inheritance as 'It means that you can take a worthwhile but not very lucrative job (e.g. working for an NGO) and still know you can afford a decent house and have kids.'

What were you thinking of spending some of the money on, bearing in mind it is not yours to spend?

You sound convinced your children will blow this money or let it have a negative effect on their lives. Well you are the parent and you need to bring them up with values, self esteem and responsibility so that they understand the value of money and what it can do for you when you don't piss it up a wall.

I have received my one and only inheritance and it was spent on the children and a car. I made a 5 figure sum when I sold my flat and that has been used for 2 kitchens and a car. I made the money work for me and have something to show for it.

My children will be very well off when they reach their late teens/early adulthood and it is up to DH and I to make sure they understand the best way to use the money, along with having a treat or two.

You could set up trusts with the money. Discretionary ones where they could vest in the income (ie receive income from the investments) when they are 18 but that they don't vest in the capital (ie a lump sum) when they are older at say 21 or 25.

Is there provision for the money to be drawn on to help with education? (It would be pretty useless their having to wait until 25 if not!)

If so, start drawing on it as soon as possible for that purpose. Your children will see the value of not having to choose between studying and a bar job to pay for their course, of not having to worry about finances, of being able to actually study, rather than worry.

Later, they will need to do a few years' worth of working before they can get their hands on the money, or else they will be out of the circle of any wealthy friends they managed to acquire while benefiting from "free" studies.

My brother and I had some money from our grandfather (who left it to us to piss our father off), and we both "blew" it on our educations, so didn't end up with the problems you feared. Hope this makes you feel better?

FAB I am certainly not intending to do anything which falls outside of what is legal - the money is in trust but there is provision to use funds for the children's benefit before they are 25. So we could choose to use more or less of it.
Mooncup you are right that the value may well be eroded by the time they come to control it. But I still reckon there is enough for as much studying as they can possibly think of and still buy a first property outright. But I hope not much more than that, I really do. I just think that it is too young to start getting ideas that money does not need to be earned.
There's no way we can make sure they have had to earn their living before they receive the money - they can easily stay in full time education until they are 25 (I did!)

Hi Trustfund. I have seen this go both ways with my dh's family.
You will know your children better than we do, if they have lazy traits then they might just see this as a ticket to do nothing.

I'd suggest buying a property if they go to Uni or College. It's a good investment and the sooner they are on the property ladder the better. ( Given the market at the moment it's an ideal time to buy.)

If they finish Uni and find it hard to get a career this is money that could be used to travel or work abroad. Work with a charity and get some real life experience.

If they are not willing to work, giving them the money is the worst thing that you can do.

It's all down to the individual though. I wouldn't tell them for the longest time possible. Let them be 'normal'.

We have inherited a few times (dh and I been together since mid teens we are now late 20's) first lot was when dh was about 17 we frittered it away we bought a car but apart from that we lived it up 5* hotel breaks at aged 17 etc. we now both wish it hadn't been given that young and it was stupid we had no idea about the future just lived for the hear ad now. second lot we put straight into house but we were mortgaged up to the hilt still as wanted a certain house which was expensive. We have recently unexpectedly inherited from a distant relative in our late 20's at our age now we are more sensible we understand the importance of it and that it needs to last us quite a while. We have spent so long planning how to use it. It's been the most useful money, yes we have had some treats (before this we were living very carefully) so dh seems to have bought most of the apple store and I had lots of new clothes. After the fun we have put some aside for extension on house and there is enough for me to get pregnant (now 8 weeks!) and not worry about working for as long as I want. Having the later money has been wonderful in my opinion the longer you can keep it tied up the better. I think the letter about what relative would have liked them to use it would be good and talking to them lots before they have access to it saying that is the money for your house when you are older so they get it into their head that is what it's for. I would also think about pre nups to protect them too when girlfriends/boyfriends come on the scene. Oh ad tell them to think carefully who they tell, they will find that some so called friends suddenly treat them differently and expect them to pay for things or expect loans-these are not proper friends. For this reason we have kept out latest and biggest inheritance a secret from most people.

I think it depends upon how much. Less than a hundred thousand is small deposit on property or car plus long holiday type money whereas a few hundred thousand is setting up a decent deposit on a starter house in the south or a whole house up north.

A million or two is decent house, kids' school and university sorted but you still have to work. Ten million is starting to get into the no need to work territory but still not rich and a hundred million plus is wealthy to the degree that managing your wealth could take up quite some time if done privately.

Obviously some will think that a million is all the money in the world but I can't buy a decent house for £50,000 nor ten times that and a few years of university will cost the best part of £100k at today's rates.

Gerry Robinson did a series on inheritance and in every instance where parents wanted to control the inheritance of their kids, they did decide, after thought and counselling, that they must trust their kids to do the right thing and not put onerous clauses in the way.

For me, I have dictated (horrible word !) specifics for education, university, gap type year and some free cash and the rest can be used for property or left until 25. I believe 18 is too young and 21 at 21 you may well still be in the throws of university (and drunk) so better to get out of university with a little cash and then start out on your own for a couple of years before the rest comes to you.

I saw the Gerry Robinson programmes too- fascinating.
I guess we have to trust them really. 25 is still quite young though-they may well still be in education at that point (I was!)

OP One way to sort the wheat from the chaff on the adviser front is to find a fee based financial adviser that is Chartered member, or even possibly a Fellow, of the CII. To become chartered they need to have completed a level 6 qualification (degree level), undertake continuous professional development, plus have a minimum number of years experience. To be a fellow you need even more. Unfortunately as an industry there are lots of people that are rather back of a fag packet and this gives others a bad name. I would defend with most of my career that a good adviser will bring insight and meaningful recommendations to your situation... but I may be a little biased!