How to tell children about trust fund?

[notveryhappyhere]

So, first of all I know that this is an extremely nice problem to have!

My inlaws are wealthy and have given my 3 children money in trust.(It's in their name so can be accessed by them whenever they like.) It was about £500K a few years ago but has done incredibly well recently and is now around £1m each. It makes me feel a bit sick to write it.

My children are teenagers and have no idea about this money. The eldest is 18 now.

We are quite well off, foreign holidays (when it was a thing), and the children are at private school. We are not flashy though and try to teach them the value of things. My eldest is at university and all of his Uni friends were at state school, he keeps quite quiet about his background and doesn't like us to spend money on him. If it is relevant, we are in Scotland not the SE England so this money is a huge amount.

I've always felt uncomfortable about the money as I worry that it might dent their ambition, send them on a wrong path as I've seen happen to others. It's a huge amount of money, especially to a teenager.

My eldest has really matured of late, but when they were first given this money he was going through a particularly silly stage (aged 14), failing at school and generally being immature which is why I was determined to keep it under wraps at the time.

Before when it was £400k to start with I felt ok about mentioning it to them as they got older, not making a huge deal out of it just 'some money for a flat/house' when you're older. But now it feels a bit of a scary amount to be honest.

Any advice? My husband (who grew up around a lot of money)is pretty relaxed about it all but it stresses me out!

Thanks and if you're going to give me a hard time this isn't the thread. I've had a tough week (death of a friend) and am just looking for advice on how to navigate this (very fortunate) situation that we are in.

@picknmix1984 haha! I wondered how long it would take. We’re not in in London as I said in my OP. We’re not even in England!

The point is that whilst it’s not a sum you could retire on aged 18, it’s a huge sum to an 18 year old and it’s the perception of that rather than the actual amount that could be damaging.

We are in a similar position, but have made sure any trusts are discretionary because the risk of it being blown is far too high due to complicating factors.

Your 18yo seems quite sensible so far. But the money which is legally his, he really needs to know about, as otherwise he could make false declarations on things. If there is other that is not legally his you could say 'there is some other money' but no more details.

I would tell him about the money but say he is not to share the info with younger siblings as could be destabilising. I would try to be as clear as possible it is for major capital spends like housing, or to support education, not for frittering.

Thanks again everyone. It’s so helpful and interesting to get everyone’s views on this. We had thought about investing it in property for them but didn’t want the hassle and rental yield here is low.

Having spoken further with my husband on the tax return stuff. He did say to my eldest that it was money from grandparents that we were looking after for him. I think we’ll keep it low key and just say money towards a house for when you’re older. He is not money driven so I would be surprised if he asked. Interestingly he said when we visited a friend of mine who lived in a one bed flat - “I’d like to live like this, simpler.” He’s really got his head screwed on, that one.

@notveryhappyhere you seem to assume that all your children will stay in Scotland forever. The point I was trying to make was they may not so that money may not actually go that far if they migrate to London for example. I wasn't trying to diminish the problem for you.

Tell them about it adult to adult, tell them it will be immensely helpful when they are ready to establish themselves, not now, and tell them that if they piss it up the wall you will disinherit them.

[quote picknmix1984]@notveryhappyhere you seem to assume that all your children will stay in Scotland forever. The point I was trying to make was they may not so that money may not actually go that far if they migrate to London for example. I wasn't trying to diminish the problem for you. [/quote]
Where did I say that?! If you read my posts (again!) you’ll see my eldest is at University in England.

I get the prices of London properties and Edinburgh is pretty hefty too but it’s about perception at this stage.

OP it doesn’t sound like your husband is actually that relaxed about it if he has assumptions that it will be invested in property etc and ‘kept’ for the next generation. I think you need to take advice about attaching conditions to it or there may be trouble ahead.

@Rainallnight I don’t think we can attach conditions to it now. I think it’s just he’s not a big spender, neither are his siblings or his parents.

I’d start talking about it conceptually OP, the trust exists, it’s for the future etc. I wouldn’t get into amounts yet but bit by bit normalise it and talk about what it means, what it makes possible ie perhaps a career that doesn’t have to be financially driven if they prefer to do something else but also the responsibilities etc.

I imagine your children already know their family is wealthy.

I have some friends who have had similar.
They have bought their first flat /student house then kept it and rented it, bought a lovely family house late twenties and have another rental /holiday flat as well. Round here that's a million quid gone instantly. The rental income supports them to have a very nice lifestyle but to afford holidays and school fees etc they still need to work. They all seem to want to prove themselves too.

I have other friends though who have 'failed to launch' despite being given enormous amount of help /funds, these are all state school kids though and there was definitely less pressure - a feeling that (relatively) they're already at the top so don't need to try!

I do get why you're worried though, my worst nightmare is to win the lottery, I would find it so stressful!

I wouldn’t tell them until my last child had graduated and got a job. It can be extremely destructive to suddenly have access to such money when you don’t have the emotional maturity to deal with it.

A lovely thing for your in-laws to do.

I wouldn't give it to them until they are at least 25. I'm late 20's now and I know if I had that kind of money given to me in my early 20's I would have pissed it away

@SugarfreeBlitz

Just curious how that affects Student Finance? Or maybe they dont need to apply for it? Surely it needs to be declared for that as it will be earning income?

Maybe that's what the GP left it to them for? Their education I mean. If it wasn't for the legalities around that, I'd make them wait until they'd completed their uni ed.

The OP has explained that they are funding their DS's uni education and they have not used student finance.

@notveryhappyhere yes that's why I said that 1 million may not go far. I'm sorry I'm saying things you don't want to hear. That's social media I'm afraid. If you want advice that agrees with you ask a friend!

It really went against my instincts to set it up this way. However the lawyer, my father in law and my husband all wanted to as it was the easiest and most economical way of doing it. Also at the time, we weren’t looking at this kind of amount!

Well you now have more than £3M and you need to have the most appropriate kind of trust for your children’s needs, not what is easiest and cheapest for your husband and father in law.

BTW I’m struggling to understand why a woman who works in finance would say that.

We are talking about perhaps £7k in legal and accountants fees, it’s not a lot compared to the capital. Personally I’d not be happy to have that amount of money in a bare trust.

I also think it’s less than ideal ( I’m trying to be kind here ) that you are having your 18 year old sign a tax return that he doesn't understand.

If he gets no income from the trust, why does he have to sign a tax return ?

And if he does get income , why aren’t you giving it to him? You can’t take income from the trust in his name and then put it elsewhere.

*If he gets no income from the trust, why does he have to sign a tax return ?

And if he does get income , why aren’t you giving it to him? You can’t take income from the trust in his name and then put it elsewhere.*

This stood out to me too and is somewhat worrying, especially if as you seem to indicate your oldest seems to be so naive around money.

I totally understand why you are concerned, but your son is an Adult. You have no right to hide his money from him.

You need to work with him to help him manage it. Talk to him about investments, about his future. But getting him to sign tax returns and potentially hiding his post is wrong.

No need to be so personal @C0RAL! The advice we took was from a trust specialist who is highly experienced in this field. My husband and FIL too are experienced in the field of trust law one being a lawyer and both themselves had trusts from young ages. So it wasn’t a matter of me just trusting the mennzzz. FYI - the income from the trust is reinvested. I can sense you’re frustrated with me but please remember I’m a person trying to do the best thing here. I’m a bit delicate (see my OP) at the moment and whilst I get your point I’d rather you weren’t so aggressive. Everything is above board and nothing has been signed by subterfuge. I feel this focus of yours is taking away from my question.

Thanks everyone, I appreciate all your input.

We have a MUCH smaller, but still significant amount that was given to me by an uncle for my kids savings.

I always let it be known that it was there ‘in the background’. That it was their security, towards a house deposit or to start a career and that never again would they be in a position to amass money like that until
They are much much older. Emphasising the value of having capital .

From when they were about 10 I took them into the Halifax to talk about high interest junior ISA. Involved then in moving savings into better interest accounts etc. Then into NS&I bonds when ISAs reverted to low interest.

Then, at 18 they took their own initiative and moved money into Help to Buy ISAs, and premium bonds.

They just know that that money is for their future and they need to take care of it.

But by now it is modest flat deposit, not the sums you are dealing with which are more mind blowing.

I would probably carve off a modest chunk for fu and frittering, and develop a sacrosanct culture around the rest.

I’m not frustrated with you at all - your sense is wrong. I am however a little confused by some of your comments, as are some other posters.

And nothing I have said is remotely personal or aggressive.

However I can see that my polite and well intentioned posts are not helping you so I will bow out. I hope that you come up with a plan that is in your children’s best interests.

@C0RAL maybe I’m being over sensitive. I do appreciate (most!) of your input and the time you have taken. So thank you. I think you’re a fellow Scot?

Personally, having had parents who paid for what I needed/wanted (not to the sun of £1m but still)

I would say let them get through uni (debt free) get jobs, and start adult life before telling them.

Things like getting partners etc could be quite negatively affected if they were "rich" so I'd want to be protecting them from that.

If they can enjoy their early 20s without the burden the money could bring. And to learn to work for what they want I think in the long run that'd be grateful for that.

If of course they want to do expensive PHDs then perhaps it's a different answer.

@RainingBatsAndFrogs that’s interesting. Yes I think my younger two would love that. Oldest is just not interested really.

They do have about £30k each that has amassed over time from generous grandparent birthday gifts. My husband has suggested we let them have (almost) free reign on that. A practise run! They will each be eyeing up what the other has done and learning from their mistakes! Obviously we’d give them guidance but it would be a good way to do it, hands on rather than hypothetical. They could spend a bit, save a bit.

Hello!

I completely understand your predicament here. With our trust funds my parents gave us money in small instalments, ie enough for a car at 18 (but not a Mercedes, more a VW) and then a bit more for uni. Then enough for a house when the time came. I don't think you really need to tell them the full story until they are mature enough and ready to think about buying a house (having already made a career for themselves) and then you can pleasantly surprise them and let them know how big a house they can be looking at! I think around the 25 year old mark is a good time - but lots of friends can't access theirs until they are 30 as this gives them time to have built up a career and life for themselves. Hope this helps xx

The practice run is a good idea.