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.

Do none of you want to give any of it away? It sounds like so incredibly much more than anyone needs.

Honestly if I had that much money I would want to set something up like a scholarship or something. I'm not just being sanctimonious. If I had 30,000 I'd keep it but a million! Is that a good thing for a child to have?

Would they/ you/ grandparents want to do anything like that? I feel like that would be the best use of money and the best life lesson.

Covoid If people have enough money for trust funds, they probably also have enough elsewhere for charitable giving. it doesn't need to be either/or.

@CovoidOfAllHumanity I suppose it’s not mind to give but yes I do agree with you and will bear it in mind

I was thinking about the DC learning about charitable giving and the power of their money to do good in the world for others. That's separate from what their parents might or might not give themselves

We are not wealthy people so I have no idea whatsoever about all this stuff but I've always encouraged mine to choose a charity and give some of their pocket money regularly.

If I had so much more than I could personally need like that I would give a chunk of it away and I want to bring my kids up with my values.

A practice run sounds good.

My 18 year old moved his non-ISA savings into premium bonds when the %rates dropped, and loved checking in in the first month to find he had won £25.

Seeing the value of sticks and shared ISAs rise could also help, but as a family we are not familiar with S&S ISAs and whether now is a good time.

On giving: these savings make the Dc richer than DH and I, and we have always been careful with our weekly budget. But from a young age I let the Dc choose an item each to put in the Food Bank box. This (after a few false starts - but treats are always welcome in food banks, I am sure ) also encouraged them to think about priority resources and what is most needed. And they would team up: tinned steamed pud and a tin of custard. Tin of Chilli, packet of rice.

I think 25 is a good age, talk about it vaguely, in general terms but not amount?

The fun has matured amazingly, was that through a single investment fund or multiple?

I knew a few guys when I was travelling who'd inherited about 200k from grandparents. It seemed to make them a bit blase/spendy.

Obvs everyone is different and you know your children better than anyone. I personally wouldnt tell them until they're 25 but at what age are they entitled to access it? Could they have some of if post university for say, travelling? Or house deposit?

When I've had much smaller amounts of money come my way it probably has made me less ambitious to be honest. But that's just me.

Sorry about your friend OP.

The markets are crazy at the moment, particularly the US. We made a 48% return last year which is ridiculous, 26% the previous year and 14% so far this year. We are only allowed to invest in funds but even then 100% is very achievable in these frothy markets.

Are the in laws/grandparents still here? If so, as it's their money to begin with I think they should have a say in when it's announced and accessed.
Otherwise, I'm in the area of thinking that this money belongs to your kids and so they are entitled to know it's there, even if you opt to not tell them the total amount.
I also don't think you or DH can tell them it's for property investment/etc, by all means guide and advise them in what you think is sensible, and give them a good financial education, but ultimately it's their money to do what they want with, whether that's property or something more indulgent.
As for when you tell them, I don't think they necessarily all need to know at the same time, perhaps tell each when they reach adulthood? If it was me, I would have loved to know I had money available when I was 16/17 because it would really have changed my studying and career path. There was a career I desperately wanted to do and would have loved but I knew would never earn much, so I didn't pursue it, instead studying a subject at university that I didn't feel passionate about but would lead me into a stable career. Knowing I had financial security for life would have been amazing.

As much as I think it would be better for them to do their degree (heck, even maybe wait until they're established in a job or something, and want to buy a house) before you give them the money, by the time they are 18 they are adults, and it is not fair (or perhaps legal, I'm unsure on that one) for you to keep it from them.

It would be best for you to sit them down and talk to them about it, and talk through what the money could do for them. For example it'd be a great idea to just put a huge chunk away for retirement, perhaps make some other investments, and buy a house outright when they graduate. This would make such a huge positive impact on their lives.

I know that when I was at uni I wouldn't have blown such a huge amount of money.

But if they are adults, it is not your right to keep their own money secret from them, even if it might seem like the sensible thing to do.

OP we had a similar nice problem but far less money. We started to tell DC about it when they were in their early teens, but constantly in terms of: so X amount of it is your education fund if you want to go to uni and not get into debt, or if you want to do a masters. And then X amount is for your house deposit." Brainwashing them into thinking that the money had been earmarked for specific things has worked. Now they are both late teens, both at uni and both think of the money as set aside in specific pots for specific purposes. I had an absolute horror of springing it on them and them becoming dopehead trustafarians as I knew a few of those in my twenties and they were not happy or purposeful people.

If you haven't yet told them, I'd still take this approach. Explain that some money has been set aside for X and when they are ready to draw on it, they can. Also explain that This Is It. the way things are going, our generation's savings and money earned from house prices inflating will all go to the care home industry. I told DC: ' This is your inheritance. It won't come from us. No one ever gave us a chunk of money like this, so we've had to save for our old age. There won't be another one when we die, unless you want to be the ones wiping our drool and wheeling us up and down the sea front.' That focused their minds on spending it wisely!

@StressedTired such an interesting post, I do get your point , a bit of financial backing might lead to a career / job for the love of it rather than having to think about all the bills. My son is lucky - in that he hasn't been given a million quid - one less thing to think about - Ah I joke - I can see the point.

I would think about what you can do to prepare them.
Could you enrol them in a Money management course? Open University has one.

www.open.edu/openlearn/money-business/personal-finance/managing-my-money-young-adults/content-section-overview?active-tab=description-tab

Maybe get them to do the course before you tell them why exactly?!!

Possibly try and find a way of showing them examples of how it can go wrong ... maybe there's a film about people pissing their inheritance up the wall or something?!

[quote BasiliskStare]@StressedTired such an interesting post, I do get your point , a bit of financial backing might lead to a career / job for the love of it rather than having to think about all the bills. My son is lucky - in that he hasn't been given a million quid - one less thing to think about - Ah I joke - I can see the point.[/quote]
I’m cringing at myself!

This is great- thanks all! Thanks too @IdblowJonSnow for your kind words about my friend - your username did make me laugh!

@StressedTired alternative viewpoint - really interesting and does make me think. My husband reminded me that one of the reasons we didn’t want it all tied up in trust until they were 25/30 was at the time, the controlling aspect didn’t sit right. Well, when it was a significantly smaller amount! It’s hard with three such different characters in the mix though. My youngest yesterday asked his dad - are you a millionaire? He’s very impressed by money and flashy things. Opposite of his brothers. I’m very glad he doesn’t know or he’d probably tell all his friends

@whatisheupto really helpful thanks! I will take a look.

@Labobo that’s interesting, you are very sensible. Your last paragraph made me laugh!

Could you give the eldest a % of it - maybe 10 and say rest in trust for a deposit on house

See how he spends that money

They are very lucky. Couldn’t imagine having that kind of money

I’m curious why you aren’t letting him have the income or a portion of the income from the trust? It sounds like a lot of it is his money at 18 and he should have the choice of how to spend that. I had a few friends with trust funds at uni who used the income but never touched the capital. It meant they could travel, do extra courses and in general having a pretty lovely life.

There may also be benefits of getting some of the money into his own isas and pensions.

@Dustyhedge

I’m curious why you aren’t letting him have the income or a portion of the income from the trust? It sounds like a lot of it is his money at 18 and he should have the choice of how to spend that. I had a few friends with trust funds at uni who used the income but never touched the capital. It meant they could travel, do extra courses and in general having a pretty lovely life.

There may also be benefits of getting some of the money into his own isas and pensions.

I suppose for a few reasons which I’ve explained elsewhere I think but mainly . He doesn’t need the income just now as we’re happy to fund him

• dividends are low at the moment so I don’t think the income is comparable to when your friends received theirs
• we don’t want him to feel he doesn’t need to work and we don’t want him to feel different from his friends.

@Blondeshavemorefun thank you, yes they are incredibly lucky. I had nothing like this growing up and I’m actually a bit weighed down by the responsibility.

I never think it is sensible letting kids have free access to material wealth at 18, despite the fact they may marry and fight in a war. An education is required around money and that comes partly from experience and partly from knowledge passed on. In my work I see these issues frequently. Whatever you decide, factors beyond your control can conspire against you. That is part of the rub for even the most prudent and financially successful of families. Fortunes of war. There will be some leakage and loss.

It is worth having a grown up chat with them. Explain the difference between capital and income. Use the tree and fruit analogy. When the tree has gone there will be no more fruit.

Take the million or so they each have and explain how they £400k will meet their ISA investments for the next 20 years. Explain that another £400k could give them a pension. There will be some for houses too. Explain that with a good job in the meantime, they will be able to retire at 50 and travel the world.

Draw up a non-binding 'family constitution'. Put provisions within it that if they inherit anything from you they will be very lucky indeed. But if they squander what they have, there may be nothing else, or at least it will be left in trust and they may have to go cap in hand to the trustees each year for extra spending money or to upgrade their car.

Carrot and stick.

You and your children all sound really switched on (and the youngest will probably head that way too - I was much more materialistic when I was younger). Having money young IS stressful. I don't actually think you and your DH are that far apart, keeping it lowkey and gearing conversations into the importance of not pissing it away for future generations.

Working in crap jobs as teens (when it's allowed) isn't just about money, it's about life skills, making friends. I look at my trust funded contemporaries and those whose parents gave them access to cash too early (ie just being given money to travel) have found some aspects of later life much harder to navigate as a result.

Mackerel put it much better than me...

We all had money in trust from my granny. She stipulated 27 before we could access it. Perfect age I think. I put the lot into property.

I still don't understand how legally you csn avoid telling your eldest who is now an adult? It isn't your money.