How can I protect my son from a large inheritance at 18?

[Awkward718]

NC for this as it’s quite a sensitive issue.

My DM is in her 80’s and I have a pre-school age DS.

My DM has told me that she has written in her will that she is going to split her assets between her 3 children, me and 2 siblings, however my share will go direct to my DS as she considers DH and I to be financially secure and not in any need. My 2 siblings have no DC of their own.

The amount my DS will receive is likely be somewhere around 300k-400k.

I have no direct need for the money so am not at all bothered that it is being left for his benefit however I do have a huge concern that handing such a significant lump sum to my DS at 18 could have catastrophic consequences for him. He’s far too young at the moment to know whether he’ll be a responsible 18 year old or someone who could ruin their life if handed such an amount at a relatively young age with no restrictions.

Is there anything I can do to alleviate the risk? DM is adamant she’s doing a really nice thing for DS so won’t entertain changing her plans despite me highlighting the obvious risks.

Can an inheritance handed to a child for them to receive at 18 be deviated or not? I suspect it can’t. If so what other options are open to me as I don’t want to live through his teenager years terrified that he’s going to be handed what will then be a huge sum after investment growth on his 18th birthday.

If it can’t be deviated could we do something such as invest in joint assets with him as a child where both parties have to agree to a sale?

Failing that are there any other options? I’d honestly rather not have anything going to him than have this arrangement in place. He’s an only child so will inherit plenty from DH and I at a relatively early age anyway as we are both older parents.

A couple of options:

1. regard it as a parenting challenge - you have years to financially educate your child. Plenty of 18 year olds actually wouldn't blow a sum like that, try to make sure your son in one of them. Talk to him about FIRE. As he gets older, get him to read some books, articles, follow some social media accounts. There’s loads aimed at teenagers.

2. don’t tell him he’s inheriting it. I mean this seriously, how would he know? Your average 18 year old doesn’t pay much attention to letters, so intercept his post.

I suggest you don't tell him until he's over 18.

Apart from anything else he might tell his little friends.

If and when he wants to go to Uni you can tell him there is help for him from his grandma.

You would need to make sure she wasn't going to be telling him all these years though. And what happens if she goes into care? There might be a lot less money, let's say the costs are £2k per week for a few years.

On the other hand, my brother and I each inherited about four times what the OP’s son will inherit when we were about 22 and 21 (in our case a parent died contemporaneously with their parent and we split our parent’s part of a surprisingly big estate - grandparents lived well, well, well below their means). Neither of us squandered it and both of us still have a strong work ethic.

She can't vary a will that leaves money to her son instead of her!

I’ve been through something similar. One of my parents died when my sibling was only a child. They for it to be given to my sibling at 21. Our solicitor said this isn’t possible as legally it’s theirs from 18 but we can keep it a secret until they turn 21. They are 21 next year so me and my elder sibling will sign off on them getting it and tell them about it next year.

When you do start to talk to him about it, you could maybe describe the situation as him having been left an income by his grandmother, rather than a lump sum. Obviously the capital is what enables the income (and also he'll still want the investments to grow so won't want to take all the gains out as income), but I'd try to embed the idea from the start that what that money is doing is earning more money for him, and that that's the kind thing his grandmother has done for him.

OK there may come a point when spending some of the capital makes sense, probably on a house, but get him seeing the inheritance from the start as something that's working for him in the background earning him even more money, so any spending decision that loses him future income needs to be carefully planned.

Building up a new investment pot that can sit there earning money for him would take a lifetime, so there's a big downside to spending it early. But I'd show him that by getting him to see the numbers, rather than by just saying "you shouldn't spend it". Let him reach his own conclusions and that will be much more powerful as a motivator.

No, beneficiaries can agree a deed of variation, not the executor. But as a minor, the op's son cannot legally agree a deed of variation so it's not an option here.

This is a great idea.

If she's adamant, the best thing you can do is talk to him and educate him on the importance of money. That amount if invested wisely could provide a really good passive income. He could buy a couple of cheap properties and get rental income for the rest of his life. Or buy a property for himself and be without a mortgage as soon as he enters adulthood.

I also genuinely believe, though, that he should be able to spend a bit of it recklessly. You have to have a bit of fun!

Part of your job as a parent is to make him financially literate irrespective of any inheritance.

You need to try to make him a 2 marshmallow kid, someone who will put off immediate gratification for a better reward later on. Some children are automatically like this - and some are automatically the opposite. You can check by asking him if he wants one marshmallow (or sweet or whatever) now, or two of them in 10 minutes time (the older the child the longer the time delay given).

Give him a choice and you might be pleasantly surprised that he can delay gratification.

If your mum dies before he is 18, then it will by law go into trust for him and accessible when he is 18.

Stop nagging the poor woman or she may decide it would be more appreciated at a cat's home. Have you considered that she is giving it to your child so that it doesn't become a marital asset if you divorce (or you're Hs if you die)

All you can do is make sure he's well informed about financial matters and tell him not to tell every Tom, Dick and Harry that he is wealthy in his own right. Of course DM may live another twenty years.

If he invests it he will have a nice income to start his adult life with, look on the bright side it doesn't need to be a problem.

Mine would have splurged a bit, a car, holiday, clothes., but most of it would have gone towards a house.
Why not trust your son a little bit OP?

For those saying don't tell him, his grandma may tell him herself.

Can you ask for her to name you as beneficiary on the understanding you'll use it for your child when needed?
I'm financially responsible as an adult but would have pissed it all away at 18 or early 20s.
Any money our children get will be in our name until we give it to them for a major life event such as university, wedding or house purchase, no way would I want them having money to squander at 18.
Its not just the risk of squandering, its the risks of them and having the money to make vastly inappropriate decisions such as buying frinds or powerful cars.
I'd be really upset and angry if it was me.

It’s an absolutely terrible idea to let him have the money at 18. I will be honest, my kids have some money. About £100k and I’ve not given it to them at 18 and I’ve told them it’s for a house and they can have it when they buy. I have the details and haven’t shared it. My 24 year old knows the details and isn’t interested in accessing it. My 20 year old knows it exists but not how much and my 16 year old has no idea about it. I don’t care if I shouldn’t do that, but no way are my kids getting their hand on that amount of money at 18. They’re sensible but the temptation is there.

Can the principal be invested (tied up) at aged 18 and the interest be used to see him through uni. Maybe he would see the financial sense of this? Then he would be more likely to be interested in property, perhaps after travelling.
I would also not like any 18yr old of mine to be exposed to such riches at that age. Even the most level headed has the possibility to go off the rails.

Many solicitors will advocate a trust aged 21 or so. But really, he will be legally an adult. And perfectly entitled to manage his own finances.
There are many rich young people. What they do with it is up to them.
And not you. No matter how much you might like to manage it.
As for agreeing joint assets and having to agree any sales. That would be intolerable.
Would you seek to persuade him to buy a bigger house that you both own ? Or seek to persuade him to buy a small one for him and a bigger one for you that he both owns? Or something similar. Clearly you want a jointly owned asset.
And would you give that up when he is 25 and wants his share to buy a bigger place ? No.
Granny wants it to go to him. To him it goes.

If I were you, and assuming you have some spare cash, I'd open a S&S ISA (in your name) and contribute whatever you can to it (preferably an initial lump sum though). As soon as he is old enough, get him involved in understanding the investments. Let him see that over X years, £X increased by a crazy amount and then hopefully he will see at 18 that he also needs to do that with the money he gets until he actually needs that sort of money. I'm sure others would say this is terrible blackmail but I think I'd also come to a deal with him and say if you keep X% (being a very high percentage!) invested until you buy a house, I'll also give you the ISA money. If he then spends it all, it's totally on him.

The other thing that might help - if the donor is up for it - would be for her to write a letter saying that she hopes he puts it to good use (giving examples like buying a house, paying for university fees etc). Might drive the right behaviour.

I wouldn’t worry about it if she won’t listen. Steel yourself for a conversation with him at some point and see if you can get him to agree to lock most of it away as soon as he turns 18.

My DC both inherited £5k a couple of years ago and 17yo DD spent it in less than a year despite saying she would be saving it. I have no doubt she would have burned through a huge chunk of £300k, so I understand your concerns.

By all means lock it away. But in his accounts. Not in jointly owned assets !
Any assets purchased are his only.
The Solicitor will give the money directly to him. Not via mummy.

Not sure where you got the idea I thought it should be in OP’s name or joint? There are plenty of ways to put your own money away for a while.

I’m not sure which law I have broken but I didn’t tell DS about money he was given. It was placed in an ISA (it was far less than OPDS) with me as the trustee and when he turned 16 the trust part ended and it was solely in his name. He was about 20 when I told him about it. He is autistic and therefore slightly behind his peers in emotional maturity. He used to give money away once he had bought what he wanted as he didn’t need it anymore. There is no way I was telling him he had £15k just for him to hand it out to other teens. He was vulnerable enough at that stage.

I told him about it once he had an income and was managing his money sensibly. That was a few years ago and the money still sits in the ISA untouched and will be used as a deposit when he is ready to buy a place with his partner.

If I broke any law by not telling him, I have no regrets

It’s actually a really good idea to skip a generation when leaving a large sum as it reduces inheritance tax.

£13k p.a from £40k shares. That is quite a return!