11 year old has inherited a lot of money

[Jessica8282]

Hi there,

I can’t quite believe the position we’re in, which I know is incredibly fortunate. I feel bad for even feeling it’s a problem.

However my son has just inherited a large sum, we won’t know exactly how much for a while, but at least £150,000, possibly much more.

Rather than this being amazing news, I’m now worrying a lot about how this will shape the person he becomes.

My background is not an overly prosperous one, in-fact I spent large parts of my 20s and 30s in considerable debt. So I’m finding it hard to process this news and the impact it will have on him.

My questions are, can I postpone telling him until he’s older than 18 (I.e 25) or do I have to tell him once he’s 18? I can’t see how having lots of money can positively impact his growth as a person.

My second question is, do I tell him soon so he has time to process it and let us instil in him what that money will go towards, i.e a house (and it not feel like a huge money splashing celebration when he’s 18). Or do we wait so that he has at least has some time in his life of having to think about how he’s going to make something of his life without having loads of money?

Also, just any general advice on how to handle this situation to ensure he still grows up to be a nice hard working person is greatly received!

I just keep thinking how being a poor student really taught me the value of money, and how he’ll miss that experience. Which is crazy, I should be over the moon for him!

“Held on trust till they are 18 or older depending on the terms…”

Note to self: proof read!!!

That probably depends where you live, and as it would be their flat house to live in they won't have the same tax implications as a person who has more than one property. I was thinking depending where you live you could buy a one bed flat out right and there would be no buy to let and once you come of age you coukd live in said flat, so no tax implications. More than one way to buy property.

Also, if I ever came into money and I coukd set my kids up with a property, that is what I would do, then they would not have a worry of a huge mortgage or extortionate rent, we live in a very expensive city.

For me it would depend on who was leaving the inheritance. When my grandmother died I was left some money (nothing like the sort of this but a few thousand) I chose to buy a piece of jewellery to remember her by and then agreed everything else would be put away/invested until I was 18. I also chose a few items of hers to keep, we shared pieces out amongst the family, this to me at the time was more important than the money as these were the things I remember her by from when I used to play at her house. The jewellery I bought was something I chose as a last gift from her, but her actual last gift was a copy of little women which I still have. When I was 18 I was about to go to uni so my parents very sensibly advised me to reinvest until I was 21 so it would not get wasted by me as a student. I used it towards a deposit for a flat, and I'm pleased the money didn't get frittered away. My flat was great but but sentimental items are the most important to me

@Islandgirl68 tax implications are the same with one property or ten: all profit is taxed as income and there are far fewer deductions you can make from income for tax purposes after recent changes. Costs for letting are also higher as landlords (quite rightly) have to make more checks every year to protect tenants. Add to that higher costs of maintenance (I’ve just spent over £1k replacing a water heater in one of my properties for example) and the returns are just not there compared to a good managed investment strategy. And none of us know where our kids will end up wanting to live.

Still does not mean investing in property is not a bad idea, and If they choose to move away they sell and buy somewhere else.

I own several properties that I have rented out for a few years. I wouldn’t start out in this business now, that’s all

Mn wisdom is to take no risk (and put it into cash savings) or to buy property (which IMO is high risk and hard work/high cost maintaining and illiquid). That is a little crazy because there is a perfectly sensible middle road.

Personally I think the easiest route is to invest the funds in equity, such as low cost tracker funds and to drip the funds into his £9,000/year stocks and shares JISA tax allowances over 7 years until he is 18 and continue with his consent into his ISA allowances after he turns 18.

PS he has a £20,000 cash ISA allowance from 16-18 in addition to his £9,000 JISA allowance.Not many people know about this.

Some of my equity investments have tripled over the years. The returns are comparable to property and for much less hassle. I hardly even look at my equity investments. No tenants, no breakdowns or maintenance or mortgage or tax.

@blueshoes spot on

I also agree with blueshoes . Property isn't easy to liquidate and comes with complications. I wouldn't use it for a child's inheritance. Things like unit trusts / tracker funds are a good medium term investment.

Another person suggesting property is not the easy route, but from another perspective. We do commercial property for pension, but the current tenant has not paid the rent for 13 months and is going bankrupt. It was a small family company and I feel the fear they must have experienced during COVID when they were unable to open for business, but at the end of the day, the rent they should have paid has left a large hole in our income, even before the £25,000 worth of damage we are rectifying to code before we can re-let it. So we are £50,000 out of pocket at 66 years old, in one year. For a trust fund, property is not a dependable income stream. You would be better off, and doing a lot less hassle, most of the time, with a sensible mid-market equity tracker fund. It's not exciting but you do sleep at night.

DH inherited not as much but still a lot of money that he would have pissed up the wall at uni but he was told it was for a wedding and a house and should not be used for anything else. So that's what happened (lovely for us when we were getting married and setting up home).

I don't know where the money was saved but I know it wasn't invested. If you are to invest it for your son you'd need to do it with his full understanding of the risks and that is if you are in charge of it rather than other trustees. I definitely wouldn't invest in property or something else that could be high risk as seven years in terms of investment isn't that long a period and property could crash. You're right to take professional advice on the legalities and what best to do with it until he needs it so it is safe and maybe making a little interest.

You sound like you've got the right idea and you can let him know without it becoming a massive thing.

FWIW, for those people who seem to hold a distinction between investments and presumably savings in a bank account or under the bed, there are risks with whatever approach the Trustee takes. We're in a period of relatively high inflation in the UK so unless someone can put the money in a tracker cash account, the value would erode by c5-7% this year and potentially more relative to other benchmarks such as the price of property so the trustees' duty for prudence need not necessarily be met by putting the cash in a bank account and presenting what would be a smaller sum in real terms in seven years' time.

Hello, First, keep the money away from financial advisers. They are salespersons. They know, on the whole, nothing about investment. They charge big commissions for passing on the money to companies which cream off even bigger commissions.
I was once a financial adviser myself and i would not recommend anyone like myself!
Avoid lawyers too. They are not investment experts either.

To learn about investing, the best book is The Intelligent Investor by Ben Graham. Not expensive to buy, and you can download it free from the internet.
Look on Youtube for Warren Buffett As the world`s greatest investor his advice is like gold!
First: sign up with a stockbroker for a Junior ISA. Invest it in investment trusts. I can send a list. The cheapest stockbrokers are Fineco Bank and X-O.co.uk for their execution-only services. Do not assume that you will do better having professionals invest your money. You will not! Investment Trusts excepted.
You sign up with a stockbroker just like signing up for a bank account. You put oney in by bank transfer or debit card. Simple. But YOU have to decide where the money is invested. That is "execution-only".
But study the subject and you will avoid most mistakes. With a bit of care and common sense your son could be a millionaire in a couple of decades. I kid you not!!
The usual way to invest for a minor is to have a separate account basically in your name but designated for him. Eg: Jane Doe (KevinDoe)
More later, Christa.

HRTFT but my nephew inherited a similar amount at 18. My sister died when he was small so we fought and won a large insurance payout and specifically asked for it to be tied up until he was at least 21, ideally 25.
He went to withdraw his weekly £30 EMA shortly after turning 18 (we qualified due to low income) and there it was.
We barely saw him for the next 18 months. It all went on concerts, festivals, hotels and treating his friends.
We thought he was sensible but we were wrong ! Don’t be like us x

As with a previous post, given what's happened over the last 5 months, for those wedded to bank accounts, how is the erosion of spending power between inflation and interest rates feeling?

I'd tell him he has been left some money in a special account for when he's older to go towards a house.

Wouldn't mention how much it is.

As others say you could use it for driving lessons, car, uni, a bit of travel but try not to let him have more than a few thousand a year from when he was 18 as the intention is a house deposit when he starts working.

Does he know the person who left it to him well/respect them? If so then you could say they intended the money to be for a house deposit and hopefully this will be in ingrained from the beginning.

I wouldn't go mentioning it too often and hopefully he will forget about it till he's older.

Unfortunately, there is a problem. If someone is entitled to money at age 18 then the money is his. He is an adult. You cannot stop him getting it. If you do, it might not be theft exactly, but without his permission it will not be legal!
You can, of course, buy shares - investment trusts especially - so the funds will not be immediately visible so less of a temptation to go mad with them. Over 10 years it is reasonable to assume as a rough rule of thumb that the value will more than double with dividends reinvested. Gains accrue in two ways: capital appreciation and regular dividends. Wise investors spend some of their dividends and leave the assets to build up. Although both are subject to tax outside of ISAs (and a few other more risky schemes) there are extra tax allowances to benefit from.

What a pity this sort of thing is not taught in schools (search Youtube.com for "Keep them poor"). When a talk was given on investment some time ago in my local village very few people turned up and none of them (I guess) followed the very good guidance offered.
Do check out "Warren Buffett" on Youtube.com . He is in the USA so terminology etc are not quite the same but basic principles are. His advice is excellent and given in a wonderfully entertaining style. If your son follows his advice he may not become a multi-multi-billionaire like WB but he will be very comfortably off indeed! He has been investing since 1942 so has had a head start!
The best textbook on value investing is The Intelligent Investor by Ben Graham which is cheap to buy or free as a pdf from the internet.

Thinking about this - would it be worth a conversation with the Executor to advise him of his misgivings. They may be able to set it up as a trust rather than a straight release if the wishes of the deceased were known e.g. education or a house etc. It might also be worth doing so it can be properly invested - trusts tend to need to be risk free so v boring bank accounts - but be aware of the 80K protected limit for accounts so would mean two or three separate
banks/building societies

advise them of your misgivings