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!

You will not have control of the money simply because you are his mother. You will not have any capacity to buy a house now and rent it out! You certainly won't be making the investment decisions! I am not sure why if people know so little about the topic they are commenting suggesting ludicrous investment strategies and how you should deal with the matter? Your son will not be entitled till he is 18 and I assume it will be held by the trustees who will make investment decisions in the meantime. Consult the solicitor who will know about any conditions or delayed vesting.

When I was 32 I was given a house worth half a million. I am glad that I did not know this was going to happen earlier (it was a gift in the works for a while). My own children were wa h given a similar sum to your son when they were six. I have never told them and will not tell them until they are much, much older.
150,000 is a lot of money but it is not a life changing amount because of the cost of UK property. get financial advice.

@BreadInCaptivity in my case we grew up being poor and not being able to have treats . So when my mum saw the money in the account and I wanted things she let me take the money out. She did explain it but at 15/16 I didn’t listen like any teenager wouldn’t, I just wanted the newest clothes or shoes that normally she couldn’t buy me.

My Grandad left money for each grandchild, to be held in trust until age 21. I was coming up 22 and at university when he died so received it as soon as it cleared probate. my siblings were 15 and 18 and always knew it was coming. It was impressed on us that Grandad wanted us to have this money for our future and whilst he wouldn’t have minded us using it for one treat, he wouldn’t want us to use it all on fun stuff.

You don’t have any control over what he does with the money.

The day he turns 18 it is literally his, and there is nothing you can do about it.

You can hopefully teach him the value of money so that when he does get it at 18 he won’t blow it. But not everyone gets that, and even when taught the value of things there’s no telling that he won’t piss it up the wall. And if he does, then he does. It’s his money and you don’t have the right to make decisions about any of it.

@ivykaty44

It doesn’t work that way. He will be liable for tax in rental income and all expenses as soon as he is 18.

Is the a tax break on being under 18 then?

Surely you get your tax allowence of 12500 like everyone else?

And buying a property for £150k the yearly rents not likely to be much different from £12.5k

Assuming the rental income less expenses is over the tax break then yes, he is responsible. Anyway, he needs to do a tax return or advice a tax advisor on his behalf, regardless how much the income is.

He will also be responsible for all issues with the property. If the trustees allow the purchase of a property then it is his problem the day he turns 18. No way anyone would deal with a mother unless there is a proper chain of Power of Attorney in place, something he needs to sign himself when he turns 18.

Assuming the money is his outright then all control over it ceases by the day he turns 18. So, financial education is the only way to ensure he understands what it means inheriting the money. Prior to it, the funds should be invested in a way to secure the value of the money, again, in the child's name, not the parent.

I just don't understand why people think hiding something like that or refusing to give their children a financial education is the only way.
I think most children would be hurt to be told about this at such a late stage and basically realise that the parent didn't trust them or didn't bother to teach them.

Having a house it not always the only way to eternal happiness. An unsual education, several years abroad studying/working, a passion for a certain sector is equally important to having a house. DD looks at a profession which won't pay a fortune but I know it will make her happy. It may include working abroad for several years and I am sure any money she may inherit (and she will) will mean she is living a life she love.

And tbh I’m not even sure that £150k will be a decent house deposit in 7 years time with inflation the way it’s going.

But you can’t invest in pensions etc which mature at later dates, it’s his money, and if he wants that money when he turns 18 you could end up being liable for it if you’ve invested it somewhere it can’t be withdrawn.

@JanuaryBluehoo we have invested £10k in almost the exact way you have suggested. I really want us to be able to have some sort of retirement and this is my first step towards it.

Alternative

Ten grand from the 150 isn't much especially when explained to the child.

The 150 should grow much more anyway if invested properly.

Before you do anything else, you need to speak to the solicitor make sure they know your son's age. In the UK, 18s cannot inherit money. It has to be held in trust for them. Find out what age your son will get the money from the trust, likely 18/21/25.

If he gets access at 18, you can't keep it from him. That would be theft.

Morally, I also think it would be wrong. I really struggled financially as a student, living in mouldy HMOs while richer classmates were doing summer schools or unpaid internships that maid them a lot more 'employable' than me. I can't imagine how angry I would have been if I discovered that my parents had hidden money from me that could have changed my young adult life so much.

To avoid him splashing out at 18, I think it would be a good idea to tell him early (either now or at around 14) and get him good financial advice before he gets access to the money.

One more thing thing op, your life experience is valid and valuable but its not your sons.
His personality etc and experience will be totally different to yours anyway.

I would probably tell him when he was 17, with the money becoming available at 18. At that point he would know whether he was likely to be going down the uni route or not. If he is going to uni money is likely to influence his choice - he may choose to attend a local uni, or accept an offer from a lesser uni because it has a financial incentive. Knowing that there's potentially money to cover the basics frees him to go where he truly wants to.

I wouldn't worry about him not appreciating the coat of living at uni. I would work out a budget for accommodation etc with him and then go to the bank together (well online nowadays) and tie up yr2/3 in fixed rate or notice period accounts that give better interest rates and the rest in a 5yr bond. He'll still have to budget or survive on Tesco value spaghetti on toast each year. He'll also have to work if he wants driving lessons at 17 if the money isn't available to him until 18.

You can set up a trust that can last until they are older than 18. This us what we have done in similar circumstances. We did not tell our kids of their substantial inheritance until we needed to (they had to sign tax forms when they turned 18) by which time they understood that the money should not just be pissed up the wall. They still don’t know the exact figure (trust has been in operation since they were very young so initial sum has grown considerably). It will buy them a flat outright, but we feel it’s best not to tell them this.

@VanCleefArpels

You can set up a trust that can last until they are older than 18. This us what we have done in similar circumstances. We did not tell our kids of their substantial inheritance until we needed to (they had to sign tax forms when they turned 18) by which time they understood that the money should not just be pissed up the wall. They still don’t know the exact figure (trust has been in operation since they were very young so initial sum has grown considerably). It will buy them a flat outright, but we feel it’s best not to tell them this.

No you can't. It is not your money to control.

The trustees control it according to the terms of the trust. Which says the capital vests in the beneficiary at X age. It’s what was in the Will of the person who died. We’ve got similar clauses in our Wills which would have kicked in if we had died before the kids turned 18.

It needs to be invested given he’s only 11, just sitting it in a bank account means it will go backwards. So you need financial advice as others say.

You are right to be concerned.I was(as a child) in this situation.It will not make him a bad person,but if you tell him, it might influence his decisions in life.For me, life became purposeless for quite a while and I had to get psychological help for depression.Wealth does not make you happy,it can leave you with an incredibly empty feeling.I live now as an adult very very basic.For a number of years,I lived without having running water from tap.Of course not everybody will find life difficult after a large inheritance.If you and your sun life happy now,try to keep it this way.

You also need a strategy for dealing with tax. I’d be wanting to get it into junior investment isas each year (9k) so by the time he’s 18 he has a portfolio that is tax sheltered. If you just chuck it in an investment account he could have capital gains tax to pay pretty quickly with that level so you’d need to keep an eye and sell shares to use his annual allowance.

There is a lot of misinformation on here. There js every possibility that you do have control (for the benefit of the child) depending on the terms of the will but you do need to understand the exact wording.

How do you get capital gains tax on savings?
Inheritance of shares I understand but wasn’t aware of CG in savings?

ivykaty44 I talked about investments not savings. If they invested £150k and it grew to £200k when he wanted to sell he’d be liable for CGT on £37.7k at 10%. The tax would be avoided by using tax wrappers and using annual capital gains allowance but requires keeping an eye and not just leaving it alone.

I'm reading through the thread and getting quite angry at people telling you that you should tell him what the money is for. You can have discussions with him and talk through financial options but it's his money. If he doesn't want to buy a house but wants to spend it getting his pilots licence or qualifying as a stunt man that's up to him. An 18yr old can plan their future. I left home at that age as many other do. It's not the parents money.

CurtainTroubles Well yes but the limit is only 9k a year for children so it won’t all be sheltered by the time he’s able to access it at 18. I’d still rather invest that sort of money and pay tax if necessary (although annual selling should help) but it is definitely something to think about.

Bunnycat101 Can you show me where it states this in CG government information, I have searched but can’t find this, can find about selling assets but not cash being invested then being liable for CG