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!

Unpopular opinion. £150k is really not a lot and hardly forever life changing.

If you keep it then by the time he buys a house at around 20 yo - £150k won't be worth much.

I'd invest. Where? Depends. Bitcoin worked well and I bought a house with the "gamble" winnings last year, but I think it's past it's heyday now (i bought into it realllly early).

I'd invest into NFT.

Not a financial advisor, but reasonably aware of the basics.

CGT isn't paid on cash based savings. But if you turn you cash into shares by buying them it could be paid on the gain in value of the shares.

It is paid on share value increase or second homes (amongst other things). It is only paid when the asset is sold and is (something like) 40% of the gain above the allowance (currently ~12.5k). ISAs are free of CGT.

If shares gain a lot of value you can sell them and then re-invest to make use of your yearly CGT allowance. So a financial advisor would try to help ensure you don't have to pay CGT by keeping an eye on gain and taking action.

If you know you are going to want to sell everything in 3 years time, a financial advisor would also assist in gradually transferring over to cash to minimise risk of sudden stock market fluctuations on day you sell.

My kids inherited a similar sum of money a couple of years ago.
We discussed options with the exectors of the will, solicitor and financial advisor. We could have either chosen a 'bare trust' which would have saved some tax now, but would limit our control, and the children would access to the money when they are 21, or a 'discretionary trust' which allowed DH and I to be appointed as trustees, and we could use the money for their benefit or give it to them when we decide it is appropriate.
We went for the discretionary trust option as it has several benefits - as we are the trustees we are responsible for investing the money so that it (hopefully) grows. We can use the money if needed as long as its for their benefit - so eg it could be used for private school fees. We are not planning on doing this but its good to know the option is there. Finally we can give the money to them at an appropriate time of our choosjng- so perhaps some for Uni and first car, then the rest when a bit older and wanting to buy a house.
The downside are tax related - we have to pay 6% inheritance tax every 10 years - so we need to do our best to invest wisely so the amount does not shrink.
We have not told our kids about this money as they are too young to understand - I'm not yet sure when we will tell them.

@hazelnutlatte I'm genuinely interested that and inheritence from someone other than you could be put into a discretionary trust and kept form the beneficiary once they turn 18 if you are based in England and Wales? Unless the will specified this then I'm surprised that would survive challenge by the beneficiary.

@FridaRose I suspect that if a trustee 'invested' a beneficiaries inheritance in NFT. bitcoins or any other courageous investment than the beneficiary if in England might ask the trustee to make good for the original sum plus a reasonable investment return if there were any losses.

@FridaRose

Unpopular opinion. £150k is really not a lot and hardly forever life changing.

If you keep it then by the time he buys a house at around 20 yo - £150k won't be worth much.

I'd invest. Where? Depends. Bitcoin worked well and I bought a house with the "gamble" winnings last year, but I think it's past it's heyday now (i bought into it realllly early).

I'd invest into NFT.

As a small part of a balanced portfolio there might be the option to invest in crypto but no way should significant amounts be put into it, in the same way that he shouldn't just spend it all on lottery tickets. It should be invested but index funds would be perfectly adequate and provide good returns without the insane volatility or level of risk.

I hate it when parents use their kids trust funds to pay for things they should be paying for themselves

HRM Define 'things they should be paying for'...

Should trust funds be used for school uniform or food? No.

Driving lessons (that lots of parents can't afford, and therefore the child would need to go without or get a part time job)? Why not?

[quote Zilla1]@hazelnutlatte I'm genuinely interested that and inheritence from someone other than you could be put into a discretionary trust and kept form the beneficiary once they turn 18 if you are based in England and Wales? Unless the will specified this then I'm surprised that would survive challenge by the beneficiary.

@FridaRose I suspect that if a trustee 'invested' a beneficiaries inheritance in NFT. bitcoins or any other courageous investment than the beneficiary if in England might ask the trustee to make good for the original sum plus a reasonable investment return if there were any losses.[/quote]

Zilla1 this was on the advice of the solicitor who dealt with the estate and in agreement with the executors- I can only assume that the will was written to allow for this, I didn't know this was an unusual arrangement. We are in England.
If it makes any difference my children were not actually named - it was 'if person x has any children then half of their share will go to them. (Not a direct quote from the will but that was the gist)

@hazelnutlatte thank you. I'm not expert though have a little experience as a lay person. My understanding was that unless the discretionary trust mechanism was stated in the will (and perhaps not even then for a sole beneficiary who want the money from 18) then the beneficiary can seek to access the money at 18 if they want. If you've sought legal advice then you'll be in a better position than me.

Depending on the advice you receive, I would tell him now. I would suggest that he agreed to spend the money now on a flat or deposit for a flat and rent it out. As he can't do this aged 11, it might have to be in your name but it would mean he couldn't easily access it at 18 and would inflation proof it

Buying property to rent out is the worst way to make a return on capital and has the biggest hassle factor. And I say that as a BTL landlord.

@VanCleefArpels

Buying property to rent out is the worst way to make a return on capital and has the biggest hassle factor. And I say that as a BTL landlord.

Agree.

I would tell him now. If he suddenly gets it at 18 he will frit it away. Tell him now and explain the great things he could do with it would be better! It may also be a comfort that someone has left him this money!

This amount won't change his life. It's not a 'never have to work' amount. But even if it was, it's not your job to withhold knowledge of it from an 11-year old.
Your real problem will be where to stash it so that the inevitable and imminent period of high inflation (there's only one thing can happen when a country spends enormous amounts of money it hasn't got) doesn't reduce it to the price of a packet of fags. You're going to look a bit silly telling an 18-year old 'You inherited the price of a house 9 years ago, but I'm afraid it's mostly disappeared...'

A colleague of mine came into a settlement at the age of 18 for an accident she had as a child. I tried to advise her to save some of it and spend some but she was 18 and wouldnt listen to me. She blew all £50.000 in six months mostly on her no good boyfriend. I have stipulated in my will that my grandchildren cannot inherit until they are 25 and are hopefully a bit more careful with money.

@Serenschintte

I asked my DH who has financial qualifications in this kind of thing. He thinks you can’t withhold it from him once he is 18 - it’s theft. He says on the plus side you have a long time to educate him about being wise with money.

This!

Ohhhh no. You can't intercept letters, not for an 18yr old and maybe not even someone younger, unless (perhaps) it's thought to be something illegal.
You need legal and financial advice, both of which will cost you money. Best bet is Citizens advice or a free half hour with a solicitor who deals with such matters. CAB will help you find a list of reputable solicitors who fit the criteria.
They can offer pointers on how to choose the best financial advice for your circumstances.
It will take careful planning if the inheritance is to keep and possibly enhance its value. Make sure to ask about the costs of involving a financial planner before giving any instructions and get absolutely EVERYTHING in writing and emails.

Is the money being left into a trust until he is a certain age. I agree with not letting him know now.

Children's savings accounts pay more than adult ones and there are others which attract a certain amount of government money added on if you save regularly over a number of years.

One of my children came into a lot of money as a young person, and we had to look after it in a trust fund, he has never wanted the money, (its complicated), but he is an older person now, well over 25, he finds it overwhelming to think he has all of this money, he feels that it would complicate his life, so it has been invested with his agreement, its still his but having it sitting in a trust fund was really a waste. It is his whenever he wants it but so far he doesn't show any interest in it. So there is another side to having lots of money, sometimes people really can't cope with it. He might one day though so its safe for him until that day.

OR, is there a possibility that you could buy a property with it (depending where you live and the amount he inherits)?
That would definitely increase in value much much more than any savings accounts or trusts. It could be let to a responsible tenant and he would have the income as well as the rising value of the property.
My OH bought a 3 bed bungalow (very sought after as they have a larger 'footprint') for 603k in 2016 which he sold for 1.18m in 2021. The only thing he did was take out the built in wardrobes.
I think property is definitely the way to go.

@HTH1

I would get it invested for him and then cross the bridge at the right time eg when he’s thinking about buying a house, it would be a great surprise for him.

you can't do this. Unless its in a Trust with its own rules, its his at 18 full stop.....why do people not understand this?

I am slightly staggered that so many posters think it acceptable to lie / withold funds

@OnlyFoolsnMothers

I’d get legal advice followed by financial advice. I wouldn’t give a large sum of money to anyone under the age of 25- and I inherited a few hundred thousands at 20. Look at trusts, maybe portion a sum aside for uni/ driving lessons etc.

Me either. I always wanted a Ford Mustang I would have definitely blown it! Also, I think they may not try so hard academically as they’ll think ah well, I have money so I won’t bother. He will tell everyone and that could attract problems.