How to decide when kids are old enough to inherit
March 15, 2010 2:12 PM   Subscribe

What's a good way to decide the age(s) at which grown children will receive their inheritance?

We're working on our wills. Our kids are young, so if neither parent is alive we'll leave everything to a trust in the hands of the kids' named guardian. When the kids grow up they'll take control of their shares of the estate. Our lawyer informs us that some wills specify that this will happen at a particular age (e.g. 18 or 21) and others that it will happen in stages over more than one year.

We're trying to account for the fact that we cannot predict where our children will be in their lives at these ages. We also recognize that there are positive as well as negative aspects to coming into one's inheritance as young as eighteen.

Right now we're imagining each child receiving half of their share at age 18 and the other half at 21, but this is really a pretty arbitrary notion and I don't like making such a life-affecting decision simply because I lack the basis for making a more informed one.

We'd be very interested in hearing rationales for approaching this one way or the other. In case it makes any difference we're U.S. citizens living in the U.S.
posted by Songdog to Law & Government (30 answers total) 3 users marked this as a favorite
I think it depends how much money this will be--enough to invest, enough to pay for college/grad school with, enough to never work again?

It also depends on your goals for your children and the amount of influence you want the money to have on their lives, as well as the amount of control you want to keep over how they use the money.
posted by sallybrown at 2:18 PM on March 15, 2010 [1 favorite]

I guess part of it would depend on how much of an inheritance they would be looking at. I wouldn't dump anything more than a year of college + expenses' worth on them from 18-21, since it's tempting to blow a lot of money as a college freshman.
posted by craven_morhead at 2:19 PM on March 15, 2010

Personally I think 18 is really young to be handed a lot of money. At the same time, college is freakin' expensive. Maybe you could arrange it so they get enough to pay for college and room & board, then the rest when they graduate?
posted by TooFewShoes at 2:20 PM on March 15, 2010 [4 favorites]

posted by mmdei at 2:22 PM on March 15, 2010 [3 favorites]

I thought I had my act together at 18, then at 25, but I really didn't grow up until I turned 30. In the meantime, I blew through money, took out loans for an expensive master's program in the most expensive European city. Part of the growing up took place when I took a job that I thought I would like and seems cool on paper.

Anecdotes aren't data, but I know a number of former classmates who did the same thing: rushed into a master's program or law school for lack of anything better to do and inability to get a job that sounded cool. I know a number of these folks who are getting second master's degrees in unrelated, more practical fields.

If I inherited money now, I would stick it in an account. At ages 25-27, I only kept $1K in the bank thinking it was all I needed to get by and that the world would soon bestow me with its riches and money was abstract. Naturally, there are those younger than I was that had better sense, but I didn't grow up wealthy and there was no parental inheritance to be had either.
posted by anniecat at 2:28 PM on March 15, 2010

I received quite a large sum at age 18. My mother handled this horribly - gave me a bank card & no inkling of how much was in the account, so she basically trained me to spend & not save. Needless to say, I blew it all by the time I finished college.

The psychology of this is tough to gauge - if you do it at (for example, other arbitrary age) 30, then they could squander their 20s expecting a payout later on. Though at least they will have had to work through their 20's and will understand the value of work.

So I would suggest stages, along with recommendations for how to invest it for the long term & hope that they follow the advice.
posted by MesoFilter at 2:28 PM on March 15, 2010

Can you set up a trust to pay educational expenses, then give them the bulk of it later? If so, I'd pay for college and reasonable living expenses any year they were full-time students until, say, age 25 (they can take time off to travel, go to grad school, etc. and not have to take out student loans). Then I wouldn't give them the rest of the money until 30 or 35. Give them a good incentive to find meaningful work and support themselves as adults should.
posted by decathecting at 2:30 PM on March 15, 2010

*Correction to this sentence: Part of the growing up took place when I took a job that I thought I would like and seems cool on paper [but it's really boring and doesn't pay alot and I don't think I want to leave either because my spouse and I need to be in the area for his job, and I'm used to it and I hate my field anyway...there are a host of reasons why I'm stagnating but I wasn't smart enough not to go into a field that I only knew about abstractly and through internships and I didn't get that I'd change....]
posted by anniecat at 2:31 PM on March 15, 2010

Oh, a suggestion: Why not just start an IRA for them and dump the money into there?
posted by anniecat at 2:32 PM on March 15, 2010

My grandmother gave me a small inheritance that I didn't receive until 25; had she given it to me sooner, I wouldn't have gone so far into debt for school. By the time 25 rolled around, I needed a new (used--as in, my 12 year old car was dying, so I bought an 8 year old one) car; my small inheritance went to that, so that debt has followed me, and made it difficult to save.

I also found it a bit insulting that, though legally an adult at 18, I wasn't trusted with my own money.

So, just another anecdata point.
posted by PhoBWanKenobi at 2:37 PM on March 15, 2010

I live off a trust, and it was setup so that i gained control of it when I turned 25, and even then, it was on the stipulation that i graduated college and was gainfully employed... basically meaning I couldnt just sit back and become a trust fund kid(not that its that much money to begin with, it just supplements my income)

As a result, I had to make sure that i made it through college and that i had a decent job, and in turn I guess I became responsible enough to control the money and not blow it on stupid stuff.

Everyone matures differently, 21 for some, 25 for others, and even still 30 for some... only you can really gauge what your children are like now and how you feel they will be in the future...
posted by Mesach at 2:39 PM on March 15, 2010

My grandparents set up a small trust where the beneficiaries don't get the entirety of their money until unusually late (I think 35?) and I wouldn't really recommend that. The trust administrators haven't always been great at investing the money, the tax implications of interest payments can be complicated (for example, if the trust is based in the US but your kids move to a foreign country once they grow up), and payouts have sometimes been late and/or sent to the wrong address. Plus it's not hard to imagine a situation where the beneficiary loses contact with the trust administrators during the time period when they can't access their money. Not to mention, for every year the trust is around, money from your estate is being paid to administer it. I am (to understate it) not exactly one to blow money and it's just mildly annoying that the trust is there and that someone is being paid to manage it when it's not necessary.
posted by phoenixy at 2:49 PM on March 15, 2010 [1 favorite]

I think the advice to be careful about giving full controll of the money at 18 or 21 is important and should be heeded but I think there is definitely some benefit to being given some (perhaps a small yearly fraction of the sum) starting at age 18.

I say this because if your kids are taken in by their appointed guardian, they may never fully feel like that is their home, no matter how awesome their guardian is. They will be missing the comfortable launch pad (ie free place to live) that most college age kids have.

Also keep in mind that your kids might learn a trade or profession that doesn't require a college degree, so some start up money at 18 could be very helpful to put down security on an apartment or buy a cheap car to get to work.
posted by fermezporte at 3:01 PM on March 15, 2010

I am close to a multimillionaire with three kids under age 13. The parents decided that the kids will get their trusts when they are in their thirties. The reasoning is that by then (hopefully) they are past expensive youthful scrapes, bad business ventures, failed marriages and the like. It'll be a boatload of dough for each of the three, and by their thirties they presumably will better be able to deal with "the shock." (The kids have no idea of how well off the family is.)
posted by jgirl at 3:26 PM on March 15, 2010 [1 favorite]

I've heard it said that you should break it up into 3 stages: Give the kid some inheritance when they turn 18 so they can choose to go to school, some again when they turn ~21-25 so they can again get some help to improve their lives, and then the rest when they're in their 30's because at this point, if they haven't figured it out yet, they never will.
posted by lizbunny at 3:30 PM on March 15, 2010

Our lawyer advised us to do it in stages. I think we have them, should we both be killed in a huge exploding fireball or something, receiving a third at 18, a third at 21, and then the rest at 25.
posted by misha at 3:33 PM on March 15, 2010

Trust, a trustee who you can trust ( no pun intended ) while they are younger, and then not full control until they are perhaps 25.... but this really greatly depends on how financially educated they are and how much money they will be dealing with. If they are well educated financially, and in a good position, access to these funds should not deter them from success - (this is where a good trustee comes in, if you have one). If it's just joe average public-school financial education, and not a great deal of money - I'd say put it in trust and give it to them when they are 21.
posted by TravellingDen at 3:42 PM on March 15, 2010

As a 21 year old I say...

1) Trust controlled by named (and trusted) guardian until 18.
2) Yearly payments of some quantity significant to live off of until 25.
3) The whole shebang at as they turn 26.
posted by phrontist at 3:49 PM on March 15, 2010

I am in the process of doing this with my own family. I recommend waiting until the youngest child reaches 25 before handing out any inheritance. Additionally you could stipulate that a portion of the inheritance could be used for education.
posted by axismundi at 3:51 PM on March 15, 2010

The older the better, I'd say. I got mine at age 17 (with a bit of court help) and used it to pay for my year abroad as an exchange student. That was great! I'm willing to bet it's also not the norm. My sisters, for example, got theirs at age 18 and promptly wasted it.

If it were me, I'd say age 30. "...30?!?" Yup. 30. Maybe even 35.
posted by 2oh1 at 4:07 PM on March 15, 2010 [1 favorite]

We went for a trust fund for each kid under the control of a family member/guardian that we totally trust (different from the physical guardian). Guardian can disburse money as he sees fit for certain types of expenses (medical, education etc.) At age 25, the child becomes a co-guardian so they can learn to manage the money and help decide how to spend it, at 30, the child becomes the sole guardian. (Leaving it in the trust costs some money but it also keeps it out of the hands of creditors and ex-spouses.) I know we thought about a bonus "spend however you want" payout at college graduation and/or age 25 but I can't remember if that went into the will.
posted by metahawk at 4:12 PM on March 15, 2010 [1 favorite]

Best answer: I think you should really be asking yourself "What do I hope my children do with their inheritance?" and then structure it accordingly.
posted by 2oh1 at 4:14 PM on March 15, 2010 [1 favorite]

Do it in installments, starting when they're 18. If you're really worried about it, put an education stipulation- you get part of it at 18 IF it goes to pay for school, if not their payments start at (insert age). I'm currently having to take out student loans (and I'm going to a public university where part of my tuition is paid for by the government- but school is SO EXPENSIVE and it's only getting worse). Instead of using my inheritance to pay my school expenses and then working to save up money, I'm working to pay off my student loans + interest while I still don't have access to my's actually costing me more given the interest I'm paying.
posted by kro at 4:51 PM on March 15, 2010

I like 2oh1's advice.

If we are talking multi-generational wealth, you have a (sort of) responsibility to maintain that for future generations beyond your kids. At least I'd feel that way. If that's the goal, a big-time trust where basically nobody ever gets to touch the principle might be in order.

The smaller the amount from there, the less restriction I'd put on it.

One possible solution that has incentive and restraint built in would be that disbursements are based on percentages- if the funds are sizable enough, the kid has to foot the bill for say 10% of their education through work and saving. For the next few years, the fund pays them (say) 25% on top of whatever they earn. After that, it is theirs.

I would hesitate to set up a scenario where the kid lives like a king, builds up debt, just knowing that the big chunk will come in X years. Maybe hide the true value of it?
posted by gjc at 5:01 PM on March 15, 2010

Make it 30, but prior to that if they submit a business plan to your attorney that has legitimate merit then the money can be invested in their new company.

After starting a business at 25, I could have used all the money I could have gotten but if I'd had access to large amounts of money I might never have started the business in the first place.
posted by thorny at 5:02 PM on March 15, 2010

I have no idea how I would structure this, but I would hope it would come out something like:

- Enough to pay for college + living
- Once graduated college, enough to get on your feet and figure out what you want to do
- The rest at 27
posted by CharlesV42 at 6:29 PM on March 15, 2010

I received access to the interest from my trust, as well as a small portion of it, when I was 18. The lump sum was gone before I was 20, so when I received the remainder at 25, I gave control back to my trustees and have attempted adulthood ever since. There was a separate arrangement for tuition, most of which I luckily ended up not needing.

So I guess all you can do is hope that your kids won't grow up to be irresponsible gitfaces, and make an ironclad provision for tuition payment.
posted by elizardbits at 6:33 PM on March 15, 2010

Response by poster: I really appreciate all the perspectives you've offered. I don't know what the future will hold but I'm not anticipating that there will be a fortune in the balance. The family home is likely to be the principal asset, and that can't be used for tuition unless it is sold or mortgaged by the trustees. But the will ought to cover various possibilities, and you've helped me to identify them.

I've marked 2oh1's answer best because it surpised me, and because it seems obvious after someone else has spelled it out for me. It's a great suggestion of how to think about this problem.
posted by Songdog at 8:35 PM on March 15, 2010

I think that there's a lot that you can do as a responsible parent to head off the possibility that they receive their inheritance and promptly squander it on cocaine and hookers (or whatever scenario you have in your head).

I was pretty financially responsible when I left home at 17. Maybe part of that's just me, but part of it was definitely that I learnt about saving and budgeting from my parents. I've even seen a blog advocating giving your kid some of their pocket money to spend, some to save and some to invest.

So you could see it the other way round: decide when you want them to receive the money and then do your best to bring them up so that they will be financially responsible by that age. Clearly the appointed guardian (in the case of your death) would have to be on the same page about it all.
posted by emilyw at 1:50 AM on March 16, 2010

I think you're getting a lot of good advice. I have some experience with getting too much money, too soon, and generally agree with the tenor of the board.

Some personal thoughts:

1) in some ways, I resented the way money occasionally rained from the sky, because it made it very hard to think about budgeting and saving responsibly. It meant a lot to me to be living off of what I earned, but it's harder to make that meaningful when you random-periodically get a $10,000 check.

I was having a conversation last week with a friend about structuring finances for college kids, and, based on a lot of anecdata, came to the conclusion that 4-6 month lumps encourage budgeting; weekly or 4-year lumps don't (the one because you never have to worry about next week; the other, because the time when the money runs out is kind of beyond the even horizon.)

2) Be very thoughtful about "paying for education expenses". I got my college paid for. . . but I was too young and immature, and ended up doing essentially an entire second pass starting in my late 20's. If I'd had a bit more freedom, I'd have left college earlier, and just done the one pass later. That would have been both happier and more financially responsible. I'm not the only person I know in that situation, too; and note the comment above about kids going into semi-random Master's programs because they don't know what to do with their lives, and then going back for something practical and appropriate when they *do* know.

So my advice about education is to make sure you don't tie it to a particular age. Giving a young person the freedom to live as an adult (supporting themselves) BEFORE making all their educational decisions is one of the best gifts you can give them.
posted by endless_forms at 8:40 AM on September 29, 2010

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