Children Inheriting Large Sums of Money

[Anonymous]

I will start by saying that I know this is in the category of first world problems and that I should be grateful for this, so please, I am well aware of that but still very concerned and wondering what others have done in similar situations.

To greatly simplify - I have an elderly relative who I would wager money has a severe personality disorder. She is impossible to deal with and has alienated the entire family. She never married. She and my mother are sisters and are enmeshed - for lack of a better word. For this reason, trying to maintain a relationship with my mother has meant having some contact with elderly relative.

Elderly relative wants to leave large sum of money to my children. Originally she had drawn up a document that placed another distant relative - who neither she nor I communicate with - as custodian of the money until my children turned 18 - at which point my children were to gain unrestricted access to it. I was very upset by this. First, I was worried about the ramifications of such young adults getting that much money all at once. Second, I was upset at having basically a stranger in charge of it both because I don’t know whether the person is responsible and because I was worried about how all of this would interfere with my relationship with my children. While I tell myself that I will raise them responsibly and to be good people, I also feel that you never know and 18 is very young. Why listen to mom telling me to study hard when they know they have a pot of cash waiting?

Additionally as is probably evident, elderly relative and I have a lot of bad history and I can’t shake the feeling that she is doing this - knowing I am opposed to it — as a way to reach out from the grave after she dies and still interfere in my life. I have begged her to change it into a more sensible Trust or even better to leave it to someone else entirely, but she refuses and tells me I am “stupid about money” and don’t know what I’m talking about.

Again I am well aware of the absurdity of this situation, but advice? Am I way off base in my reaction to this? Has anyone been in this position? How have you handled?

[Anonymous]

Keep in mind this inheritance may come with strings attached, and that those might be a lot more onerous than the risk of your kids making a hash of things. Most likely you are signing up for years of beck-and-calling, with threats of yanking away the purse strings!

So accept and refrain from criticising or kow-towing. It may turn out that your kids end up with nothing anyway.

[Anonymous]

It may not even come to pass. I’d stop fighting it. Maybe Relative will in the end leave it to the Campaign to Elect Trump Emporer

[Anonymous]

Is your relative planning to tell the children? If so, then just make it clear to them as they grow older that nothing is guaranteed.

[Anonymous]

Anonymous wrote:Is your relative planning to tell the children? If so, then just make it clear to them as they grow older that nothing is guaranteed.

Yup. Maybe save in a Roth IRA and not a 529, but that's about it.

[Anonymous]

Thanks all.

My kids are very little and relative is nearing 90, so it’s unlikely they’d be old enough to understand for quite some time and unlikely she’d be able to do much purse string holding with them.

I know anything could happen but knowing her as I do, I’d be shocked (and at this point delighted) if she left the money to anyone else. So I’m trying to plan for the event.

[Anonymous]

I inherited a lot when I turned 18. My father offered to manage it for me. Relieved, I said, "Okay!" and skipped off into the sunset. He set me up with a monthly allowance for the first year, and paid for college for me. Then the second year he gave me a a semester allowance, then a yearly allowance.

[Anonymous]

Anonymous wrote:I inherited a lot when I turned 18. My father offered to manage it for me. Relieved, I said, "Okay!" and skipped off into the sunset. He set me up with a monthly allowance for the first year, and paid for college for me. Then the second year he gave me a a semester allowance, then a yearly allowance.

Thank you. This helps. I think I just keep reading horror stories of kids blowing it all, etc. Having college paid for would be wonderful for them.

[Anonymous]

Anonymous wrote:Thanks all.

My kids are very little and relative is nearing 90, so it’s unlikely they’d be old enough to understand for quite some time and unlikely she’d be able to do much purse string holding with them.

I know anything could happen but knowing her as I do, I’d be shocked (and at this point delighted) if she left the money to anyone else. So I’m trying to plan for the event.

Talk the situation through now with a financial adviser -- if you don't have one, find one (sometimes banks will give financial advising services for free to longtime customers, so ask!). Try to create a relationship now with an adviser who has some experience in wills and trusts and who will still be around in the next few years when your relative dies.

You can't dictate the instrument the relative uses, but you can at least let a financial adviser know what's up and ask what the adviser thinks. It sounds as if your relative will not be open to, for instance, working with you to identify a better trustee than this other, distant relative, but let the adviser likely has heard similar scenarios before, and can help you think it through. It can be pretty reassuring to hear that other folks have had similar experiences and things turned out OK.

It's entirely possible that the other relative/trustee would turn down the trustee role anyway. If that person says yes to being trustee before the fact, but after your relative dies, doesn't want the job, there are mechanisms for changing trustees, possibly to someone who will be much easier for you to work with.

Don't wish away the money, though. It is SO good to know there's money for college tuition -- for that, above all else. College is so freaking expensive now that everything you can set aside for it is good.

[Anonymous]

Are you at least cordial with this other distant relative? Is this other relative a reasonably decent person? If so, perhaps you can convince this relative that it would be best if this money was placed in a 529 for the benefit of your children.

You can then take the money you were going to spend on their college and gift it to them at an appropriate time (perhaps help with the downpayment on their house) or, alternatively, set up 529s for their children with it.

[Anonymous]

Anonymous wrote:Are you at least cordial with this other distant relative? Is this other relative a reasonably decent person? If so, perhaps you can convince this relative that it would be best if this money was placed in a 529 for the benefit of your children.

You can then take the money you were going to spend on their college and gift it to them at an appropriate time (perhaps help with the downpayment on their house) or, alternatively, set up 529s for their children with it.

No, we are not cordial. I have tried to suggest 529s and various other things, as has an attorney, but she is convinced that it is all just a scheme by me to “steal” the money. It’s just impossible, and I get so depressed and hurt by it when I think about it.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Are you at least cordial with this other distant relative? Is this other relative a reasonably decent person? If so, perhaps you can convince this relative that it would be best if this money was placed in a 529 for the benefit of your children.

You can then take the money you were going to spend on their college and gift it to them at an appropriate time (perhaps help with the downpayment on their house) or, alternatively, set up 529s for their children with it.

No, we are not cordial. I have tried to suggest 529s and various other things, as has an attorney, but she is convinced that it is all just a scheme by me to “steal” the money. It’s just impossible, and I get so depressed and hurt by it when I think about it.

I misunderstood. You meant cordial with the relative she has as a custodian. It’s not that we are cordial or not. It’s that I haven’t heard from him in 25 years. I don’t really know him at all. He’s got three kids of his own so I’d hope he would understand, but I just don’t know.

[Anonymous]

Anonymous wrote:

Anonymous wrote:I inherited a lot when I turned 18. My father offered to manage it for me. Relieved, I said, "Okay!" and skipped off into the sunset. He set me up with a monthly allowance for the first year, and paid for college for me. Then the second year he gave me a a semester allowance, then a yearly allowance.

Thank you. This helps. I think I just keep reading horror stories of kids blowing it all, etc. Having college paid for would be wonderful for them.

Them blowing it depends on how they are raised. Are they raised to mostly save but sometimes indulge? Are they raised to value material things or content of character? Do they feel like they can get money any other way by having it given to them? Do they know how to work? Were they taught how to budget? These are all things you are in charge of molding within them.

[Anonymous]

On the 95% chance your kids turn out well (it sounds like you're a very thoughtful and invested parent so strong odds that they will) having a giant chunk of change could actually be wonderful for them. They can pursue undergrad and graduate degrees without a worry, they can select careers they care about like teaching and non-profit work without worrying about their salary's impact on their own kids lives, they have a mental safety net and can take some well calculated risks that someone without a financial cushion couldn't afford to take.

Yes there is a 5% chance the money will make them lazy and they'll blow it on stupid junk. Under any circumstance they will likely spend some of it on frivolous things and you'll have to bite your tongue that they're "wasting it". But try to appreciate all the wonderful things this can bring to them and while they're going up keep an open dialog about the values / money / hardwork / how lucky they are to have this and how smartly they can use it etc. Odds are what you role model will be what defines their future.

[Anonymous]

I would also think more about how you teach your kids about money and money management now. Because that will lay the foundation for how your kids interact with this inheritance, if and when it comes.