View Full Version : DD unexpected inheritance
Gardenarian
6-10-16, 6:06pm
My daughter was left a large amount of money in trust by her grandmother. We were unaware of this until recently. She comes into the money, no strings attached when she is 21.
DD is a very sensible and responsible kid, but this seems like too much for someone so young. There is no way, legally, that we can put any restrictions on it.
DD is aware that her grandparents have set up a college fund for her, but she works - she will be baby sitting and working as a camp counselor this summer - for her spending money.
We haven't told her about this, and the whole thing is uncomfortable. I don't want to say the exact amount, but it's enough to get into a great deal of trouble.
Our plan is to take her to a financial planner sometime before she has access to the trust. They can tell her the best way to invest it - I hope.
We haven't told her because we want her to be planning for a productive and independent life. Knowing you will need to support yourself is a great motivator. I'm not sure how she will respond to knowing that she actually won't have to work (if she doesn't blow the money.)
What would you do in this situation? She'll be 21 in 4 years.
Thank you!
Wow. I understand your concerns. My DD's now ex-boyfriend (they just broke up) inherited a really good sum of money from his mother who passed away with cancer and his grandmother, who died shortly after.
He took off for a month-long Costa Rican trip, bought a lot of music equipment (he's a DJ part time) and he is no longer working. And he's in his late twenties. My DD recently moved out and she took her mattress with her. She had given him several weeks' notice to buy a bed for himself, but he never did, and so he slept on the floor the first night after she moved. His rationale for not having bought a bed: A mattress costs $1000 and for that he can go to India for a month. So.. point being.. young people do not always think rationally about money.
I would encourage you to take her to that financial planner. By now, she's probably learned a lot from you and you can only hope and pray it stuck. She will probably blow some money, but not sure that she will "get into trouble."
Does she have to know about it now? Can you withhold the information until she's 21? I would consider doing that as well.
Scenario 1
She is responsible and decides to live off the interest and never work. She will be like mr. money mustache immediately which is not a bad thing, right? Most of here like that guy.
Scenario 2
She spends it foolishly and then has to get a job like she would have had to do anyway without the gift.
Scenario 3
She is hyper responsible and works all the time while not spending the gifted monies.
Scenario 4
She spends it all and also gets into legal or similar trouble and then has to get a job and get out of trouble ...
Only the last one is scary.
And it's a possibility for anyone really.
I wouldn't worry too much.
I'd take her to a financial counselor now so she can start learning what to do.
Then I'd back off and not bother her with my worries.
Too much helicopter parenting will just drive her away from you and/or cause her to lie to you about how she's handling the money. And really, once she's 21, it's her business.
Since you know about it, you can start to discuss finances in a general way and ensure she is at least learning what she needs and is thinking about the future and her goals and such. You can always talk about the lottery and how you would handle it or hope she would handle something like that. Give her various scenarios to think about just like the above poster. If she is thoughtful, giving her information now to think about will give her some lead time. The worst thing is to just dump it on her when she is 21.
Williamsmith
6-10-16, 8:58pm
I would think the longer you wait to tell her, the more you will inadvertently imply that you didn't trust her enough to tell her about it right away. She might surprise you with her maturity, after all she is your daughter and you have spent a lifetime preparing her for important decision making.
I would think the longer you wait to tell her, the more you will inadvertently imply that you didn't trust her enough to tell her about it right away. She might surprise you with her maturity, after all she is your daughter and you have spent a lifetime preparing her for important decision making.
+1
My daughter recently inherited a large pile of capital from my mother-in-law, who left her enough that she'll not need to worry about tuition or working/housing during college/grad-school/post-doc work. It's also enough that she could simply drop out now, buy a house, and almost be able to live off the interest of the remaining capital. She's 19 now.
I've had her manage her college fund since she was 12 or so, and our family finances are no secret to her.
She hasn't altered her drive to succeed academically one bit, nor is she reacting to the news that she can now kick back and be Lara Croft, Tomb Raider if she wants.
Probably because we raised her carefully, to understand money/finance/investing/planning.
It didn't occur to us to hide the inheritance from her, though I am tasked with holding it in trust for her until she is 25, dispensing it for her needs as I see fit. Her first offer to me upon hearing of it was to ask if she could pay back the loans I took out to pay for her first two years of school...
I agree that you should start, if you haven't already, having conversations about her regarding finance, frugality, life planning, etc. Then, once you've got an idea of where her head is at with regards to money, toss into the mix that she will probably be getting some money from her grandmother. She will probably ask questions at that point, or shortly thereafter, for details.
I agree with the others that this needs to happen sooner rather than later. And remember, she's never supported herself at this point, so she should be forgiven for having naive ideas about how much life costs. If you're comfortable with it consider showing her your family budget, to emphasize the cost of things she probably hasn't ever thought about like housing, health insurance, taxes, etc. To a teenager a million dollars (or whatever, heck to a teenager $100,000 will likely seem like a ton of money) will undoubtedly seem like boatloads of money. So teaching her that your family drops $80,000 per year (or whatever) for your current lifestyle and that that means a million dollars would be gone in only 12 1/2 years is probably going to be an eye opening experience which can lead to a discussion about investing to make it last longer, etc.
DD was around 9 when she was left a healthy sum of money by my brother. If she were older, I would have counseled her from the start, sat her down and explained the blessing she had received. As it was, I watched over the funds so that it would pay for her higher education and expenses which it did. As mentioned, I don't think any of us gain a real appreciation for how finances and budgets really work until we have some life experience.
I would think the longer you wait to tell her, the more you will inadvertently imply that you didn't trust her enough to tell her about it right away. She might surprise you with her maturity, after all she is your daughter and you have spent a lifetime preparing her for important decision making.
+2
Talk to her and show examples SLOWLY about wise management and inappropriate management and who to talk to about her good fortune. Bad friends can have a bad influence if she doesn't learn who and what is appropriate and soon.
Has she ever had a job and earned her own money? Will she have a job this summer? If so, then I think it's a great opportunity to have very regular conversations about any number of finance topics. For example:
How income taxes work
How to track your income and expenses (daily)
How to look at your spending in a values-based way (needs vs wants)
Financial goal setting (short term, medium term, long term)
Basic investing and the power of compound interest
Risk management (aka insurance)
Charitable giving (if that's part of her value system)
If she's not working a job of some sort this summer, then perhaps you'll need another plan about how to make these topics more applicable. Maybe she could be part of weekly family finance meetings where she learns about the household income and expenses and gets to make suggestions and practice problem solving. Although you'd have to be pretty comfortable with potentially spending more than you might like for a few months until she gets the hang of how budgeting works and fixed vs variable expenses.
Good luck! Don't fear this. Your daughter is being given a great opportunity and there is a very high probability that she will do amazing things as a result. A few decades of awesome parenting will do that for a kid!!! :D
ToomuchStuff
6-11-16, 11:08am
My first question would be in the grandmother still alive or are condolences due? If she is still alive, then part of your fears should be discussed with her. If not, then who is in charge of the trust currently and how is it setup? I also think your daughter should not be in the dark about it as those who don't receive and education about money, in my past experiences, do worse then those who do. If you don't think your daughter is mature enough to have a conversation about money now and she is getting ready to work, I would be self reflecting as you should be able to talk and need to about taxes and such.
Money provides opportunities, and if she is going to do something dumb, wouldn't you rather it be now, when she is a minor and you can control her? Sudden, non discussed wealth, tends to come and go the way it does with lottery winners. Those that know (two friends who had a million dollars in trust for them before their first birthday), and were raised talking about it, do better. (one owns/runs a bank, the other works his dream job and travels watching NCAA Wrestling which his family was involved with) Don't let fear be your guide, let open discussion be.
iris lilies
6-11-16, 11:20am
You are getting good advice here and I have nohing to add other than to ditto the idea you should start talking to her about it.
My cousin has a great deal of money and one child who just graduated from college. I often wonder how he is talking to her about finances. I suspect she has no idea how much it is. I dont know the amount but its at least $10 million and likely up to $20-25 million by now. He himself had a trust fund and it was interesting that even though he was from working class parents, he adopted the old money role of driving old German cars and shopping at thrift stores and living in modest houses. He is really tight with money!
Just last month he showed me a $ bill that my parents gave to him when he graduated from college. They told him not to spend it foolishly, knowing full well he would not, haha. Well, he saved that bill all of these years and asked me to give it to his daughter with a card saying "dont spend it foolishly!" Haha. Our family is funny about money.
His daughter was raised this way and observed her parents going out to work every day, includng her dad sometimes pushing a broom in his janatorial service, so she should have modest expectations.
I know what the OP means by enough money to get into trouble. My friend who is 67 years old and with a partner has a small Social Security check. She scrambled around to get work and had some small jobs. Then, she inherited around $225,000 which is IMHO a good amount for her. If it were more, she would likely go crazy and spend it all on Italian real estate or some such insanity. But this amount can make a difference in her life without obligating her to more thngs she cant afford.
Teacher Terry
6-11-16, 7:00pm
It is too bad that she did not stagger the $ from 21-30. That gives kids a chance to grow up more. I would educate her on $ and hope for the best.
Simplemind
6-11-16, 10:55pm
It is too bad that it isn't staggered. There are many reasons for that but it is out of your hands. I totally agree that the conversations about how to handle money should start immediately. I started my kiddo very young and he did his own banking almost once a week for years. He got comfortable earning it, saving it and learning how it worked. I bought him several age appropriate books and he now has his own financial planner.
He has seen me deal with the finances of my parents estate and asked questions about what future responsibilities he would have. That was perfect timing because we were just getting ready to sit him down along with my husbands daughter to talk to them about how our estate will be split since this is a second marriage for both of us. My son will be coming into a substantial amount from my side and his father's side. It is really important to me that he be prepared for that. None of our kids are planning on having kids so the buck stops with them..... that provides a lot to think about when you are leaving it.
Gardenarian
6-12-16, 3:39am
Oh, thanks for all your advice!
Yes, grandma is gone and the trust is set in stone.
We have talked about money a lot; there is some $300k in her college fund and she has been thinking of how she can get a great education and still have money to explore (the world, herself, different careers.) So the idea of having money isn't an entirely new thing.
I do agree about the trust issue and am not comfortable hiding things from her. I will broach the subject soon in a kind of off-hand way "Hey, it turns out grandma left you more than we thought!" and try to avoid details for the moment.
I like the idea of "what would you do if you won the lottery?" and those sorts of questions. That should get the ball rolling.
My first thought was "so you need to read MMM's blog. From the beginning."
She is currently working a little, but has little time outside of school work (we homeschooled the first year and a half of high school, so she is doing 4 years of work in 2.5 years.)
She really likes to give money away, since she was a little kid. I remember her at 8, giving ALL her birthday money to a charity to save feral cats.
This is a very creative, artistically talented, musically gifted, smart kid (ENFP) who pretty much loves everybody and is all puppies cupcakes and sparkles. An absolute love, but add a pile of cash to that and I'm not sure what happens.
She's always been a straight arrow; perfectly honest, no partying, has really terrific friends. Of course, a lot changes when you're on your own.
I'll keep you updated.
Iv'e been thinking about this off/on since I read it yesterday.
What about a blend of ideas. She is currently 17?
Tell her now she has an inheritance coming to her at age 21. Don't tell her the value. Ask her to think about what she would like to do with the newfound money.
Invest/manage it.
In 2 years (halfway), tell her the full value. That gives her 2 years still to think about what that value can do for her and/or what she can do with it.
I think the 2 additional years for maturing is a good thing.
I was a very different 19yo than I was a 17yo.
food for thought!
DD recently moved out and she took her mattress with her. She had given him several weeks' notice to buy a bed for himself, but he never did, and so he slept on the floor the first night after she moved. His rationale for not having bought a bed: A mattress costs $1000 and for that he can go to India for a month. So.. point being.. young people do not always think rationally about money.
Hmmm. If one values experiences over possessions (as many of us here profess to do) wouldn't an India trip be the desirable decision? Plenty of time to get a new bed later...when he has a 50-something back like me.
Gardenarian, I'm on the side of those who favor helping her learn how to use the gift she will receive and how to take care of it. My only point with the comment above is to show that she may decide there are priorities outside of your experience that would provide her with real value. It might not be ridiculous to talk to her about setting it up as an annuity, paying her a monthly amount that she can count on to help pay bills, travel, whatever until she is a little older and could then get full access to the principle.
Love your signature, Gregg! Back to the topic
Hmmm. If one values experiences over possessions (as many of us here profess to do) wouldn't an India trip be the desirable decision? Plenty of time to get a new bed later...when he has a 50-something back like me.
True, but I was considering the whole situation, where he already has had a lengthy international experience and a couple of other less exotic but costly experiences with the money; and one experience he isn't having at the moment is a job. And the choice to not buy something basic like a bed.. I think almost everyone has one, and he can certainly afford both a bed and a trip if he wants one at this point. Those particular choices, taken together, send up a red flag to me.
As far as my initial thought that the OP could withhold information about the money... you guys are right. Not a good idea.
DH was just citing a statistic that 60% of 1st generation inheritances are squandered, and by the time it gets to the 2nd generation, that statistic rises to 90%. So I think the OP has a right to be a little concerned. I've seen money squandered by my own family--people who should have known better. This may sound off-script for me, but I do think the only people who really value money are the ones who work for it. There are exceptions, of course, and I know many of you guys have inherited money and done prudent things with it, but as a rule...
It's interesting your statistics, catherine, about people squandering money that they inherit. I can remember my father commenting on more than one occasion (usually when we were visiting relatives and hearing a story about some acquaintance who had blown a lot of inherited money on fast cars or a fancy house or whatever) that people who inherit money should be prudent with it (or something to that effect.) and that people who earn it themselves should feel free to spend it however they choose.
I agree with prior posters about talking about long-term goals and using the money as a tool. Find a financial planner (maybe you already use one) that charges fees based on market value, not trades or commissions. Cultivate a relationship among all of you. I would talk about using a small amount as "splurge" money every now and again, but to keep in mind her long-term goals. Also, depending on the amount, talk about pre-nuptial agreements when/if she marries. Money can be a blessing and a burden.
True, but I was considering the whole situation, where he already has had a lengthy international experience and a couple of other less exotic but costly experiences with the money; and one experience he isn't having at the moment is a job. And the choice to not buy something basic like a bed.. I think almost everyone has one, and he can certainly afford both a bed and a trip if he wants one at this point. Those particular choices, taken together, send up a red flag to me.
My choice to grow out my hair and own nothing I couldn't carry in my pick-up sent a lot of red flags flying in my parents house (and even more in my gf's parents!). A "real" bed - by all inner-spring, pillow top, consumer society standards - was not on that list for a long time. The fact that I had experienced several different places did not satiate my desire to travel and experience more. If anything the experience of travel left me even hungrier for more. I didn't have a nest egg so had to do it on the cheap, but it was worth every second of sleeping on the ground and washing in a river. Jobs were whatever I could find that would pay me enough to eat, drink, be merry and then move on to the next destination: not career moves. Almost everyone I grew up with had a bed in their 20s. Considerably less people, at least in my circle, trekked in Nepal or had tea at Angkor Wat or loaded a cargo plane in exchange for passage to Nairobi. Now that I'm in my 50s people still ask what it was like to do that, but I've never heard anyone comparing notes on what kind of bed they owned when they were young. I don't see any reason to think the young man in question is making poor decisions based solely on the criteria of traveling vs. staying home and getting a job.
ApatheticNoMore
6-15-16, 4:23pm
I just took my bed from my parents house (and it was older than me - could have been the bed I was conceived in) and slept in it for years and even a while after it was so broken down and sagging it caused back pains. Until I determined I probably should actually do something about the problem of waking up in pain - which might be due to the bed. Of course it was! Though it was good for years after I moved out until it reached that point.
I neither traveled nor had a new bed when I was young.
Just to play devil's advocate, why would it be a big deal if someone chooses to blow an inheritance? Its not money they struggled to save up. I would probably encourage my kids to save and invest, too, but if they decided to go on a round-the-world cruise instead, why would that be worse? Its a gift. If I gave them a rare vase and they planted an avocado tree in it, who says that's wrong? My kids won't get any nine digit windfall that would allow the next four generations to live a life of Riley, but they will probably get a few bucks someday. I'm starting to seriously think that I might earmark part of that as fun money. Set it up so the only thing that one account could be used for would be travel or show tickets or whatever they consider fun and exciting. I would a lot rather give them experiences than antiques. YMMV
iris lilies
6-15-16, 4:38pm
Just to play devil's advocate, why would it be a big deal if someone chooses to blow an inheritance? Its not money they struggled to save up. I would probably encourage my kids to save and invest, too, but if they decided to go on a round-the-world cruise instead, why would that be worse? Its a gift. If I gave them a rare vase and they planted an avocado tree in it, who says that's wrong? My kids won't get any nine digit windfall that would allow the next four generations to live a life of Riley, but they will probably get a few bucks someday. I'm starting to seriously think that I might earmark part of that as fun money. Set it up so the only thing that one account could be used for would be travel or show tickets or whatever they consider fun and exciting. I would a lot rather give them experiences than antiques. YMMV
Blowing it sometimes means literally spending it on blow. Unlimited drug money has proven to be a bad thing for many people. We watched a 40 something year old friend ruin his life with drugs and die when he got few hundred thousand in cash plus Califrnia real estate. He always did drugs prior to the inheritence but he had to work a dn kept it under control.
but a round the world cruise is not a bad way to apend it, agreed.
iris lilies
6-15-16, 4:42pm
My choice to grow out my hair and own nothing I couldn't carry in my pick-up sent a lot of red flags flying in my parents house (and even more in my gf's parents!). A "real" bed - by all inner-spring, pillow top, consumer society standards - was not on that list for a long time. The fact that I had experienced several different places did not satiate my desire to travel and experience more. If anything the experience of travel left me even hungrier for more. I didn't have a nest egg so had to do it on the cheap, but it was worth every second of sleeping on the ground and washing in a river. Jobs were whatever I could find that would pay me enough to eat, drink, be merry and then move on to the next destination: not career moves. Almost everyone I grew up with had a bed in their 20s. Considerably less people, at least in my circle, trekked in Nepal or had tea at Angkor Wat or loaded a cargo plane in exchange for passage to Nairobi. Now that I'm in my 50s people still ask what it was like to do that, but I've never heard anyone comparing notes on what kind of bed they owned when they were young. I don't see any reason to think the young man in question is making poor decisions based solely on the criteria of traveling vs. staying home and getting a job.
see, I had the same reaction. If one doesnt have back problems, who needs a "real" bed in your 20's 30's 40's etc. and $1,000 is a ridiculous price to pay anyway.
I had a twin mattress on box springs the floor up into my 30's. It drove my mother batty, but I was saving momey. i liked cash not bedroom furniture. actually I DID go to Asia rather than spending money on a real adult type bed.
I would think the longer you wait to tell her, the more you will inadvertently imply that you didn't trust her enough to tell her about it right away. She might surprise you with her maturity, after all she is your daughter and you have spent a lifetime preparing her for important decision making.
I was thinking this one - my daughters would have been livid (especially the younger one) - and I would have been allowed zero input at the point in time I would have wanted it the most.
see, I had the same reaction. If one doesnt have back problems, who needs a "real" bed in your 20's 30's 40's etc. and $1,000 is a ridiculous price to pay anyway.
We didn't get a real bed until our 30s, when my wife was pregnant and demanded a "real bed", and her concern was mostly that our futon allowed our pack of Basset Hounds easy access to the bed, and they were bed-hogs.
I still prefer futons, sleeping in hammocks, or sleeping on the ground.
ToomuchStuff
6-16-16, 10:24am
Just to play devil's advocate, why would it be a big deal if someone chooses to blow an inheritance?
As a person outside the situation, it is more a self reflection that their values and yours differ. Where it becomes a big deal, IMHO, is situations where it was fraudulently obtained or promises were made to the person that left the inheritance.
Gardenarian
6-16-16, 10:10pm
I agree, it's her money, it wouldn't be a big deal if she spent it. Not if it was on travel, or a cause she believed in, or charity, or just living large for a few years (the last is unlikely, but possible I suppose.)
We've had some preliminary conversations about this, and she says she'd like to go to school abroad. But she also wants to get a real job, as soon as she can. Just because she likes to work with people.
I do worry about drugs. It seems like a surefire way to wreck the rest of your life. My niece had a smaller trust fund and a lot of it went up her nose. She dropped out of college and never went back. She spent the last of her money on a huge, tasteless wedding for a marriage that lasted a couple months. She now works as a bartender in a Hooters- type place. Maybe if she hadn't got the money she would have stayed straight.
Then again, she was always kind of stupid.
Maybe having money just enhances the qualities you already have
BTW, I don't have a real bed - just a very thin futon on a piece of plywood. It's best for my back.
catherine
6-16-16, 10:55pm
BTW, I don't have a real bed - just a very thin futon on a piece of plywood. It's best for my back.
Haha.. OK, OK, not everyone needs a bed! Maybe I was supersensitive because my mattress breaks my back and we JUST splurged on a half-price Memorial Day special and paid $347 for a queen mattress to replace The Grand Canyon.
I feel I'm also sensitive to the fact that the inheritance often comes from people who scrimped and saved and sacrificed to put it in the bank, and then often those who didn't have to do anything to earn it wind up not valuing it in the same way, Yes, they can spend it all on trips or cars or drugs or mattresses. It's just money. When you're dead, what do you care what your heirs do with it? But it reminds me of the movie--I think it was a Steve Martin movie where a man comes and presents him with his whole life savings, not knowing Martin had made a million dollars. So Martin says, "Thank you very much! I already have a million dollars, so I can blow this all on hats!"
I think that your daughter will learn more from you and the way you have lived your life than she will learn from a financial planner. Planners can tell you about asset allocation, the long term total returns from various classes of investments, tax rates and other technical stuff but, the power of your personal example is bigger than that of a planner because it is such a big part of the child's experiences. If you have spent money intelligently and been able to meet your personal goals, I think your child is a lot less likely to spend money in a wasteful way. She might spend it differently but, she may think about what she does if she has learned that from her parents. It's a good time to reflect on where your money went and how you felt about the result.Teaching young people about managing money is really about relationships more than numbers. Just a thought.
Given what you said about her being generous, you might also want to have some semi-philosophical conversations with her about what the appropriate conditions are for sharing one's abundance with others. Because she is probably going to have friends find out about the money at some point, and at some point someone will ask her for a loan or an outright donation/gift. She needs practice in setting healthy boundaries. And choosing the right people to surround herself with. Many very smart people get this aspect of their wealth management horribly wrong.
Given what you said about her being generous, you might also want to have some semi-philosophical conversations with her about what the appropriate conditions are for sharing one's abundance with others. Because she is probably going to have friends find out about the money at some point, and at some point someone will ask her for a loan or an outright donation/gift. She needs practice in setting healthy boundaries. And choosing the right people to surround herself with. Many very smart people get this aspect of their wealth management horribly wrong.
Excellent advice. When the megamillions or powerball gets big enough I always buy a ticket. (yes, I know it's stupid, but I only buy one. And, hey, you never know...) People always think I'm joking (but I'm dead serious) when I say that if I check my ticket and it's a winner I will be chucking my iphone in a trash can, heading to the airport, and calling SO to let him, and him alone, know where I'm going so that he can meet me there. Once we get there I will be closing my facebook account and no one will be able to come out of the woodwork from my past/present and beg for money.
Gardenarian
8-31-16, 11:34pm
Well, dd has said she doesn't really want the money. She would like to arrange for a small allowance to be given to her, at least until she's 25. She wants to work, and do a gap year backpacking on the cheap like the other kids.
We'll meet with her financial advisor soon and see what the options are.
Gardenarian
8-31-16, 11:37pm
Oh, and no one scrimped and saved for this money. It comes from the selling of a large ranch that had been in the family for generations. Probably originally stolen from natives, more's the pity.
sounds like it is all going to work out fine then. Especially the fact that she doesn't even want access to it until she's at least 25. A very rational suggestion on her part and an indication that she has a good head on her shoulders, which suggests that her parents have probably done a good job...
Oh, and no one scrimped and saved for this money. It comes from the selling of a large ranch that had been in the family for generations. Probably originally stolen from natives, more's the pity.
Does your daughter have a strong sense of social justice? If so, it might be interesting to look into the history of the ranch, and maybe find a way to give some of the money back to the people/places her fortune came from.
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