Adult children inheritance

[Joylush]

I have two adult children, twins no less. The daughter is extremely responsible with money. The thought of leaving money to my son makes me queasy.

How do you handle potential inheritances in a case like this? I know the rule of thumb is to split equally so as to avoid no hard feelings. But my two will potentially inherit quite a sum. The thought of it being wasted and ill spent, well, makes me queasy.

I'd honestly feel better leaving my son's portion in control of his sister just to protect him from himself. But I don't want to cause grief between them either.

I know there are worse problems to have but the pain is real.

[Bamaman]

You could always leave the son's half in a Special Needs Trust that pays specific life expenses stipulated by you.

The trust funds are isolated from judgements, unpaid bills, etc. that might be owed--even through bankruptcy proceedings.

Such trusts are to protect the child from blowing all their inherited funds when judgement is not good. It also would take the pressure off your daughter/executor because the terms would be set in stone.

We have a daughter that is untrustworthy fiscally. We plan to setup a Special Needs Trust for her two children as it is doubtful she will ever raise them. We have permanent custody of a 6 year old girl while her half brother lives with his father.

[Joylush]

As I understand it a Special Needs Trust can only be set up for someone with a disability. Perhaps there is another kind.

[GrayHare]

You can set up a trust that releases funds gradually, such as by age. A downside is someone has to monitor that, and if that someone is a family member it could lead to animosity between your son and that family member. If an unrelated party administers such a trust, they will want a fee.

[catman2020]

Quote:

Originally Posted by GrayHare You can set up a trust that releases funds gradually, such as by age. A downside is someone has to monitor that, and if that someone is a family member it could lead to animosity between your son and that family member. If an unrelated party administers such a trust, they will want a fee.

+1

This comment pretty much sums up what I think are your options. I am the Trustee in a situation like this. Trust pays out monthly income to all siblings, but mainly to provide support to two nonworking siblings. It would be a pretty big burden for the sister, but she can bring in an attorney or accountant to help administer it without making that attorney the Trustee. Basically my suggestion would be to get with a well regarded Trust and estate attorney. You can design the Trust to do just what you think is best.

[easysurfer]

The way I look at things is the last final wishes is for the person writing up the will (or trust) not the survivors who will inherit. Thus, have not problem of not dividing all things equally if some have a track record of blowing any money given to them.

[ncbill]

Quote:

Originally Posted by Joylush As I understand it a Special Needs Trust can only be set up for someone with a disability. Perhaps there is another kind.

Sounds like the OP wants a HEMS (health, education, maintenance, support) trust.

Plenty of discussion about those over on bogleheads.

[Joylush]

Yes, I do need to find a good estate attorney. I believe what I'm looking for is a Spendthrift Trust. I'll need one for my adult sister I help support as well. I guess my daughter could be the trustee as I'd trust her over anyone else.

I need to get over the fact I can't control things from the grave, but it's hard.

Both are turning 27 next year. My daughter is a home owner and has saved over $100,000 in investments and retirement savings. No Debt but the mortgage.

Her brother with a similar income has nothing saved. Just found out the Roth IRA we set up for him as a child and which had grown to $11,000 was liquidated by him. He said to "pay off debt" (not college debt, not car debt...had none of those, credit card debt I assume) and to use in a more self directed way (his words). I don't know what that means but from his Facebook posts I suspect it's related to bitcoin. Same kid who whines about not being able to afford car repairs. Guess I'm just really disappointed. It's not like they weren't both taught equally.

When he reported that it felt good to have paid off his credit card debt it was all I could to do to keep from saying that "I'm not familiar with that feeling" being as I've never had credit card debt. I just said good job.

Same kid wrecked a car and got $6000 for it. Spent that on who knows what, tattoos maybe and then got a $3000 loan at 11% to buy a motorcycle. Didn't get insurance on the motorcycle because "it's a waste of money" and motorcycle gets stolen so now he has the debt and no motocycle. The stupid decision making never seems to end.

[bingybear]

Quote:

Originally Posted by Joylush Yes, I do need to find a good estate attorney. I believe what I'm looking for is a Spendthrift Trust. I'll need one for my adult sister I help support as well. I guess my daughter could be the trustee as I'd trust her over anyone else. I need to get over the fact I can't control things from the grave, but it's hard. Both are turning 27 next year. My daughter is a home owner and has saved over $100,000 in investments and retirement savings. No Debt but the mortgage. Her brother with a similar income has nothing saved. Just found out the Roth IRA we set up for him as a child and which had grown to $11,000 was liquidated by him. He said to "pay off debt" (not college debt, not car debt...had none of those, credit card debt I assume) and to use in a more self directed way (his words). I don't know what that means but from his Facebook posts I suspect it's related to bitcoin. Same kid who whines about not being able to afford car repairs. Guess I'm just really disappointed. It's not like they weren't both taught equally. When he reported that it felt good to have paid off his credit card debt it was all I could to do to keep from saying that "I'm not familiar with that feeling" being as I've never had credit card debt. I just said good job. Same kid wrecked a car and got $6000 for it. Spent that on who knows what, tattoos maybe and then got a $3000 loan at 11% to buy a motorcycle. Didn't get insurance on the motorcycle because "it's a waste of money" and motorcycle gets stolen so now he has the debt and no motocycle. The stupid decision making never seems to end.

bingo... spend thrift trust likely with sprinkling provision. You want to make sure it it written so his creditors can not attach to the trust. Your daughter might be able to be a trust advisor if she is close enough to her brother to know what is up with him. A corporate trustee could do the dirty work and maybe save the hard feelings. We have similar issues. Things also can change greatly when spouses are involved. You will also need to determine who or how the assets will be invested.

[CRLLS]

I wonder if you could leave instructions via the Will or Trust for the Executor or Trustee to purchase a SPIA with the spendthrift as annuitant. I would normally be concerned that the income could be transferred/sold to one of those "I have a structured settlement, but I need cash now" companies. A quick google search says some annuities " it restricts transfers or assignments, and cannot be changed, commuted or sold."

https://www.standard.com/annuities/eforms/17169.pdf (no personal connection)

I know that annuities are poorly thought of here but If the above is true, it seems that this might be a good case for one.

The benefit here is that the trust disappears after the SPIA is purchased.

[Jeffman52]

My wife and I told the kids to expect nothing in inheritance. We plan to spend our last penny and die together on the front porch. (They are welcome to sell the house for a few extra pennies)

We have helped them here and there but minimally. I've too often seen what money can do to people that never earned it. It takes away their drive to do for themselves. Frankly, my Dad was like that. If you gave him $200K cash, he would be broke and close to derelict in less than a year wondering where it all went. Chances are he would show up with his hand out again. DOH!

So it may seem mean but why leave them anything if they are just going to blow it anyway with nothing to show for it. Why not leave it to a charity or other good cause that you support? Or set up a trust where it can only be spent on college for the Grandchildren and once they age out, it goes to charity. It's a shame to me that so many that did the right things and worked hard to have money, will not see the next generation in their family carry on that legacy.

Sadly, I am my richest relative and expect that my kids will not do as well as I have, even though they have had the benefit of a good education and college that I didn't have. They will do OK, and maybe it will change, but so far I don't see them setting themselves up for later success. Maybe when they get in their 30's they will start thinking harder about saving for when they are 50 or older.

[pj.mask]

I think some people can’t handle money but I caution that as a general statement.

Trusts are delicate. Lots of people can set them up but you need someone good to give you useful advice. Trusts can and do ruin family relationships. If you set up a trust administered by your daughter, don’t give any discretion on distributions. Some % or dollar amount or something. If you leave options for “needs” - their opinions of what that means may differ. Another option is to give her like $20k on the side so she can give her brother a few bucks here or there ‘out of her personal money’ when she deems necessary as a soft break when he demands extra distributions.

[Danmar]

Quote:

Originally Posted by pj.mask I think some people can’t handle money but I caution that as a general statement.

Yes, agree. Every kid is different and the parents know them best. I have no problem giving all our wealth to my sole heir(daughter). She is very responsible but obviously some aren’t. OP knows best. I can see how a trust might help. Maybe the child matures in the future? Would it be wise to try to design trusts for both? Or is that too difficult?

[donheff]

I had trusts that would slowly trickle the money out when the kids were younger because I remembered what an immature dip-**** I was in my 20s. They both would have needed the external control back then but now they are both sensible and saving so no external controls are in order.

Edit: I just noticed this sophisticated forum program replace my clear text sh** with "****." Cool

[karen1972]

I'll have to tell my mom about a few of these, I've been trying to figure out what to do about my brother who at 55 moved back in moms basement. I think that says it all and his wife doesn't mind.. oh boy.

I've actually suggested mom just buy him a small house now and just deduct it from his inheritance. I've always wondered if it's better to give them some now when living so the parents can "supervise" and help direct their children on financial matters rather than just waiting until they are gone when they can't help. Obviously, that's not always feasible but it is a good test of what is going to happen in the future.

[ivinsfan]

Quote:

Originally Posted by Joylush Yes, I do need to find a good estate attorney. I believe what I'm looking for is a Spendthrift Trust. I'll need one for my adult sister I help support as well. I guess my daughter could be the trustee as I'd trust her over anyone else. I need to get over the fact I can't control things from the grave, but it's hard. Both are turning 27 next year. My daughter is a home owner and has saved over $100,000 in investments and retirement savings. No Debt but the mortgage. Her brother with a similar income has nothing saved. Just found out the Roth IRA we set up for him as a child and which had grown to $11,000 was liquidated by him. He said to "pay off debt" (not college debt, not car debt...had none of those, credit card debt I assume) and to use in a more self directed way (his words). I don't know what that means but from his Facebook posts I suspect it's related to bitcoin. Same kid who whines about not being able to afford car repairs. Guess I'm just really disappointed. It's not like they weren't both taught equally. When he reported that it felt good to have paid off his credit card debt it was all I could to do to keep from saying that "I'm not familiar with that feeling" being as I've never had credit card debt. I just said good job. Same kid wrecked a car and got $6000 for it. Spent that on who knows what, tattoos maybe and then got a $3000 loan at 11% to buy a motorcycle. Didn't get insurance on the motorcycle because "it's a waste of money" and motorcycle gets stolen so now he has the debt and no motocycle. The stupid decision making never seems to end.

He's a 27 year old guy,do you think this story is unusual? Just because he doesn't "get it" now doesn't mean things can't change. In fact I wonder why you know so many of the details of his finances...

Unless he's using his money for drugs or living on the street I think you are overreacting here...whatever you do.. do not make his only sibling and twin turn into the money police...

Guess what... once we die we no longer have control over our money and how it gets spent...That's a big hurdle to get over but it's a fact. You and your DD have similar views on money and your DS right now has a different view.perhaps the school of hard knocks will turn this around who knows. You poo-pood his paying off his CC debt because you never had any, good for you but being judgmental here won't help things.

[socca]

Quote:

Originally Posted by bingybear ... A corporate trustee could do the dirty work and maybe save the hard feelings.

My mother is co-trustee of a QTIP trust set up by my stepfather. The other trustee is the trust department of a bank near where she lives. This arrangement seems to work well. One advantage: my greedy step-brothers can't direct all of their irritation at my mother for continuing to stay alive and thus depriving them of access to 'their' money because there is also a corporate co-trustee participating in the management of the trust. The bank does collect nice fees without doing much work, but the non-financial advantages of the arrangement probably make it a net positive. YMMV.

[MRG]

Quote:

Originally Posted by ivinsfan He's a 27 year old guy,do you think this story is unusual? Just because he doesn't "get it" now doesn't mean things can't change. In fact I wonder why you know so many of the details of his finances... Unless he's using his money for drugs or living on the street I think you are overreacting here...whatever you do.. do not make his only sibling and twin turn into the money police... Guess what... once we die we no longer have control over our money and how it gets spent...That's a big hurdle to get over but it's a fact. You and your DD have similar views on money and your DS right now has a different view.perhaps the school of hard knocks will turn this around who knows. You poo-pood his paying off his CC debt because you never had any, good for you but being judgmental here won't help things.

+1

Do your kids get along? They won't if sister is the keeper of the money. It that what you really want for them? A lifetime of resentment?

At 27 we had a negative next worth and did stupid things.

FIL was worried about the DW and her ability to control money. He was considering something similar. We had this conversation about age 45. I took him in the office and showed him our 401k balance with 7 figures.

In the end he just split it 50/50. DW can tell you where her DF's money is today.

[aaronc879]

Best solution to this problem is to spend the money yourself.

My Uncle received and inheritance in the form of a monthly allowance. If he runs out of time before the money is gone the same allowance goes to his daughter. Maybe set something up like that so your Son can't blow all the money in a short time.

[l8_apex]

Quote:

Originally Posted by MRG +1 Do your kids get along? They won't if sister is the keeper of the money. It that what you really want for them? A lifetime of resentment? At 27 we had a negative next worth and did stupid things. FIL was worried about the DW and her ability to control money. He was considering something similar. We had this conversation about age 45. I took him in the office and showed him our 401k balance with 7 figures. In the end he just split it 50/50. DW can tell you where her DF's money is today.

Quote:

Originally Posted by ivinsfan He's a 27 year old guy,do you think this story is unusual? Just because he doesn't "get it" now doesn't mean things can't change. In fact I wonder why you know so many of the details of his finances... Unless he's using his money for drugs or living on the street I think you are overreacting here...whatever you do.. do not make his only sibling and twin turn into the money police... Guess what... once we die we no longer have control over our money and how it gets spent...That's a big hurdle to get over but it's a fact. You and your DD have similar views on money and your DS right now has a different view.perhaps the school of hard knocks will turn this around who knows. You poo-pood his paying off his CC debt because you never had any, good for you but being judgmental here won't help things.

This. I was making all manner of stupid decisions in my 20s, but still managed to ER at 47. My vote is to just choose a trust that distributes money over a number of years, I'm not sure about trying to define somebody else's needs vs wants. In today's society, most everybody has their 'needs' covered, depending of course on how one defines it.