What can a will maker do about leaving a large inheritance to young children?
As discussed in a previous post, children that lose both their parents will inherit at 21 if the parents die without a Will.
At 21 the human brain is not fully developed. Leaving someone their entire inheritance at 21 to manage on their own is not wise.
What should you do then?
There is no one answer.
The age of your children is a factor.
If your children are 16 or 17 years old it’s quite different from having children that are 2 or 3 years old.
With very young children there is no way of telling how they will be with money when older.
At 16 or 17 some children display remarkable levels of maturity. Some are mini-business tycoons wheeling and dealing with their peers and making money. Rare but it can happen.
Making a gift of a lump sum first
If your child or children are the rare few who are good with money at 16 or 17 you may have some confidence letting them receive a larger part of their estate at 21.
However, if the children are clueless about money even though they are older forget about giving them a large sum of money at 21.
Instead you could make a gift of a fixed sum to your children at 21. It could be $10,000, $20,000 or even $50,000. Enough to last for a while. Then lock away the rest till later.
Delay the ‘vesting’ age at which children get the money
Instead of letting children receive their entire inheritance at 21 appoint a trustworthy person as executor and trustee. Then you could delay the age at which your children receive their entire inheritance to perhaps 25 or 30.
This gives your children a chance to grow up and mature first before the money ends up in their hands.
Make a Will with powers of maintenance and powers of advancement
Consider making a Will with a power of maintenance and power of advancement clause.
That way you can safely delay the age at which the full inheritance is to be released. 25, 28, 30. You decide.
Powers of maintenance and advancement gives your trustees the discretion to release funds earlier before your children receive their full inheritance.
So if before they reach the vesting age (say 30) the lump sum you leave to them at 21 is gone they can go to the trustee and ask for funds to be released early for their maintenance, education, benefit or advancement.
This way your children will not end up destitute. More importantly by delaying release of their inheritance the chances of the money lasting longer will be increased.
At EzWills all our Wills have a standard clause giving powers of maintenance and advancement to the trustee.
Protecting your children from having too much money too young
If no thought is put into protecting children from the effects of a large inheritance whilst they are still young it compounds the tragedy of losing both parents.
If you have young children and do not make a Will you will leave your children with the burden of managing their inheritance alone at 21.
Whether you think 21 is too young or not too young feel free to make a comment and share this post. We need to have some conversations about topics like this.
1st May 2019