Inherited Wealth, Good or Bad?

Why does she have to know now how much she will inherit? Why not let her find out when the time comes? Both of my parents have living wills specifying what will be distributed and where. I have no idea what it states nor do I care. Could be a few million or absolutely nothing. I don't plan on adjusting my life according to what it says and will try to build my own wealth. This is the first time I've actually thought about that in probably quite a while, haha.

 

I set up a trust. My kids get 25% of their money at age 21 and the remainder at age 30.
I was thinking of changing it to 25% at age 25 and the remainder at age 40. As I age my time horizon for them expands as well.
Just a thought.

 

As long as you are there to help her through College, she will never resent you.

 

This is an interesting topic and something I've been thinking about recently. Mainly because I've been listening to people in my parents generation and have been a bit surprised by what I'm hearing. I don't have children so I'm going to refrain from my opinion for awhile. But, hopefully this thread will provide some insight into parents' thoughts. Then I'll fill you in on what I've been thinking.

 

Not sure I understand this one. If I have a kid that is dead set on a private undergrad school that will cost $50k a year, I will not pay for it. He/she would need to get some sort of scholarship (50% or more) in order for me to begin paying for it. I say this because imo you can get an equally great education at a state school for a lot less. I only think huge tuition bills are remotely worth it at private schools if it's for graduate/pre-professional studies.

I was fortunate enough to grow up in Florida where state schools have low tuition costs and 100% scholarships are pretty easy to get. I attended the University of Florida where the cost was $100 per credit hour. My parents paid for my living and food expenses, which I think totaled to $8k a year for three years (paid by college savings put away many many years ago). I wouldn't have resented anyone if they didn't pay for it. At the age of 18, you're an adult and can be an independent.

 

Well of course 'help' doesn't mean pay for entirely. If you pay the bill entirely, I think the outcome will be worse. But if you refuse to even cosign for your child when they are deadset on what they want (as far as a career), they will resent you. I think this would be especially true if they knew you donated to charity.

My original statement was just to say make sure are able to financially 'aid' in your child's education.

My father was not hurting for money. He paid my sisters' (both) tuition entirely. He refused to cosign for me. I had to put my first two years on an American Express card. My tuition is about ~$250/credit hour. After interest from American Express, tuition costs me closer to $325/credit hour. This bill will take me a lot longer to payoff than a standard subsidised/unsubsidised federal student loan. I am a full time student and full time employee while both of my sisters have nearly dropped out.

There was no logic behind my father's decision. I have always been the better student in the family. I'm in my last year of my Bio-Chemical Engineering Undergrad. I resent my father.

This is absolutely not the case in Michigan. You cannot get a loan without a cosigner until the age of 24. If you are between 18 and 24 and own a house.... then maybe. But how often is that the case? Things have changed.

You can only file as an independent if you parent do not claim you. As long as my father claimed me, I was unable to receive any financial aid; as my father was worth too much. After filing my FAFSA yearly, I would receive $135 and would be rejected from any scholarships based on need. As far as academic scholarships; it's difficult to maintain that level of a GPA while working 50 hours a week to pay your bills. It's especially difficult while you are in a program as challenging as mine.

Now that I am 24 and legally seen as an independent, I have been awarded Pell Grants and financial help that almost takes care of ALL of my tuition bill. Unfortunately, I owe American Express ~ $400 a month from previous tuition bills. My father has made my life much harder than it needed to be while I watched my sisters (or a charity) get money thrown at them.

A child's high education is one of the last steps of his or her development that will ever be associated with the parent. If you are not there for that period to show you care about their future, they will resent you. It will not matter later down the road if you make amends. You were not there to show you believed in them when it mattered. It's easier to walk up to somebody that has already accomplished their goal and say " I knew you were going to be able to do it all along".

 

It is very difficult to generalize. First, most state schools are very large, so there isn't a lot of personal attention as is the case with most small private schools. Private schools often tend to have better facilities, and attract better faculty. This isn't always the case, but it holds true in many instances. Also in terms of job placement/graduate school acceptance, a 3.5 GPA at Princeton might be better than a 4.0 at Penn State. For law school, name recognition might only go so far, since a lot is dependent on LSAT scores. However, if you are taking about PhD programs, etc, the quality of your undergrad institution definitely does count, since the better your school, the most prestigious the faculty; therefore, the letters of recommendation will come from someone well known. This can be a deciding factor in some cases.

Not to get off topic - it really depends on your lifestyle and your child. If you feel your child is capable of handling the money, then give it to her outright. If, however, she proves to be irresponsible, perhaps a irrevocable trust with your daughter as income beneficiary is the best option for her.

One thing, she absolutely has to be educated on how to manage money. If you live a modest lifestyle, and she doesn't actually know how much money you have/how much she will get, then it is likely that she will experience "lotto syndrome," whereby people who live middle class lives get great wealth very suddenly, and invariably blow it in a few years.

 

Luke, do you mind sharing how your relationship was and now is with your father and his age (approx)? I agree with you.... You can't even have a legal alcoholic drink at 18 anymore in the US. So, I don't think the law thinks of you as an adult.

 

Absolutely!

Let me start by saying that my father is a terrific man. He is now 60. I am 24.

My father had a strange dad. My father's father really favored his daughter. My dad didn't get much support but his sister had everything handed to her. This was true even in my grandfather's will. He left my father 'a penny' while his daughter, my aunt, received a little over 3 million. My father ran away from home at age 17.

Now, half a century later, both my father and my aunt are equally as unhappy. I'm not sure why my father would take a similar approach to his finances as his dad did. I think to a degree he resents me! The only thing I can think is that since he was on his own at age 17 he doesn't understand why I can't be. This is a valid argument. But things really are much different than they were 45 years ago. Also, if my father were to consider how unhappy that situation has left him, why would he want his son to do the same?

My relationship with my father has always been almost non existent. I have always had a job. I started working at fourteen to save for my first car. Both my sisters had cars given to them. I was told I better start working. During my summers I worked 60 hour weeks pouring steel in a foundry.

This is where I see 'some' good from my father's teaching philosophies. I take EXCELLENT car of my cars. My older sister has totaled 4 new cars that were given to her. I learned to work on my cars because I couldn't afford to take them to a shop. This is where it ends though.

My father never took me fishing or camping. We never did any real bonding. When I had a job to do, like repair a car of mine, I would ask if he'd be interested in doing it with me. He never had any interest. To be honest, to this day, he is still hung up on his resentment of his own father! I swear it haunts him. It has blinded him so greatly that he doesn't notice he is reliving it from the other end.

Be there for you kids. Take them camping, canoeing and learn what they like. Support them. If they have a serious interest in studying help them however you can. Don't give them everything. They will end up just as unhappy as my aunt. Don't financially abandon them, they will end up like my father. Sometimes help is needed financially. When your child's future is at stake, I think it would be a good idea to show that you believe in them.

Sorry for the long posts. I am hoping that the more I can talk about and understand this situation, the less the chance I will repeat my father and grandfather.

 

Luke thanks for sharing........ It was similar to what I expected but I wanted to confirm it. I think you are pretty insightful into your situation and others might benefit from reading your words.

 

Thank you sir!

 

I think you should set it up so that she won't receive a dime until she graduates from college. At this point, she will have accomplished something on her own and should be presumably old and wise enough to make smart decisions about how it should be spent.

 

Keep in mind she's going to get hit with 45% estate tax and 33% income tax. So that large sum can quickly become a small some.


I'm also a fan of not letting them touch one red cent till they are about 30. That's about the right age I think. Young kids will blow it all on car stereo equipment and other mindless junk. Older kids tend to spend it more wisely, such as down payments for homes, etc. I think 25 is too young, and 40 is too old. I would give it to them between 30-35.

 

Looks as if the resentment comes from the fact he didn't pay a dime for you, but he did for your sisters. If his stance was equal for all, then I doubt you would resent him as much. That's not including the part where he used you as a dependent for tax purposes.

I still don't think private school is worth the tuition unless you want to go into something like IB where UPenn, Princeton, etc would help. Not all state schools are good, but there are definitely a lot of good ones. Each state usually has a flagship university that can equip a student (if they decide to put the energy into studying) to succeed out in the job market. UNC-Chapel Hill, U Michican, U Virginia, Florida, Georgia, all California state schools, Texas system, etc should be ample. I don't think paying the absurd amount to go to somewhere like Vanderbilt will really make all the difference. Successful people have the drive in them to be successful regardless of the school they attend.

 

Wow. I hope I am able to share some interest with my son.

That's an understandable position. That doesn't explain why my sisters resent him just as much though. :shrug:

I think the resentment stems from the fact that he generally seems uninterested in his children. If you convey that image to your kids, it doesn't matter how much money you give (or don't give). I guess money really can't buy love.

 

Not a penny until she graduates college.

$25k (todays equiv) upon graduation of college

$100k (todays equiv) at 30 - thats not enough to be a deadbeat through your 20s waiting for the big score but is enough for a down payment on a decent home

$500k (todays equiv) at 40

THATS IT - the rest goes to charity.

 

My parents taught me to work for my money. Helped me set up my own business and paid for college, I could ask for nothing more. I never expect anything when they pass and pretty sure they will donate everything to charity anyhow. We grew up in a modest suburb of Los Angeles, normal house, no f-cars, etc.

On the flipside, my cousins grew up in Beverly Hills, carried Dior purses everywhere, etc. Parents worth low 9 figures. One has been to rehab three times, twice before age 15. Mother has an eating and drug disorder as well. Dad solves everything by throwing money at them. They can expect a large inheritance and can care less about anything but money.

Teach your kids early about the value of a dollar. Make them do chores for spending money and keep some savings. It's nice to grow up wealthy and taken care of, but make sure they understand a lot of people aren't as fortunate and they will be level-headed as adults, in my opinion.

If I decide to have kids and was setting up my will, I think my kids would get a very small percentage, if anything. If all went well raising them, hopefully they wouldn't be disappointed about that.

 

Charity begins at home. The people running the charity should have to work for their money too

 

This is proof that you need to instill these financial responsibilities in your daughter as early as possible. The more she knows about how to manage money, the better she will do with it when she receives your inheritance.

Not if you prepare her. See, most people that have problems with large inheritances are people that were not prepared to have such money. It's just the same as winning the lottery when you've been poor all your life. Suddenly you have all this money and you don't really know what to do with you. You don't have any experience with investments or financial responsibility, so you just waste it all, or wind up hurt/killed being stupid.

Teach her as much as you can about how to properly manage money, send her to a good college and even see if you can get her to take a finance class or 2 just for kicks, and she'll be fine. Preparation is the key to success in life. People that are not prepared make knee jerk, irresponsible decisions that are costly in many ways. This applies to all aspects of life.

 

Totally agree.
I am shocked when people give more of their money to charities then their own families.
If your thought is that the money will spoil your kids, just make it where they will receive your money through out a period of time.
You never know what the future might bring. Your child might end up needing charity because you gave your money to charity.

My mother in laws mom gave most of her estate to a nephew who was not doing well and had several children. Results that my mother in law now is not well off and her cousins family is well off thanks to the estate her mother left them. Talk about a twist in life.

 

Ive seen many people who are on the dispersment plan wallow around as lazy arses waiting for their next check...even if it is 5-10 years down the road. Thats why the check needs to be small enough to not be worth waiting for.

I know at least a dozen people in their 40s that are worthless because they are trust fund babies and the term BABIES is accurate. They have no motivation as they know eventually a check will show up.

yes there are some kids that will turn out okay even with a buttload of cash handed to them but IMHO most wont regardless of how well you raise them. But IMHO no one will ever become a fully well rounded person without having to struggle for a portion of their life. Everyone should know what it feels like to have the weight of financial hardship on their shoulders. You will never have that feeling if you know there is a magic payment waiting for you down the road..5,10,20 years..doesnt matter...you can get through anything if you know that payment is waiting for you.

As for 'charity begins at home' ...I dont consider $625k peanuts...thats plenty of charity to give your offspring.

I dont have any kids but if I ever do they will get a state college paid for education and about $25k on graduation to help get started in the world..after that they are on their own. Just like I was.