DD unexpected inheritance

[Gardenarian]

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!

[catherine]

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.

[Tammy]

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.

[sweetana3]

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]

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.

[bae]

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...

[jp1]

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.

[pinkytoe]

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.

[razz]

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.

[cdttmm]

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!!!