What is Good Age to Receive Inheritance

[mb196]

I'm considering passing my stache to my children using Trust Funds.   These funds will pay out a monthly stipend and then go under their control at a certain age.

What is a good age for that?  Please provide me with general ideas I could use for this.  I'm thinking 28 and 35.  Either one of those.  I'm trying to picture that by then they're set in a career and have made their own money through hard work and then this money comes in and is almost irrelevant to them. 

Please, I know that it depends on a number of factors and I know the importance of educating kids now so they know how to handle money later.   All I'm looking is an average age.....a best practice...

[jlcnuke]

I'd say I wouldn't have handled it responsibly before 30, based on how I handled lump sums of money (mostly spent on women and partying, the rest wasted :P ) I did get before and after that age.

[charis]

I definitely could have used money at 28 to pay off student loans from graduate school - I graduated with loans, got married, bought a house and had a baby at about 28-29 years old.  Alternatively, can you specify using funds for set reasons at different ages?  Maybe 25 for educational costs only and 35 years for the remaining.

[Jrr85]

I'm considering passing my stache to my children using Trust Funds.   These funds will pay out a monthly stipend and then go under their control at a certain age.

What is a good age for that?  Please provide me with general ideas I could use for this.  I'm thinking 28 and 35.  Either one of those.  I'm trying to picture that by then they're set in a career and have made their own money through hard work and then this money comes in and is almost irrelevant to them. 

Please, I know that it depends on a number of factors and I know the importance of educating kids now so they know how to handle money later.   All I'm looking is an average age.....a best practice...

You basically have the average.  Pretty standard to have disbursements from any age from 25 to 35, or staged disbursements, where say 20% is handed out at 25, another 20% at 30, and then the remainder at 35. 

I do not work with trusts, but a friend of mine that does says that the approach she prefers, which almost nobody follows, is to give well functioning kids/young adults money early and often, while the parent or grandparent is alive to give guidance. 

If you make them wait until  you're gone, the age doesn't really matter that much.  If you make them wait until later, there is chance that they'll be more mature, or there is a chance that they will basically stay in a holding pattern of immaturity while they eye their eventual payday.  Of course there's no reason you have to ever give them access to the trust.  You can make a grandchild or somebody else the beneficiary and make it a spend thrift trust that lasts their entire life (and with many jurisdictions getting rid of the rule against perpetuities, I guess you can keep it in trust forever?). 

[sol]

Our trust is set to pass our wealth to the trustee/guardian while the kids are under age 25.  And our expectation, based on family money management skills, is that the trustee would immediately buy a bigger house and an extra car and use the rest to live it up, providing my kids with the least frugal upbringing I can imagine, for just a few years until they are all broke again.  I think it would be a loving and supportive family environment for kids who just lost both of their parents, but none of them would ever find this particular online community.

On the advice of our lawyer, whatever remains will pass from the trustee to the kids in stages, a quarter at age 25, half at age 28, and the remainder at age 30.  The idea is to keep them out of poverty and off the streets, not establish a legacy of lasting wealth or influence.  We fully expect them to make bad decisions with that money, if there is any left, and that's okay.  We'll both be dead and won't mind too much.

[Lis]

Be aware of your trustee/guardian as well. My cousin's portion of her inheritance of our grandmother was supposed to be held until she was 25, though the trustee (her mother) could access it to pay for school expenses. Her portion was all gone by the time she graduated and there's nothing for her once she turns 25. Her mother took all of it out for "school expenses," but she went to a state school and had generous scholarships, so we're not entirely sure where the money went. (On that note, be sure of your executor too). We're fairly certain her mom's mortgage, a brand new car, and a trip to Cancun were part of the "school expenses," but we're also very much hold the belief of "not our circus, not our monkeys" and just sorta watched from afar.

[Laura Ingalls]

Guardian and trustee doesn't have to be the same.   We have a family member as a guardian and a corporate trustee for the money til 25. 

[LessIsLess]

Kings have passed on their thrones to children as young as a few months old.  If it's good enough for a king, it surely is good enough for ordinary people.  Another word- let's not discriminate against youth.  Discriminate against incompetence.

Not feeling comfortable?  Try this formula.

Stocks double roughly every 10 years.  At age 20 [or 25], give your heir 1/3 lump sum. 
Repeat every 10 years.  Your portfolio would never run out.  In fact, it would grow to a larger amount.

If your heir blows it, they would have to wait 10 years.  Hopefully they would learn their lesson.  If not, that's okay too.

[Roger D]

Let the trust pay out 4% of its capital, more-or-less forever.

[golden1]

In all honesty, the later the better.  I received an inheritance when my dad died when I was 20, and to be honest, I blew way too much of it on stupid crap.  I wish my dad had set up something that would have dispersed it in smaller amounts yearly until age 35 then release the rest.  I likely would be FIRE right now if that were the case. 

[marshdesign]

My dad has it passing to us when we all turn 50. Before then the executer of the estate has control and you cannot take out anything (medical and college for grandkids of course, but that is it) until each kid reaches 50. I just happen to be the executer, but far away from 50. BUT MY HOPE is that all of us kids are past 50 when this is even an issue. Thank goodness my dad is healthy. But my dads estate is complicated so he is making sure I will be ready to manage it. But he says, we do not need the money before we are 50, we will just blow it on a new house or boat, and he might be right (not me but my siblings!). He told us to live our lives to not expect anything, to be financially prepared on our own, we need to stand on our own two feet for the majority of our life.

[Frankies Girl]

Age is meaningless.

You should look at what sort of person(s) your children are and decide based off of their maturity, work ethic and overall ability to handle money.

If you feel that they may not handle it well, then by all means set up a trust or a series of distributions at specific ages, but if your children are basically level-headed and raising their own families, working a steady job and making progress at being an adult, I'd likely not bother with a trust setup and let them inherit outright.

[Vertical Mode]

In all honesty, the later the better.  I received an inheritance when my dad died when I was 20, and to be honest, I blew way too much of it on stupid crap.  I wish my dad had set up something that would have dispersed it in smaller amounts yearly until age 35 then release the rest.  I likely would be FIRE right now if that were the case.

I believe the description above is a type of "Spendthrift Clause". Also useful for asset protection, to be sure the money goes where you intend instead of any creditors the intended recipient may have.

OP, if you are seriously considering leaving an inheritance to your children, I have a book to recommend:

https://www.amazon.com/Wealth-Secrets-Affluent-Building-Protection/dp/047013979X

Aside from the occasional plug for their firm (few and far between, I promise), this book has a lot of information you may find useful. Lots of stuff I know I never would have thought of.

[chemistk]

I also agree that a set age is meaningless. I'm 25 have a career, a toddler, and a newborn any day now. Since finding this community, I am on a path to FI before 50. If my parents were to pass away tomorrow, i would certainly use any money they passed wisely.

I also have friends and family my age that, if given a large sum of money, would spend all of it within 6 months.

You have to look into your crystal ball and envision what kind of people your kids would be. If you're not sure, a metered release of funds over a few years might be best. 28 seems like a good age.

[Dicey]

Age is meaningless.

You should look at what sort of person(s) your children are and decide based off of their maturity, work ethic and overall ability to handle money.

If you feel that they may not handle it well, then by all means set up a trust or a series of distributions at specific ages, but if your children are basically level-headed and raising their own families, working a steady job and making progress at being an adult, I'd likely not bother with a trust setup and let them inherit outright.

My brother and I are co-executors and co-trustees of my parent's modest estate. The six heirs range from 50 to 59. Their trust is rather poorly written, so only about a third of the money has been distributed to date. The only one that hounds us for more money is 55 years old. Based on her FB posts, she's blown every cent she's received so far on dinners out with friends and booze. She's always been irresponsible, and we're convinced she'll be that way to her dying breath.

To echo Frankie's wise words, it always depends on the person. In general, the later, the better, but not always. I agree with the idea of meting out the money at long enough intervals that it never runs out, if your estate is large enough. Be aware that the cost of doing that can be steep, so pay close attention to the fees.

[WranglerBowman]

I think 28 is a pretty good age for a mature kid/young person to receive money.  35 might be a better age for an immature person to receive money, if there is a good age...  I really didn't start to buckle down and make a lot of wise decisions with money until I was 26-28 and I consider myself to be on the upper end of money maturity now at 33.  At 30 I don't feel I made too many dumb decisions with money.  I would have been ecstatic at 28 to receive any lump sum of money as we were looking to purchase our first home (foreclosure home), towards the end of the last recession, as the foreclosure market was drying up...would really like to not be paying PMI on our mortgage too.

[MrGreen]

Is this only in the event that you're dead before your kids are adults or do you plan on passing inheritance amounts while still alive, well before your death?

[runewell]

Let the trust pay out 4% of its capital, more-or-less forever.

less

[Laura33]

We set stages, with the last payout at 35 or 40.  We also wrote a letter of direction to the trustees instructing them to allow liberal draws for their support while they are under the care of our guardian (expressly including buying a larger house -- my sister could never house my kids and hers in her current place), to cover college/trade school/etc., and to allow a lump-sum withdrawal at other times for something like a downpayment on a house.  Our lawyer suggested this approach, because it allows the trustees to adjust to the kids' personalities and needs, e.g., tighter rein on the spendthrift kid while not penalizing the kid who is responsible and stable at 22.

If we had someone with a known issue/special needs, that would be a different case entirely.  E.g., by brother with depression who has been struggling his whole life and seems to only recently have gotten on his feet -- if one of my kids was in that situation, I'm not sure I'd ever pass on a lump sum.

I also second (third, fourth, etc.) the importance of picking the trustees properly.  We chose the folks in the family with significant financial knowledge (BIL is now a CFO), but we also chose people who we knew would ok the expenses we wanted to encourage (e.g., not my mother, who seems incapable of spending money for anything).

[GettingClose]

Has anyone done different ages or amounts for different children?  We currently have two kids who get a significant lump sum outright, and others who will get distributions much later in life, with early distribution for educational expenses, etc.

[mb196]

Vertical Mode, thanks for the book recommendation.  I'll get it from the library.  Funny side story, I live in a large city with a great public library.  My first place to look is always there and it rarely disappoints.   Well this book is not there but my college library has it and as a former student I have access to it.

I'm going to go with 35 and use the same age for my two children although I recognize their two distinct personalities.   One will expect it, the other won't care for it and will probably pass it to his own kids.

Thanks for all your comments/replies.

[IllusionNW]

Please also be sure to use a reputable attorney to draw up the documents and to consult with your CPA regarding tax consequences.  Drafting trust/estate documents is one area where you want everything to be iron clad.  And given the peculiarities of each jurisdiction, the online forms you can get from certain services aren't going to be at that level.

We just had our documents drawn up and learned a lot about taxes, disbursements, etc.  Definitely worth the consult with an attorney.

[Goldielocks]

I can tell you what a crappy age is -- 67!   
By age 67 and older you have nothing left (major) to spend it on or to dramatically improve your life, overall.  Your path in life is pretty set and most of us have figured out how to finance it.   

If I could have chosen, I would have liked an inheritance at the age of 30 or so, after I had started to have kids and was so very house poor.   (There was too much stress from working too many hours, too many bills, kids medical bills, no vacations, etc)

Yep, It would have all been spent in home reno's, car, home cleaning services, and vacations, and kids activities, but we would have spent it on building family memories, too, while our own funds could be put into retirement and educational savings for future.  I think that there would have been less yelling, too.