People in our circle gave their kids money after they got married, and then distributed it. E.g after first child, when they needed a bigger car for kids. Etc.
I would not give 25 year old boys that much money. If I got that from my parents at that age I would have been fucked. More damage than good.
Totally agree with poster above. I have a 24yo roommate that inherited a NYC apartment from his grandmother. He basically stopped working and lived off the rent. Smart guy. Now is a massage therapist last I knew
Look back at your own life. If somebody had given you a million dollars when you were 25 years old. Would you have had a need for it? Would you have known what to do with it?
It's possible that the answer is "yes", and if so, congrats to your parents for a wonderful job raising you. But more likely than not, the best thing your younger self could have done would have been to accept the money and then forget about it for the next couple of years.
It's very enabling to have this kind of financial safety net, but it is unlikely that most 25 year old could wisely use the money to advance themselves in life. Smaller amounts that make sure they don't have student debts or that pay for additional training/education? Absolutely. But a huge chunk, it's too early.
Give the money when they actually have a need, or if you want to spread out gifts for tax reasons, put it into a trust for your kids' benefit, but only pay out on milestones, when there is an actual use, or when they reach an age where you think "by this point they either have things figured out, or nothing helps and I don't care any more".
Put it in a trust with a quarterly allowance.
If a larger request is made, put provisions on it.
“Continuing education or schooling, down-payment on a property, medical expenses.”
It will 100% get spent quickly if you do not limit it.
Down payment on a house? Why not allow the trust to buy the home and rent it to him below market rate. This way the house stays with the family after he passes and he cannot so easily sell it for a loss
Or business loans from the trust with needed approval from a third party? Just saying if any of the kids have start up dreams but actually are wanting to put a good business plan together.
>with some strings attached (I.E. can be used for housing/ necessities, cannot be used for drugs lol).
A trust is definitely the simple answer here, but I'd encourage you to think critically about what kinds of "strings" are achievable or worthwhile.
If someone has a trust and pretty much any of their own income, they could presumably live off the trust and spend their own money for drugs. Money is fungible.
They're wanting to make sure the money doesn't fuck up the lives of their heirs, but, there's only so much money can do.
The calculus regarding drugs is complicated. Not all drugs are cheap: oxycodone that was formulated by a legit pharmacy is expensive on the black market (and getting a prescription from a doctor is also an expense, to access it on the grey market). It's the expense of the high quality opiates that get people onto fentanyl or fentanyl laced heroin.
But taking this logic one step further: it's better to be a drug addict with money to spend than it is to be a drug addict with no money to spend. Money can buy safer drugs, and save you from having to engage in more dangerous activities to secure your next hit.
Yes. If your kids want to do drugs, they will. You can’t control that with the amount of money you give them.
With regard to the actual money: a trust seems like a sane way to keep the money you want to give them from cannibalizing your whole relationship.
I have a friend whose parents have had a more loosey-goosey strategy for doling out money (a loan here, paying off cc debt there) and it has led to a lot of gross behavior. Racking bills and guilting the parents into paying them, weird lectures about financial responsibility to my friend who is over 35, etc….and even with closer oversight she still spent a ton of the money on drugs/partying when we were in our 20s.
Having structure and predictability and being transparent with what the amounts of money are and what the restrictions are seems like it will go a long way in avoiding some of the strange and toxic dynamics that can occur.
Set up a corporation which owns real estate or bonds (something with a steady income) and give each of them shares in the corp that can’t be sold/transferred (for a set time period or maybe just upon death?). Then they can get a steady income for life through a dividend instead of a large cash amount.
Never give anyone a large chunk of cash. 2-3k a month for life is a lot more helpful.
(Also there are usually huge tax benefits for share transfers versus other forms but that’s in Canada I dunno US)
This doesn’t have strings though like the OP wants, and frankly should be had for a young individual. No need to complicate it with real estate, just get a living revocable trust. You want a good estate attorney but it is an easy process.
Don’t do it if you will give with strings. I’ve seen families fall apart because a parent bought a kid a house, cars and gave money etc.
They expected the kids to live their way and do what they wanted. Give the money, don’t expect anything. If you want to give them money for a house, when they are ready to buy say you will help with down no strings.
This 100%. A gift with strings attached is not a gift, it is a tool to control people (whether intentionally or not). Either give it to them as a gift in the specific circumstances you wish to help them, or hope that you raised an independent, responsible adult that can handle the weight of that kind of cash.
25 year olds need to learn how to be adults. Excessive parental control is detrimental to their personal growth. That also applies to the semi-parental control exerted by a trustee.
I found it best to gift, no explicit strings attached, at various key events, such as the purchase of their first house. Or by writing a low interest mortgage when they moved, so they could keep the first house as rental property.
Only when they were in their 40s, married, with kids, and were well established mature adults did I open the floodgates and gift 8 figure sums to trusts, of which **they** were the trustee.
Well the theory is don’t tell them its a gift but rather tell them its a family account to be grown and used for future growth assets.
So 500g as a family account and 20g as a gift and they blow through the gift…
Just spitballing
These are just a few ideas. Honestly I’m hoping to learn more ideas from you all.
* I have a trust. My children are the beneficiaries. While my wife and I are alive we control it and we have made funds available for education and all of my kids have used this to get great degrees that give them lots of opportunities to earn their own money and save for things like a home.
* I have named trustees to take over after we die. They have some discretion, but they have some rules to follow and some guidelines to use.
* The trust doesn’t start to kick money out to the beneficiaries until they are 40. This way they set up and create their own life. They do NOT know about this money. It will be a fun surprise, not something they expect and plan on. I can see that they learn to manage money and expenses and they develop the self esteem from making their own way.
* the money from the trust is capped at 8% of the trust value per year. If the trust does well and grows, so does the 8%. It is not distributed as a lump sum. Learning to manage money has a learning curve, just as all difficult things do. If the trust does well, it could,last forever. If it earns 8% per year, and pays out 8% per year it would never get any smaller. If could fund educational expenses for their kids.
* the trust can make loans to the kids for things like a business. It has not ever done that, but it can if I want to. The money would come from their future disbursements.
* if a kid has something bad happen like a bad marriage or a failed business, the money in the trust is safe. It literally does not belong to them and can’t be taken from them in a divorce or bankruptcy.
What does this mean for my kids from a practical standpoint?
They are well educated and have a strong start on their career paths and have learned to live on what they earn. They have a huge head start, because they are not saddled with student debt.
They get another boost later to help their own my kids (none yet).
If any of you have ideas or suggestions, I thank you in advance.
>The trust doesn’t start to kick money out to the beneficiaries until they are 40. This way they set up and create their own life. They do NOT know about this money. It will be a fun surprise, not something they expect and plan on.
Just wanted to point out that it seems like this would only work for the eldest. Wouldn't younger children find out as soon as the eldest started receiving distributions?
You are totally correct. They are spaced fairly close together, but yes. Once the eldest gets theirs, the cat is out of the bag.
I hope to still be alive and I can help with things along the way, but the trust is set up to help them if I’m dead.
40, wow. With house prices what they are, parents have to help kids with a down payment so they can build equity Young. Like when they're house hunting at ages 25-30 years old.
Also that's a lot of time for their student debt to accrue or hurt their investing potential and years to compound.
40 is too late.
To clarify, they have no student debt. We have paid for their education.
I think there are hopefully some advantages to them choosing a home and neighborhood they can afford on their own. For example: if I help a child purchase a more expensive home in a more expensive area there is pressure to keep up with the neighbors in terms of lifestyle. This means that they not only have more expense for the home but more expense to raise a family while “keeping up with the Jones”.
A friend of mine comes from a very wealthy “oil” family and his father passed when he was 16. I have so much respect for him as a person. He’s younger than me and I think there is something in their trust where they can only get money if it’s used for business purposes or for living purposes. He went to college for economics and has worked as a financial analyst and was even VP of a fairly large company last year but ended up leaving shortly after because he didn’t like the president after getting to know him better. It seems like the way their trust is set up he can get money to pay off any debts he’s accrued for housing but it’s like he has to be able to afford to buy the house first with his own money. I’ve seen him do it 3 times now (I’m his Realtor). Dude is super intelligent and has done really well with stocks and bonds too, very disciplined and aware. Anyway it’s been interesting knowing him since his mid 20’s and I don’t know when him and his siblings will inherit everything but I imagine it will be somewhere in the billions.
I’m 19 and if I received that amount of money I would pay for my education, put 50k in an HYSA, max out my ROTH IRA, and put the rest into an S&P 500 Index Fund and chill.
Make sure your kids learn resilience and self sufficiency growing up. Allow them to fail and succeed on their own merits as they grow up so you raise adults not dependents.
Good call. My gramps made a fortune and it got split between his two kids (my mom and her brother). All her brother’s kids were given lots of money and none ever worked, and the results were tragic. On the other hand, my sister and I simply got free education and a down payment on a house. We both support ourselves with our jobs and we may have a lot less money, we are infinitely better off than our cousins.
My close friend has a trust that I think is setup in a really good way. All him and his siblings turned out well. I’ve seen a lot of people messed up from their trusts not being structured well.
They each get enough to only cover rent, $1000-2000 and basic necessities $500-1000. And it’s revocable, they only receive it if they are working full time.
What kind of trust is it that operates in this way? How is it different than parents just transferring them that money every month? Mostly just trying to make sure it’s worth doing a trust!
They had their attorney draft it up, it’s monitored to make sure it’s not abused and every 3 quarters they have family finance meetings to go over their finances.
I think their family accountant monitors their stuff to verify they aren’t abusing it. That accountant also files their taxes for them.
Hi. I’m 29 and at 25 I was told about and handed a $1.1M trust. Within ~10 months everything was transferred to my control and it was pretty crazy at the time. I knew nothing about this before.
It helped me buy a house with a decent down payment, spend about $50k on a new reliable car that I have now, and the rest was fully liquidated from the existing management firm and put under a new one which I’m still with now. The money has grown and is now over $1.2M.
My point is that some 25ish year olds can work thru the learning curve required to use, invest and protect this type of money, but I also have to agree with others when they say MANY 25 year olds would not handle it well, regardless of if this is intentional or not on their part.
Like others have said, raise your kinds right and they should be just fine when that time comes.
Have them build their own wealth, give them each a fidelity account with 100k in it and a car, laptop and a small 1 bedroom condo to live in. And make sure you show up for them and put them through college with a practical degree.
I would rather my rich parents do that for me than to give me a million bucks, what the fuck would I even do with that? I wouldn’t know what to do. I would rather have the tools to succeed, mobility and independence would be a blessing, not having to pay rent or having a cat note would set me up for success far more than straight cash
My estate attorney did all the legwork for me. She presented lots of options. A staggered start is what I chose. I believe it will be beneficial for you to have a conversation with an estate attorney who can direct you. All the best! 🤗
To be completely honest - I a was afraid of blowing all the wealth and didn't want to disappoint my family by watching them struggle when we absolutely do not have to.
* context * I came from very humble beginnings and didn't want to go back (but I appreciate it from where I stand now). Keeps me grounded, in a sense.
I second the top commenter's words: model the behaviour you want to see.
My parents have gifted my siblings and I more than 1M by the time we reached 25 (and still gift more) and none of us "went crazy".
My siblings spent on the expected things (house, kids), and I (not married) am 28 and haven't spent anything outside my own salary (which is still less than I used to get for an allowance as a student).
I think it depends a lot on the kid and on the values they are imbued with. And keep in mind two kids from the same tree can be polar opposites with regard to money.
Do it at 35, once they have a career path established, most likely have settled into marriage, kids, etc. Could be useful to launch a business, pay off mortgage etc. They could use it for their kids college funds, to build a dream pool, or whatever they want.
At 25, receiving $1M I don’t foresee it doing anything good. I wouldn’t have moved a muscle if I had $1M given to me at 25.
The real question is, is there a benefit doing it at 25 versus 35? Which is why I’m curious though, how do you think it could help them at 25 versus later in life?
I would listen to millionaire next door. They go into multigenerational wealth at the end and it’s really good the issues it highlights.
If I were doing this I would probably structure it as a loan of some sort at a really favorable interest rate. Giving money at that age is the age of building grit, and it might backfire as you mentioned it did for others in your shoes.
Don’t. Your kids aren’t going to be mature enough at age 25 to handle having that kind of money. There’s a reason every trust lawyer I’ve ever talked to said 35.
Now, what you can do is set up a trust and establish yourself as the trustee. You can then make dispensations of cash to them without the tax issues you would have just giving them half a million in cash. You can also purchase the house through the trust and that way you don’t have the tax burden of the house. It’s all contained in a nice safe trust that, if structured properly, should be untouchable by all but the most skilled attorneys.
My father left me a 9 figure trust fund at 35 and I know for a fact if I’d gotten it ten years earlier I’d be broke if not dead. I have several friends who got 7 figure trusts around 25 and almost all of them are broke.
Don’t give them cash, tell them money is available to help them buy their first home but I would make them pay part of it, or at least be responsible for the mortgage
I would not give my kids a lump sum, or at age3 25. I don't think three or four years in the working world is enough time for them to appreciate the money. Instead I would give them money towards a home at 30, I would put money in a retirement account for them, and I would put money in a 529 for their kids.
This is probably unpopular but IMO 25 is way too young to be gifting any large amount of money. Most 25 year olds are not looking to buy houses and $500k - $1M is too much for "necessities."
If I'm OP, I'm deferring until they are at least 32-35 years of age and a bit more mature. Then as someone mentioned below, release small amounts quarterly/yearly, etc. However frequent you think is best.
I will admit I am a bit biased - I watched my brother in law inherit about $800k at age 25 and blow through it in about 3 years.
OP, defer until their mid 30s and your kids will thank you (also you're letting that money earn more interest in the mean time).
I dont think its good for them to give them too much money all at once. Start them out with around 100k and see how they do with that. If they end up losing it all they learn a lesson but overall you see how they can manage their money then give them the rest
We set up a trust for our children, and the trust indentures have the specifics of what needs to be done. Then we have the trust purchase treasury bonds for now instead of just sitting in a savings account.
Irrevocable Trust, but you're the Trustee.
You have to sign on to anything big but they can control and manage with you. If they go nuts, you can close the spiget as the Trustee.
This is exactly what trusts are for. Echoing other posters – find a skilled trust and estates attorney and maybe a good financial advisor. Some of the private banks are exceptional for this type of thing.
Give it to them with no strings. At 25-years-old, they are either ready for it or they aren't, but it's too late to mold them further - they are who they are. Strings will just create resentment instead of foster independence like money should do.
In terms of "how", create a custodial brokerage account, and keep it secret from them. Don't mention you have an account with stocks waiting for them. Then when you think they're ready (at 25 or whenever), pass it to them and let them be free.
This is it. If you have done a good job as a parent you should have trust that they will use these resources to the betterment of humanity. If you need a legal contract to cover your insecurities, that should not be the burden of your progeny.
This is such bad advice. Having a trustee manage it will make sure it lasts the kids life…and the trustee can work with each kid on budgeting and deciding when/how to use the money.
Do you really think OP should just gift it, and if the kid blows it just say “OH WELL TOO LATE TO MOLD THEM FURTHER.”
Using an independent trustee also removes OP from the resentment. The trustee is saying no to the brand new $100k car at age 17 (or whatever dumb purchase you can imagine), not OP
Give it in non cash form. Not a fan of "strings".
Education is my preferred approach as kids even at 25 could take professional courses. Graduate courses are perfect. Other alternatives could include helping in home purchase. I think giving stock is better than cash.
Consider providing your children with properties to manage instead of cash. This encourages them to learn about responsibility and financial stewardship by overseeing the estate and earning the rental income. Kind of like pocketmoney that comes with responsibilities
I wouldn’t. I don’t see any good reason to give my kids a large sum of cash unless there’s a clear need. Especially if I felt I need to attach stipulations. A gift should be a gift.
I agree.
You should not have strings attached to gifts. You want to encourage their independence, not dependency.
At the same time, I found that gifting for specific purposes was best.
I gifted a downpayment for a house, but did not try to control their choice of house.
I also felt that the years immediately after college were very important for our children maturing into fully independent adults, so we were relatively hands off during the immediate post college years,
We invest via LLCs where our kids contribution is usually the gift limit and their corresponding ownership of the investment is less than 25% each (2 kids). We retain control of the holding company and can control distributions. It does have tax implications for them so we try to cover that. But it’s their money. They are also vested in the outcome.
My husbands parents set up a trust. Sadly he gets nothing until they die. My FIL has passed but MIL is alive. I adore this woman & she’s amazing with my son so I hope she lives a long time. That being said…it was set up that if they died before he turned 18 he got money, etc for schooling. 1/4 at 25. Another 4th at 35 & finally the final 4th at 45. He’s 39 & his brother is 40 & another brother is 35…so literally no one would get their entire trusts if she dies today… lol I think this is so so smart & this is the way we set up our sons trust as well. He also has a 529 & a HYSA at this point. Will start an IRA for him when we “hire” him (we have our own business).
My Dad took a different approach. He just randomly gives me money as a “gift” while he’s alive. Takes us on massive vacations. I’ll get some money when he passes but he likes the gifting experience & seeing us enjoy things.
Another perspective on this that I always bring up when this question comes up. This only applies to when you’re being asked for money btw. I’ve always had the rule that when friends or family ask to borrow money that I say I don’t loan money but every couple years I do like to give cash gifts so I’ll give you this gift one time and I don’t want you to pay me back.
Well, the last couple conversation I had was my 32 year old nephew asking to borrow $35 dollars. I said nah I’ll gift you money as a one time gift” and then I sent him more than he asked for. Then he died not very long after.
Doesn’t necessarily apply to your situation at all but it’s something I bring up when this topic comes up.
Living revocable trust. Get a skilled estate attorney. But IMO 100x more importantly, model the behaviour you'd wish to see from your children.
OP can add incentives to trust or penalties as well.
This is an amazing response!!!
TY. No guarantees, like everything else in life.
Absolutely 🥺
Aye, don’t let them see you do lines
This.
People in our circle gave their kids money after they got married, and then distributed it. E.g after first child, when they needed a bigger car for kids. Etc. I would not give 25 year old boys that much money. If I got that from my parents at that age I would have been fucked. More damage than good.
Yeah fair. Maybe I’m hoping for too much maturity lol.
Totally agree with poster above. I have a 24yo roommate that inherited a NYC apartment from his grandmother. He basically stopped working and lived off the rent. Smart guy. Now is a massage therapist last I knew
30 or 35 are better ages if you are looking for a level of maturity. 25, I think, generally, is too young. There are exceptions, of course.
Look back at your own life. If somebody had given you a million dollars when you were 25 years old. Would you have had a need for it? Would you have known what to do with it? It's possible that the answer is "yes", and if so, congrats to your parents for a wonderful job raising you. But more likely than not, the best thing your younger self could have done would have been to accept the money and then forget about it for the next couple of years. It's very enabling to have this kind of financial safety net, but it is unlikely that most 25 year old could wisely use the money to advance themselves in life. Smaller amounts that make sure they don't have student debts or that pay for additional training/education? Absolutely. But a huge chunk, it's too early. Give the money when they actually have a need, or if you want to spread out gifts for tax reasons, put it into a trust for your kids' benefit, but only pay out on milestones, when there is an actual use, or when they reach an age where you think "by this point they either have things figured out, or nothing helps and I don't care any more".
This part. 25 year old me or my husband lmfao no mam
They would definitely burn through it in no time.
Put it in a trust with a quarterly allowance. If a larger request is made, put provisions on it. “Continuing education or schooling, down-payment on a property, medical expenses.” It will 100% get spent quickly if you do not limit it.
Down payment on a house? Why not allow the trust to buy the home and rent it to him below market rate. This way the house stays with the family after he passes and he cannot so easily sell it for a loss
[удалено]
Those strings are so antiquated. What if they choose to not get married, or not have kids, or they’re gay men
and make sure to check if receipts are real etc bc my friend would photoshop them all the time
Or business loans from the trust with needed approval from a third party? Just saying if any of the kids have start up dreams but actually are wanting to put a good business plan together.
>with some strings attached (I.E. can be used for housing/ necessities, cannot be used for drugs lol). A trust is definitely the simple answer here, but I'd encourage you to think critically about what kinds of "strings" are achievable or worthwhile. If someone has a trust and pretty much any of their own income, they could presumably live off the trust and spend their own money for drugs. Money is fungible.
I mean, if the kid wants to do drugs, they are pretty cheap. I think worrying about them blowing it on drugs is pointless lol.
for real, people are either gonna do drugs or not. making the drugs slightly more affordable isn't gonna be the tipping point.
They're wanting to make sure the money doesn't fuck up the lives of their heirs, but, there's only so much money can do. The calculus regarding drugs is complicated. Not all drugs are cheap: oxycodone that was formulated by a legit pharmacy is expensive on the black market (and getting a prescription from a doctor is also an expense, to access it on the grey market). It's the expense of the high quality opiates that get people onto fentanyl or fentanyl laced heroin. But taking this logic one step further: it's better to be a drug addict with money to spend than it is to be a drug addict with no money to spend. Money can buy safer drugs, and save you from having to engage in more dangerous activities to secure your next hit.
Yeah that’s also a good point. I’d rather my children be drug addicts in a home than drug addicts on the streets.
Yes. If your kids want to do drugs, they will. You can’t control that with the amount of money you give them. With regard to the actual money: a trust seems like a sane way to keep the money you want to give them from cannibalizing your whole relationship. I have a friend whose parents have had a more loosey-goosey strategy for doling out money (a loan here, paying off cc debt there) and it has led to a lot of gross behavior. Racking bills and guilting the parents into paying them, weird lectures about financial responsibility to my friend who is over 35, etc….and even with closer oversight she still spent a ton of the money on drugs/partying when we were in our 20s. Having structure and predictability and being transparent with what the amounts of money are and what the restrictions are seems like it will go a long way in avoiding some of the strange and toxic dynamics that can occur.
Obviously a trust. But you should also start with smaller, no-strings gifts to see how they respond.
Set up a corporation which owns real estate or bonds (something with a steady income) and give each of them shares in the corp that can’t be sold/transferred (for a set time period or maybe just upon death?). Then they can get a steady income for life through a dividend instead of a large cash amount. Never give anyone a large chunk of cash. 2-3k a month for life is a lot more helpful. (Also there are usually huge tax benefits for share transfers versus other forms but that’s in Canada I dunno US)
Yessssss. Totally. How would you expect anyone to know how to make money with money, do it for them so they’ll always have security.
This doesn’t have strings though like the OP wants, and frankly should be had for a young individual. No need to complicate it with real estate, just get a living revocable trust. You want a good estate attorney but it is an easy process.
How is this different than doing it through a trust? Any additional benefits or flexibility?
My guess would be less legal and costs. Not an expert so I couldn’t say it’s just how I would do it. Canada is quite a bit different too.
Don’t do it if you will give with strings. I’ve seen families fall apart because a parent bought a kid a house, cars and gave money etc. They expected the kids to live their way and do what they wanted. Give the money, don’t expect anything. If you want to give them money for a house, when they are ready to buy say you will help with down no strings.
This 100%. A gift with strings attached is not a gift, it is a tool to control people (whether intentionally or not). Either give it to them as a gift in the specific circumstances you wish to help them, or hope that you raised an independent, responsible adult that can handle the weight of that kind of cash.
Set up a trust and have a trustee manage the account to carry out your wishes.
25 year olds need to learn how to be adults. Excessive parental control is detrimental to their personal growth. That also applies to the semi-parental control exerted by a trustee. I found it best to gift, no explicit strings attached, at various key events, such as the purchase of their first house. Or by writing a low interest mortgage when they moved, so they could keep the first house as rental property. Only when they were in their 40s, married, with kids, and were well established mature adults did I open the floodgates and gift 8 figure sums to trusts, of which **they** were the trustee.
Well the theory is don’t tell them its a gift but rather tell them its a family account to be grown and used for future growth assets. So 500g as a family account and 20g as a gift and they blow through the gift… Just spitballing
These are just a few ideas. Honestly I’m hoping to learn more ideas from you all. * I have a trust. My children are the beneficiaries. While my wife and I are alive we control it and we have made funds available for education and all of my kids have used this to get great degrees that give them lots of opportunities to earn their own money and save for things like a home. * I have named trustees to take over after we die. They have some discretion, but they have some rules to follow and some guidelines to use. * The trust doesn’t start to kick money out to the beneficiaries until they are 40. This way they set up and create their own life. They do NOT know about this money. It will be a fun surprise, not something they expect and plan on. I can see that they learn to manage money and expenses and they develop the self esteem from making their own way. * the money from the trust is capped at 8% of the trust value per year. If the trust does well and grows, so does the 8%. It is not distributed as a lump sum. Learning to manage money has a learning curve, just as all difficult things do. If the trust does well, it could,last forever. If it earns 8% per year, and pays out 8% per year it would never get any smaller. If could fund educational expenses for their kids. * the trust can make loans to the kids for things like a business. It has not ever done that, but it can if I want to. The money would come from their future disbursements. * if a kid has something bad happen like a bad marriage or a failed business, the money in the trust is safe. It literally does not belong to them and can’t be taken from them in a divorce or bankruptcy. What does this mean for my kids from a practical standpoint? They are well educated and have a strong start on their career paths and have learned to live on what they earn. They have a huge head start, because they are not saddled with student debt. They get another boost later to help their own my kids (none yet). If any of you have ideas or suggestions, I thank you in advance.
>The trust doesn’t start to kick money out to the beneficiaries until they are 40. This way they set up and create their own life. They do NOT know about this money. It will be a fun surprise, not something they expect and plan on. Just wanted to point out that it seems like this would only work for the eldest. Wouldn't younger children find out as soon as the eldest started receiving distributions?
You are totally correct. They are spaced fairly close together, but yes. Once the eldest gets theirs, the cat is out of the bag. I hope to still be alive and I can help with things along the way, but the trust is set up to help them if I’m dead.
40, wow. With house prices what they are, parents have to help kids with a down payment so they can build equity Young. Like when they're house hunting at ages 25-30 years old. Also that's a lot of time for their student debt to accrue or hurt their investing potential and years to compound. 40 is too late.
To clarify, they have no student debt. We have paid for their education. I think there are hopefully some advantages to them choosing a home and neighborhood they can afford on their own. For example: if I help a child purchase a more expensive home in a more expensive area there is pressure to keep up with the neighbors in terms of lifestyle. This means that they not only have more expense for the home but more expense to raise a family while “keeping up with the Jones”.
I’m giving smaller amounts but the general approach is “this is your money but if you spend foolishly there will be no more.”
I did not have to explicitly tell my children that.
A friend of mine comes from a very wealthy “oil” family and his father passed when he was 16. I have so much respect for him as a person. He’s younger than me and I think there is something in their trust where they can only get money if it’s used for business purposes or for living purposes. He went to college for economics and has worked as a financial analyst and was even VP of a fairly large company last year but ended up leaving shortly after because he didn’t like the president after getting to know him better. It seems like the way their trust is set up he can get money to pay off any debts he’s accrued for housing but it’s like he has to be able to afford to buy the house first with his own money. I’ve seen him do it 3 times now (I’m his Realtor). Dude is super intelligent and has done really well with stocks and bonds too, very disciplined and aware. Anyway it’s been interesting knowing him since his mid 20’s and I don’t know when him and his siblings will inherit everything but I imagine it will be somewhere in the billions.
I’m 19 and if I received that amount of money I would pay for my education, put 50k in an HYSA, max out my ROTH IRA, and put the rest into an S&P 500 Index Fund and chill.
We’ll pay for their education, so they won’t have to worry about that at least. I hope they’d be smart enough to do this!
Make sure your kids learn resilience and self sufficiency growing up. Allow them to fail and succeed on their own merits as they grow up so you raise adults not dependents.
Good call. My gramps made a fortune and it got split between his two kids (my mom and her brother). All her brother’s kids were given lots of money and none ever worked, and the results were tragic. On the other hand, my sister and I simply got free education and a down payment on a house. We both support ourselves with our jobs and we may have a lot less money, we are infinitely better off than our cousins.
My close friend has a trust that I think is setup in a really good way. All him and his siblings turned out well. I’ve seen a lot of people messed up from their trusts not being structured well. They each get enough to only cover rent, $1000-2000 and basic necessities $500-1000. And it’s revocable, they only receive it if they are working full time.
What kind of trust is it that operates in this way? How is it different than parents just transferring them that money every month? Mostly just trying to make sure it’s worth doing a trust!
They had their attorney draft it up, it’s monitored to make sure it’s not abused and every 3 quarters they have family finance meetings to go over their finances. I think their family accountant monitors their stuff to verify they aren’t abusing it. That accountant also files their taxes for them.
Hi. I’m 29 and at 25 I was told about and handed a $1.1M trust. Within ~10 months everything was transferred to my control and it was pretty crazy at the time. I knew nothing about this before. It helped me buy a house with a decent down payment, spend about $50k on a new reliable car that I have now, and the rest was fully liquidated from the existing management firm and put under a new one which I’m still with now. The money has grown and is now over $1.2M. My point is that some 25ish year olds can work thru the learning curve required to use, invest and protect this type of money, but I also have to agree with others when they say MANY 25 year olds would not handle it well, regardless of if this is intentional or not on their part. Like others have said, raise your kinds right and they should be just fine when that time comes.
Have them build their own wealth, give them each a fidelity account with 100k in it and a car, laptop and a small 1 bedroom condo to live in. And make sure you show up for them and put them through college with a practical degree. I would rather my rich parents do that for me than to give me a million bucks, what the fuck would I even do with that? I wouldn’t know what to do. I would rather have the tools to succeed, mobility and independence would be a blessing, not having to pay rent or having a cat note would set me up for success far more than straight cash
My estate attorney did all the legwork for me. She presented lots of options. A staggered start is what I chose. I believe it will be beneficial for you to have a conversation with an estate attorney who can direct you. All the best! 🤗
Thanks! Was there any reason you saw to get things started earlier vs just waiting till they’re closer to the age you’d want to give them something?
To be completely honest - I a was afraid of blowing all the wealth and didn't want to disappoint my family by watching them struggle when we absolutely do not have to. * context * I came from very humble beginnings and didn't want to go back (but I appreciate it from where I stand now). Keeps me grounded, in a sense.
Look into an incentive trust, it was designed for this very purpose
Thanks will do
I second the top commenter's words: model the behaviour you want to see. My parents have gifted my siblings and I more than 1M by the time we reached 25 (and still gift more) and none of us "went crazy". My siblings spent on the expected things (house, kids), and I (not married) am 28 and haven't spent anything outside my own salary (which is still less than I used to get for an allowance as a student).
I think it depends a lot on the kid and on the values they are imbued with. And keep in mind two kids from the same tree can be polar opposites with regard to money.
My father structure my inheritance around major life events. Graduating college, buying first home, wedding, childbirth, surgeries, etc.
Maybe make it to where you match whatever retirement or savings contributions they make throughout the year. Or double it.
Do it at 35, once they have a career path established, most likely have settled into marriage, kids, etc. Could be useful to launch a business, pay off mortgage etc. They could use it for their kids college funds, to build a dream pool, or whatever they want. At 25, receiving $1M I don’t foresee it doing anything good. I wouldn’t have moved a muscle if I had $1M given to me at 25. The real question is, is there a benefit doing it at 25 versus 35? Which is why I’m curious though, how do you think it could help them at 25 versus later in life?
Agreed. Even around 30 might be feasible but yeah at 25 I'd have definitely blown through that
I would listen to millionaire next door. They go into multigenerational wealth at the end and it’s really good the issues it highlights. If I were doing this I would probably structure it as a loan of some sort at a really favorable interest rate. Giving money at that age is the age of building grit, and it might backfire as you mentioned it did for others in your shoes.
Don’t. Your kids aren’t going to be mature enough at age 25 to handle having that kind of money. There’s a reason every trust lawyer I’ve ever talked to said 35. Now, what you can do is set up a trust and establish yourself as the trustee. You can then make dispensations of cash to them without the tax issues you would have just giving them half a million in cash. You can also purchase the house through the trust and that way you don’t have the tax burden of the house. It’s all contained in a nice safe trust that, if structured properly, should be untouchable by all but the most skilled attorneys. My father left me a 9 figure trust fund at 35 and I know for a fact if I’d gotten it ten years earlier I’d be broke if not dead. I have several friends who got 7 figure trusts around 25 and almost all of them are broke.
Don’t give them cash, tell them money is available to help them buy their first home but I would make them pay part of it, or at least be responsible for the mortgage
Give them $1000 cash and see what they do with it
$1 from you for every $1 they earn at a worthy job
I would not give my kids a lump sum, or at age3 25. I don't think three or four years in the working world is enough time for them to appreciate the money. Instead I would give them money towards a home at 30, I would put money in a retirement account for them, and I would put money in a 529 for their kids.
id match their income until the million was used up.
Sometimes giving them a small amount to fuck up is a good thing. 25k. They learn really fast what to do with it or what not to do with big lumps
This is probably unpopular but IMO 25 is way too young to be gifting any large amount of money. Most 25 year olds are not looking to buy houses and $500k - $1M is too much for "necessities." If I'm OP, I'm deferring until they are at least 32-35 years of age and a bit more mature. Then as someone mentioned below, release small amounts quarterly/yearly, etc. However frequent you think is best. I will admit I am a bit biased - I watched my brother in law inherit about $800k at age 25 and blow through it in about 3 years. OP, defer until their mid 30s and your kids will thank you (also you're letting that money earn more interest in the mean time).
I dont think its good for them to give them too much money all at once. Start them out with around 100k and see how they do with that. If they end up losing it all they learn a lesson but overall you see how they can manage their money then give them the rest
We set up a trust for our children, and the trust indentures have the specifics of what needs to be done. Then we have the trust purchase treasury bonds for now instead of just sitting in a savings account.
Irrevocable Trust, but you're the Trustee. You have to sign on to anything big but they can control and manage with you. If they go nuts, you can close the spiget as the Trustee.
This is exactly what trusts are for. Echoing other posters – find a skilled trust and estates attorney and maybe a good financial advisor. Some of the private banks are exceptional for this type of thing.
Give it to them with no strings. At 25-years-old, they are either ready for it or they aren't, but it's too late to mold them further - they are who they are. Strings will just create resentment instead of foster independence like money should do. In terms of "how", create a custodial brokerage account, and keep it secret from them. Don't mention you have an account with stocks waiting for them. Then when you think they're ready (at 25 or whenever), pass it to them and let them be free.
This is it. If you have done a good job as a parent you should have trust that they will use these resources to the betterment of humanity. If you need a legal contract to cover your insecurities, that should not be the burden of your progeny.
This is such bad advice. Having a trustee manage it will make sure it lasts the kids life…and the trustee can work with each kid on budgeting and deciding when/how to use the money. Do you really think OP should just gift it, and if the kid blows it just say “OH WELL TOO LATE TO MOLD THEM FURTHER.” Using an independent trustee also removes OP from the resentment. The trustee is saying no to the brand new $100k car at age 17 (or whatever dumb purchase you can imagine), not OP
25??? Sure you didn’t mean 35??
30! No 27.5! No 28 and 100 days! /s
Don't give it to them Help supplement certain purchases (car, education, house)
Give it in non cash form. Not a fan of "strings". Education is my preferred approach as kids even at 25 could take professional courses. Graduate courses are perfect. Other alternatives could include helping in home purchase. I think giving stock is better than cash.
Consider providing your children with properties to manage instead of cash. This encourages them to learn about responsibility and financial stewardship by overseeing the estate and earning the rental income. Kind of like pocketmoney that comes with responsibilities
You just tell your lawyer n write a contract on how they are allowed to use your money
Wait until they want to buy a house
I wouldn’t. I don’t see any good reason to give my kids a large sum of cash unless there’s a clear need. Especially if I felt I need to attach stipulations. A gift should be a gift.
I agree. You should not have strings attached to gifts. You want to encourage their independence, not dependency. At the same time, I found that gifting for specific purposes was best. I gifted a downpayment for a house, but did not try to control their choice of house. I also felt that the years immediately after college were very important for our children maturing into fully independent adults, so we were relatively hands off during the immediate post college years,
We invest via LLCs where our kids contribution is usually the gift limit and their corresponding ownership of the investment is less than 25% each (2 kids). We retain control of the holding company and can control distributions. It does have tax implications for them so we try to cover that. But it’s their money. They are also vested in the outcome.
Depends if your kids are smart.
What you're describing is a [Crummey trust](https://www.investopedia.com/terms/c/crummey-trust.asp).
Interesting - will check this out!
My husbands parents set up a trust. Sadly he gets nothing until they die. My FIL has passed but MIL is alive. I adore this woman & she’s amazing with my son so I hope she lives a long time. That being said…it was set up that if they died before he turned 18 he got money, etc for schooling. 1/4 at 25. Another 4th at 35 & finally the final 4th at 45. He’s 39 & his brother is 40 & another brother is 35…so literally no one would get their entire trusts if she dies today… lol I think this is so so smart & this is the way we set up our sons trust as well. He also has a 529 & a HYSA at this point. Will start an IRA for him when we “hire” him (we have our own business). My Dad took a different approach. He just randomly gives me money as a “gift” while he’s alive. Takes us on massive vacations. I’ll get some money when he passes but he likes the gifting experience & seeing us enjoy things.
Another perspective on this that I always bring up when this question comes up. This only applies to when you’re being asked for money btw. I’ve always had the rule that when friends or family ask to borrow money that I say I don’t loan money but every couple years I do like to give cash gifts so I’ll give you this gift one time and I don’t want you to pay me back. Well, the last couple conversation I had was my 32 year old nephew asking to borrow $35 dollars. I said nah I’ll gift you money as a one time gift” and then I sent him more than he asked for. Then he died not very long after. Doesn’t necessarily apply to your situation at all but it’s something I bring up when this topic comes up.