Leav­ing it to the grand­kids

Central Leader - - OPINION -

Leav­ing in­her­i­tances to wealthy grown-up chil­dren can be a funny thing in this day and age.

If the kids have grown into self­suf­fi­cient, rel­a­tively well-monied adults there can be a temp­ta­tion for older folks to think about hav­ing the wealth they leave skip a gen­er­a­tion.

In other words, leav­ing the money to the grand­kids.

They just don’t seem to need the money all that badly and the grand­kids, fac­ing user-pays costs for ed­u­ca­tion and ridicu­lous house prices, look like they do.

Grand­par­ents worry about their grand­kids af­ford­ing homes.

They worry about them end­ing up with a big debt af­ter their ed­u­ca­tion.

But for those de­cid­ing to leave the money, or part of it, to the grand­chil­dren, there are some things to bear in mind.

The first is to con­sider very care­fully how you leave the money, of­ten the pro­ceeds of a house sale.

Some pro­fes­sional or­gan­i­sa­tions would have peo­ple set up trusts to hold the as­sets for the grand­kids un­til they reach an age of fi­nan­cial re­spon­si­bil­ity, say 25, with the pro­fes­sion­als as the trustees.

They will en­sure that it is spent on the things you want it spent on, whether it be a house de­posit or univer­sity fees and liv­ing ex­penses.

The prob­lem with this ar­range­ment is that pro­fes­sion­als can turn out to be quite un­pro­fes­sional and have a ten­dency to charge high fees. They are also a pres­ence in your grand­child’s life, stand­ing in judg­ment as to whether to re­lease money for a pay­ment.

If you trust your chil­dren (your grand­kids’ par­ents) to do the right thing with the money, it’s OK to leave it in trust with them as the sole trustees.

A lawyer can help you do that by nam­ing them in the will as trustees and leav­ing in­struc­tions as to what the money is for.

It doesn’t re­quire any­body ac­tu­ally for­mally ar­rang­ing a trust.

Only if they (your kids) can’t be trusted then another trus­tee is re­quired and only when you un­der­stand the true costs of the pro­fes­sional trus­tee (and its abil­ity to lift its fees in the fu­ture) should you con­sider the pro­fes­sional.

If your grand­kids are old enough, and you trust them, there is no rea­son why you can­not leave them the money on con­di­tion it is spent on some­thing spe­cific, such as a house de­posit. It is un­der­stand­able to wish to con­trol your grand­chil­dren’s use of the money you leave them.

Cash is eas­ily spent, par­tic­u­larly by peo­ple who haven’t had to earn it. But ex­ert­ing con­trol from be­yond the grave may be go­ing to far. It also tends to add com­plex­ity, cost and, quite frankly, may not work.

If leav­ing money to grand­kids in such sit­u­a­tions, I also sug­gest talk­ing to your kids about what you are plan­ning and get the bal­ance right. Don’t sim­ply cut out the mid­dle gen­er­a­tion. That can be a short road to your es­tate be­ing chal­lenged in court.

Of course, many par­ents in a healthy fi­nan­cial po­si­tion will re­spond well to money be­ing avail­able to help their kids buy homes or pay ed­u­ca­tion debts.

Le­gal ad­vice is al­ways sen­si­ble in ar­rang­ing your will but re­search your op­tions first. Consult friends. Buy wills books. Consult the lessons of the in­ter­net.

Know­ing what you want to do be­fore you seek ad­vice re­duces the chance of an un­nec­es­sar­ily high bill or be­ing sold a scheme that en­riches the pro­fes­sion­als at the ex­pense of the grand­chil­dren.

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