Leaving it to the grandkids
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.