This is a topic my husband and I have considered carefully of late. Our youngest is about to turn 18, and we re-did our wills, removing guardians and assigning everything to them legally.
Our lawyer talked to us about different ways to do this, and I don't think he believes we made the right choices, but they were ours to make. We went back and forth about it ... but, in the end, we chose to say that when we die -- no matter how old they may be -- they get it all then. We really discussed it for months, but in the end, these were our reasons:
- Putting money in a trust isn't free. We don't want to waste money establishing and maintaining a trust, not when that money could be in my children's pockets.
- We've been living with these kids for 18 and 21 years, and we know they're forward thinkers with self-discipline who will listen to advice. That doesn't mean that they're immune from making bad choices, but we know that we've taught them frugal habits. While I don't think they'd handle the money as well I would (with years of experience), but I also don't think they'd blow through it.
- And perhaps most importantly: We don't really think they'll inherit early; we're both middle-aged, but we're young and healthy, and the chances of us BOTH dying while the girls are still in their 20s aren't particularly high.
However, we also chose not to simply hand it over without advice -- after all, they're young and inexperienced. Rather, we put together a full notebook of materials (2 copies, one for each child), and they know that these notebooks are in the waterproof, fireproof safe.
We put significant effort into putting this advice and materials together for the girls, and they know where to look ... if we were both to die. Right now the notebook is written for them in their early 20s; we've decided that each year we're going to review the notebook in April when we do our taxes, and we're going to update things as appropriate. So at some point we'll include sons-in-law and grandchildren, etc.
Here's what we put into the notebook:
- A personal letter explaining in detail what's obvious to older people: This money is a gift that will come but once in their lives, and if used correctly it can give them choices and make their lives (as well as the lives of their future spouses and children) better -- literally forever; whereas, if used poorly, it can get them used to a lifestyle they can't continue. It explains that this money -- though it might seem like a great deal at the moment -- is not enough for them to live upon for the rest of their lives, and it begs them to make good choices.
This letter gives them permission to spend a small portion of their inheritance on something "fun" -- and to do it without guilt -- but not to "play with" more than a certain amount. It specifically suggests that they go on a cruise or a ski vacation for the Christmas that they spend without us.
And this letter asks them NOT to make any big changes in the first six months. It discusses how they'll be emotional and will be searching to find their way; that is, they're not to buy a new car, not to quit their jobs, etc. for the first six months; rather, they're to wait until their emotions come back into focus before they make any big choices.
It tells them which family members they should go to for help (and which ones who should be avoided because they'd hurt more than they could help).
One daughter is almost finished with college, the other is just beginning. The letter instructs them both to complete their education, and it points out that we could've withheld the money until they'd done so ... but we chose to trust them to finish their educations.
One daughter has a significant other whom we think she will marry as soon as she's done with college, but we caution the other girl NOT to let any young men know that she has this money -- and we explain why.
Then we get to the checklists, upon which we spent significant energy:
- The first section of the book is a checklist of things they must do IMMEDIATELY. It includes the name of the funeral home our family's always used, instructions on going to our house, caring for our pets, securing the house and our cars, etc. This section tells them to be frugal with our funeral because money isn't love. It also contains a list of family and friends /phone numbers that they should call, and it contains photographs they could use for an obituary.
- The second section is about things they must do within a few days. It includes contact information for our lawyer, a copy of the will, and information on how to get the lawyer to open a probate file, obtain death certificates, etc. It tells them that they're labeled as beneficiaries on our bank accounts, and it tells them what banks to go to/file numbers, and how to get the money from our accounts.
This section instructs them to use the money from our checking and savings accounts for our funerals and their immediate needs. It should be enough for our oldest's boyfriend (who is not American) to fly over immediately; he would be a good influence on the two of them, if they were suddenly planning our funerals and a new future without us.
- The third section is about collecting our final paychecks, investments, etc. It contains all our account numbers, contact names, etc. so they can get what was ours. And we've made them beneficiaries on everything (that itself was a chore). This section also discusses what they must pay on our behalf; it includes a list of the bills we pay every month (so that no one can fool them by claiming we owe them money).
This section reminds them that this money can either be the best or the worst thing that ever happens to them ... and it asks them to spend the majority of it for education, for a house, and for their retirement.
And this section gives them a number of specific suggestions on exactly how they might choose to invest their money. It lists experts to whom they might turn for advice. We tell them that we lean heavily towards the idea of them finishing their educations, buying themselves houses, and then putting the rest of the money into retirement accounts.
This section discusses the virtues of keeping vs. selling our house and our cars. And it tells them how to go about selling these things (right down to the names/contact information) for a handyman, in case things need fixing around the house before they sell.
This section includes two years of our tax returns and the name of a tax attorney to whom they should turn to file our final taxes the next April. As I said, we plan to review /update this notebook every April, so each year we'll toss the oldest tax return and replace it with a newer one so they'll always have two years of tax returns, which the CPA would request.
- The final section of the notebook is documents. It includes official copies of our birth certificates, copies of our will, copies of our parents' wills (because we inherited properties through those wills). This section also contains a flash drive with all these documents digitized.
Whew, that was a lot, but -- as I said -- we put significant effort into this project. We tried to put together everything they'd need, and we do feel secure about it. We feel sure that IF we were both to die while our girls are in their 20s, they would be able to use this information to navigate the storms connected to finalizing our estate and using their inheritance well.
If we were to die, and if they were to inherit in their 20s, would they handle our money well? I think they would -- but these notes would help them do it well.
lol
