A grandparent leaves money to one of your children. The child is only 10, so you’re named as a guardian. Essentially, the money is under your control until the child is no longer a minor.
However, you’re worried about what could happen down the line. Is your child the type of person who tends to blow through money quickly? Though the child is technically an adult at 18, are you concerned that handing the full sum to an 18-year-old means it won’t be spent wisely?
A lot of parents deal with this. Perhaps your child is in line to get $50,000. You know how helpful that could be with rising tuition costs, when your child wants to buy a home or if he or she wants to start a business. However, all your child sees is the chance for a carefree summer vacation in Europe or a new sports car.
You could also be worried about your child’s friends. Many college students have very little money, work part time, and get by from one paycheck to the next. Will your child’s friends try to get him or her to pay for everything if they find out there is $50,000 in the bank?
The way you address this depends on your situation and your child, but one option may be setting up a trust for the money. This can help to limit the ways that the money can be used, meaning that it won’t be wasted and will be spent in the way that your own parents hoped. Be sure that you understand all of the options a trust provides and what legal steps are needed to set it up.
Source: LearnVest, “What Do You Do When Your Kid Inherits Money?,” Eileen Gunn, accessed June 20, 2017