Don't Wait To Tell Him About Wealth

Jason says one of his sisters made his youngest son the primary beneficiary of her retirement accounts. Jason doesn't know how much it is, and he doesn't know if he should even discuss it with his son.

QUESTION: Jason in Louisville and his wife have four young children. One of Jason’s sisters made his youngest son the primary beneficiary of her retirement accounts should something happen to her. Jason doesn’t know how much it is, and he doesn’t know if he should even discuss it with his son. Dave offers some points to think about.

ANSWER: This is what you tell the other kids. It wasn’t a slam to them. It was more that she has a special connection to your son because she’s his godmother. Just tell them the truth. Don’t let it be a surprise when they’re 24. The same thing for him—don’t let him be surprised by sudden wealth at 24.

I think it is good for you guys to have a general range in how much it is. Is this $1 million or is it $10? It changes the discussion. Ask your sister, and let her know that you don’t need to know exactly, but you need to know how to prep your son because you want the money to be a blessing to him and not a curse. That’s all you’ve got to ask her. As far as he goes, just raise him like you would raise him anyway, but age appropriately begin discussing it. Can a six-year-old emotionally grasp that he’s a millionaire? No, and it’s not good for him either. But a 16-year-old doesn’t need to be surprised, and for sure an 18-year-old doesn’t need to be surprised.

As they start to reach their teen years, I’m going to start unpacking. You might just say that his aunt has left him a nice gift when she passes away. You can say that when they’re young, and that’s all you have to say. Then later on, you say the nice gift you talked about is quite a bit of money. The thing I think you’ve got to do with a kid is teach them that wealth is a big responsibility. You ever heard the old-fashioned phrase that rich people were called people of privilege? It’s not because they were somehow privileged. It is that they have the privilege of serving with that wealth. Managing it for the good of others is a privilege. That’s what you need to drill into this kid. It’s not his money. It’s God’s. He’s going to be called to manage it for God, and that doesn’t mean a blonde and a convertible and a cocaine addiction at 18 years old.

Legally, if he inherits the money before he’s 18, it’s his money. But you control him before he’s 18. He can’t get access to the money. You can’t misbehave with the money. It’s there for him and his benefit, but until he’s a legal adult, the parents control it. You’ve got that much control, but when he turns 18, if he decides to be stupid, he’s going to be a rich stupid.

Your sister could put stipulations on the money. She could name the beneficiary, and I actually would recommend it, to not be a person but a trust and have the trust have certain terms. That way, the money is ensured to be going to good things. When my children were minor children, that’s what I had in place. Ask an estate planner. Get some professional opinions about it, but at least that way you can make the money behave longer. If it’s just left to him when he’s 18, it’s up to his decisions when he’s 18, which just scares the crap out of me.

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