If you’re wondering at what age your children or grandchildren will be old enough to handle an inheritance, well, you’re not alone.
U.S. Trust recently conducted a survey and asked them that precise question. The issue is important because many parents leave assets in a trust for children or grandchildren until they reach a certain age, so the parents have to choose an age at which to release the funds.
The survey answers varied widely. Here’s a closer look at the results:
- Age 18-24: 4%
- Age 25-29: 23%
- Age 30-34: 37%
- Age 35-39: 17%
- Age 40 or older: 17%
So then, what is the right age? It depends. As an attorney who has both drafted trusts for many years - and also been there to see what happens at the time of eventual distribution - there are no "one size fits all" solution. Just as any 2 children are inherently different in the attitudes toward money, so will be their eventual behavior when they receive an inheritance. Certainly, the path each child takes in life, including who they marry, will play a large role in this outcome.
I like a blended approach. If the size of the inheritance will be below $50,000, I suggest a lump sum distribution at either graduation from an accredited 4 year college, or turning 25 years of age - whichever happens first. This creates an incentive to finish school. The money can be made available by the trustee for educational expenses.
For larger inheritances, I suggest breaking it up into a few incremental distributions. For example, One third at 25, another third at 30 - and the balance at 50. Fifty may seem an awfully long time to wait, but part of a large inheritance, especially in this new age without traditional company pension plans, should be looked at as a retirement account.
If you have questions about these issues and how they affect your estate plan, call and schedule an appointment.