If you give a teenager a large sum of money and tell him or her that it can be spent however the teen wants, you can guarantee that a large portion of it will be wasted if not all of it. It is no different for teenagers who receive extremely large inheritances. Thus, teens who inherit need good help.
Generally speaking teenagers are not known for their wise financial decisions. Even the most spend thrifty of teens will waste money if they are given a fortune. It is not their fault as they do not yet have the life experiences to understand how difficult it is to earn money and replace what has been spent.
They truly cannot entirely grasp the concept that money does not grow on trees. For this reason a teenager who inherits wealth needs assistance from a responsible adult to manage that wealth.
Recently, the Wills, Trusts & Estates Prof Blog offered a few tips for adults who are charged with helping teenagers who inherit wealth in "What To Do When A Teenager Inherits A Fortune."
The tips include:
- Create a spreadsheet – A spreadsheet of all of the inherited assets and the restrictions on them will help the teen and the adult keep track of everything.
- Stay in contact – Use regular contact with the teen to help guide them to make smart decisions. It can also be used to make sure that they have good financial management advisors in place when they become adults.
- Use Teachers and Coaches – Teens who inherit need a sense of purpose in life beyond just spending their wealth if they are going to be successful. Teachers and coaches can make excellent mentors and help guide the teens into meaningful pursuits and careers.
Reference: Wills, Trusts & Estates Prof Blog (Nov. 28, 2015) "What To Do When A Teenager Inherits A Fortune."
Leaving money outright to a teen or any other heir is one of the most common estate planning mistakes. For more information order a free copy of our report The 7 Biggest Mistakes People Make in Their Estate Plan by clicking the link.