Single Mum Turns Down $3 Million

Dear Scott,
 
I’m a single mother raising two children on my nursing wage. I have just paid off my house in Tasmania and am now adding 10% to my super each pay. I don’t renovate or travel far. No dishwasher and a broken oven. It has come to my attention that I am to inherit $3 million from a relative. This is generous but wealth like that brings complexity. I have set myself up to retire on $42,000 per year when I’m 65. I don’t need more and I prefer the simple life of living within my means. And I want my children to do well in their own right and own a home eventually. However, I don’t want to take the satisfaction of doing it themselves away. I was thinking of purchasing a large parcel of land in Southern Tasmania to protect it from developers in the future. What would you do?
 
Grace
 
Hi Grace
 
You are obviously a weirdo.
 
However, your weirdness comes from a place of deep contentment, wisdom, and living your values.
 
You have something that most people will never have:
 
ENOUGH!
 
Yet while it’s true that wealth does bring complexity, it also has its advantages, especially for a single working mother. So if I were in your shoes I’d divide the inheritance into three accounts:
 
First, I’d put a small amount in an online savings account for emergencies (and to fix your oven!).
 
Second, I’d put a large amount into an ethically invested index share fund (given you’re bent that way).
 
Why would you want to do this?
 
So you can be in a position to do the ‘Barefoot Property Ladder’ with your kids. You can incentivise your kids to save as hard as they can by matching their house deposit savings, dollar for dollar. (And remember, your kids may not choose to live in Tassie. If they instead choose to live in Sydney, you’ll need a bloody big ladder!)
 
Finally, I’d set up a private ancillary fund (PAF), which is a type of charitable trust. You donate money into the PAF and receive an immediate tax deduction. Then each year you can use the money to give to the charities you choose. The key is to get your kids involved in deciding where to donate this money. Who knows, hopefully some of what you’ve got will rub off on them!

Scott.

Can I Block My Husband?

Hi Scott,

I dread my parents passing away! Apart from the emotional devastation, I am petrified about the financial impact the inheritance (built during a lifetime of hard work) may have. I wish to invest it to secure my family’s future, but my husband will want to spend every cent. He refuses to do a budget and will not ditch the credit cards, and I fear this will be another area in life where he will cause havoc. Do I have any right to block him (without divorce)?

Kim

Hi Kim,

Yes, technically, you could block him.

Here’s how:

First, you’d get your parents to set up a three-generational testamentary trust (which means their assets are automatically placed into a trust after they pass).

Second, you’d name a relative -- who is on your side – but independent-- to be the trust executor.

Third, they’d (hopefully!) keep a tight grip on what the trust money gets spent on.

And then you’d all live happily ever after!

Well, actually, let’s role-play this for a second:

You: “I’m getting an inheritance from Mum and Dad, but I’m not allowing you to spend any of it.”

Husband: “Huh? Why?”

You: “Because … I actually don’t trust you with money … you’ll just end up blowing it.”

Stop.

Kim, how do you think the rest of this conversation will play out?

Badly, I’d suggest.

It sounds like you need couple’s counselling to focus on the underlying issues in your marriage.

Regardless, I like the idea of a three-generational testamentary trust, mainly for the flexibility it affords in tax planning. Still, while your parents are getting their lawyers to draft this up, ask them to include a ‘divorce protection trust’ in their wills.

Just in case.

Scott.

Hit Me Baby One More Time?

Scott,

My four siblings and I have inherited close to $100,000 between us. I am the executor, and am unsure how best to manage the funds. At the moment two of my siblings are unaware of the inheritance as, to be honest, they will most likely spend a good amount of it on drugs. Would it be best to divide it individually, or invest it as a whole, or set up trusts for these two? Even with a trust, I don’t know when the best time to release the money would be. Help!

Chris

Hi Chris,

Have you seen the explosive documentary on Britney Spears?

After Britney went off the rails in 2008, her old man took out a court-approved conservatorship. This order essentially makes him her legal guardian and gives him authority over her finances and personal decisions. The controversy is that many of her fans believe the conservatorship is exploiting rather than helping the 39-year-old superstar mum.

So what does all this have to do with you?

Well, you’re acting like Britney’s father … only worse.

I mean, at least he went to court and got an approved order … you’re doing this under your own steam.

Chris, let me be very clear: IT’S NOT YOUR MONEY.

It’s your siblings’ money and, heartbreaking as it is, if they want to blow it on drugs then that’s their business. As an executor you are the servant, not the boss, and you are duty-bound to inform the beneficiaries, and then distribute the money as per the deceased’s wishes.

Now I know you’re a caring brother and you only have your siblings’ best interests at heart.

So you should urge them to see specialist drug counsellors. They can talk through the very serious issue of the money fuelling their drug addiction, and the compounded pain and shame of blowing their inheritance. They may decide to hand over financial power of attorney to you (or someone else they trust). They may not. Either way, it’s their life, and their decision.

If you feel that they are vulnerable and lack the ability to look after their money you can seek an administration order in your State. It’s a legal document that gives a person (called an ‘administrator’) power to make decisions on behalf of another person about financial affairs. This includes money, property and some legal matters. But it is a big responsibility. And it may be opposed.

#FreeBritney.

Scott.