Ask Paul: My son blew $150k sponsoring racecar drivers

Dear Paul,

I am 69 and about 15 months ago I sold $300,000 of shares and gave $150,000 each to my daughter and son, who are in their mid-30s. I am in good health and comfortably well off.

My daughter used her share to purchase a new home and my son decided that he wanted to sponsor race car drivers and gave most of it away within a month.

My son is single and lives on his own in a rented unit and I encouraged him to invest a small amount of it in shares and put the rest towards a deposit on a small home or unit but, sadly, he didn't.

The idea of giving them each a reasonable amount of cash while I am still alive was to see them enjoy it and set themselves up somewhat.

Unfortunately, my son now lives from week to week and constantly asks me and my daughter for money to get by. He earns a meagre salary of around $55,000 a year and has always been a bad money manager.

Is there a way to drip-feed my son's share of his inheritance when I die so that it may last him for many years?

I don't want to cause ill feelings between my kids if one gets a lump sum and the other is spoon-fed! Of course, I will be discussing this issue with my solicitor, but I would also be interested in getting some advice from you. - Craig

Children! I often wonder what it is that causes kids from the same family to have such different levels of financial literacy. Exactly what your son was thinking when he sponsored race car drivers is quite beyond me and I am sure you as well, Craig.

I agree completely about chatting with your solicitor, but I am happy to add a few ideas. Unfortunately, changing people's money behaviour is not easy. But the evidence here is that your son will not handle an inheritance well.

I agree with the wisdom in treating kids equally, but your son has failed the commonsense test.

One option would be to direct your estate to two testamentary trusts that allow access, as an example, in three tranches five years apart. If he loses the first, the hope is he does not lose the second and then the third!

This, of course, depends on your asset base, but it may be possible to buy an investment property to which your son gets lifetime occupancy or it reverts to him at a certain age.

Equality is a great thing, but my concern is if your son loses all of his inheritance he will lean on his sister forever. Unless he proves his ability to handle money, it seems to me you need to protect both your children. If this involves an equal split, but different access, so be it.

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