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Personal Finance

No 18-year-old needs $1 million

DEAR BRUCE: It may seem trivial to be asking this question, as there are so many people out there having such a hard time, but I do have a concern about my granddaughter. When she turns 18, her trust will expire, at which time she will be able to withdraw in excess of $1 million that was left to her by her deceased father. Obviously, my daughter doesn’t want her to have immediate access to this money and blow it; she would like to know how to invest it for her. Any suggestions? — Reader, via email

DEAR READER: Leaving this amount of money to someone at the tender age of 18 was an incredible exercise in poor judgment. Far too many times, kids who are left with excessive amounts of money when they are little grow up to be young adults who you wish could not get their hands on the money.

For example, if the money was left to them when they were 10 and they spent the next eight years hanging out with the wrong crowd, stealing, doing drugs, etc., there’s a whole list of things that could go wrong. The last thing you’d want is for kids like this to have this kind of money.
You, your daughter and your granddaughter should sit down with a trained and recommended financial adviser. You will have to trust the adviser to know where the money should go. That is the best thing for all parties. I wish you well.

DEAR BRUCE: My husband and I are 82, and we don’t have a will. My husband has refused to get one, and I don’t think at this late date I’m going to convince him otherwise.

If we both die without a will, will our children have any problem getting our home and our bank account? We don’t have any bills, and our home and automobiles are paid for. — Reader, via email

DEAR READER: The answer to your question is: Yes! You bet they will have problems! You are talking about leaving your home with undivided interest to more than one child, which is always a mistake.

For goodness’ sake, you should have simple reciprocal wills, one to the other and one to your surviving children. At the very least, one of you will have to be appointed administrator of the estate by the probate court, which will involve some expense.

I have written many columns on this subject, expressing my well-defined view that there always should be a personal rep or administrator (which you currently don’t have) and instructions to them in a will that the home should be disposed of and the monies divided. Not having a will is a huge disservice to the people you leave behind.

DEAR BRUCE: Friends of mine won a million dollars in the lottery. Would they be better off taking the lump sum or taking payments of $32,000 a year for 20 years? — P.S., via email

DEAR P.S.: Congratulations to your friends.

I have never seen a situation where taking the annual payments made any sense. Lotteries advertise these huge payouts, but then when it comes time to pay a winner, they actually pay a much smaller amount in cash as a lump sum. The other option is to make annuity payments stretched out over 20 years — sometimes longer.

Other things being equal, unless the recipients have some type of a problem such as liens — huge debts that would immediately be attached — the cash payout is to their advantage. Spendthrifts might opt for the payouts over 20 years because they know they will blow through the lump sum payment. But on balance, I would take the lump sum.

Send questions to or to Smart Money, P.O. Box 7150, Hudson, FL 34674. Questions of general interest will be answered in future columns. Owing to the volume of mail, personal replies cannot be provided.

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