When I was 12 years old, I was riding in my dad’s car when a teenage driver ran a red light and plowed into the passenger side where I was sitting. I had to go to the emergency room for treatment, but my injuries were not grave and I made a quick recovery. About a year later, I received a settlement from the insurance company of $8,000.
My dad told me he’d hold onto the money for me until I was an adult. I didn’t forget about that astronomical sum, and when I turned 18, I asked him for the money. He said, Curtis I have some good news and some bad news — which do you want first? I said, “Give me the good news.” He said, “I invested the money for you. The $8,000 is now $13,000.”
“Great,” I said. “That’s half the price of the new car I’m going to buy!”
Then he gave me the bad news: “The settlement agreement required that I put it in an account that you can’t access until you are 59 years old.”
It was as if he told me that he had taken the money and lit it on fire. I promise you that planning for life after 60 was not on my mind at that time. I wanted to buy a new car! I was driving a 10-year-old Dodge Lancer that my grandmother had generously sold me for a token price. It was beige and very Grandma, not black and fast like that car I wanted. To put it mildly, I was not pleased with my father’s decision at that time.
I occasionally share this story with clients as we are creating their estate plan. When it comes to the issue of determining when children are ready to responsibly receive inheritances, an increasing number of my clients and other Americans are deciding that the traditional ages of 18, 21 or even 25 are too young for their children to be trusted with significant portions of the parents’ wealth.
Parents sense that their children aren’t ready to handle wealth, and that is supported by new research into brain development. Scientists, who once thought that the brain was fully grown after puberty, have found the period which they call “emerging adulthood” to be the ages of 18 to 29. Crucial parts of the brain are continuing to develop during this life stage.
Specifically, the front part of the brain (the prefrontal cortex) is one of the last regions of the brain to mature. This area of the brain is responsible for planning, prioritizing and controlling impulses.
So what do I typically recommend for my clients trying to figure out what age would be appropriate to allow their children to control their inheritances if their parents were to pass away? My suggestion is typically somewhere between ages 30-35. That may sound like an advanced age to older readers or clients who were married with children and established in careers by that point, but as more young people obtain graduate degrees and delay marriage, the onset of traditional markers of adulthood is delayed.
Oh, and as for the $8,000 that my dad didn’t let me have. I thank him all the time for making the right decision — when I’m 59 and it’s worth many, many times $8,000, I’ll be able to buy more than a car with the money. Thanks Dad!
Curtis Kaiser, JD/MBA, a certified specialist in estate planning, operates Kaiser Law Group, a boutique estate and business planning firm focused on helping families and small business owners efficiently plan for their futures.