Email question: Help prevent young adults from spending through trust


I am the trustee of a trust for two young adults . One is a senior in high school and the other is in college.

They collectively have over $700,000 in CDs. Because of the restrictions on the trust through the courts, I am unable to invest the money.  Although I could appeal to the courts to invest their monies, it is like pulling teeth so I just keep the monies in CDs. Of course, this means that they will run out of money more quickly because the money is not gaining much interest.

My struggle is to get them to think about a job, financial planning, and becoming financially responsible.  Like most children, they ask for money for legitimate expenses but they don’t know how to budget.  Then they run out of money and need more. I fear that they don’t have the tools to invest and spend wisely once the rest of it is given to them. There are many books, but there are no workshops or sessions that I’ve found that I could send them to help whip them into financial shape.

And to be honest, I think they live below their means and act as if they are poor. Even though their “needs” are supposed to be taken care of, they run out of money and have to ask for more.  I think it boils down to this: they’re overwhelmed that they have so much money in the bank available to them, yet they lack the skills to budget and plan well. I wish I could hire a financial advisor who doesn’t need a $4,000 commission.  I’ve gone to three banks and they all want to manage the monies for $4,000+ a year with expected $9,000++ interest earned for each beneficiary. Because of the restrictions on the trust, the judge will not allow investments that are risky, and anything other than CDs I have to get approval from the courts. Did I mention that the trust is held in a different state? Last, I pay myself a very conservative trustee fee of $45 per month. That is for my time, balancing the checkbook, writing checks, and meeting with the CPA once a year to file taxes and trust forms.

Any help, articles, websites, or other resources you can share would be greatly appreciated.


Thanks for your email. I think it says a tremendous amount about you that you’d try to make sure the young adults are doing the very best that they can. And based on what you’ve shared with me, it sounds as though they are doing pretty darn well. I don’t know too many people of that age that are very good at budgeting.

This is a classic example of why more money causes more problems. The reason for this is simple, there’s a huge amount of money at risk. Not investment risk, as the court has more or less ruled that out, but the risk that the trust is liquidated, for no good reason. While there is no perfect answer for this situation, I do believe a few solid strategies could help. Additionally, it’s important to realize that these young adults most likely don’t have significant working incomes. This is what is causing the money to be spent down. This is what is to be expected, to some degree. Once the young adults graduate from college, then the use of the trust could and should slow.

Here’s what I suggest trying:

  • A group discussion to openly agree on what need constitutes a withdrawal from the trust. I believe there to be three parties involved. A majority vote will dictate what is appropriate.
  • Establish a target amount that is ideally withdrawn from the trust each year, for the next five years. This establishes some reasonable limits. A target can help change the “bleed it down” thing that is going on now.
  • Have the young adults set goals for this money, as it relates to their lives at ages 25 and 30.
  • Monitor work ethic. The worst thing that could come of this situation, from a financial perspective, is a terrible work ethic. Blowing through $700k is one (bad) thing. Blowing through $700k and developing a garbage work ethic, is another.
  • Have a discussion about how long this money is to realistically last them. Again, I believe that once they are out of college, the spending should screech to a halt, assuming they are gainfully employed.

I know this is a difficult situation. There are no perfect answers. But if you truly believe the young adults are doing a pretty reasonable job, then they probably are. Remember, this period of their lives is naturally going to require the most money from the trust, because they lack significant income. The spending will slow.

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