Money Mentor: How can I stop my grandson from wasting his inheritance?

Dear Money Mentor,

I have being trying to write my will. My husband has died and passed on the assets to me in his own will. I know what I want to leave my two daughters, but I also want to leave 25 acres to my grandson, who is currently 23. The problem is that he spends every penny he has and is all the time asking for more money. If I gave him €50 today, he would be back asking for more tomorrow. I want him to have the land, but I’m worried that he will simply sell it and spend the money once I am gone. I have talked to my daughters about it, but find they have very different views. One said that I should will it between them and they could then pass it on at a later stage. I went to the solicitors and I am more confused than ever. What are my options?

Firstly, it is good to see you putting so much thought into your will. If you are that concerned about your grandson, there are a number of options for you to consider given the situation you have spelled out.

If you do want to leave the land directly to your grandson, the straightforward thing is to do just that. You could hope that he has matured by the time you actually do pass it on.

However, if you are convinced he will just sell it on at any stage, you could set up a trust. This is normally done for minors if the parents die before they are 18, or if a child is incapacitated. It can also be used to hold assets in trust until a specified date – for example when you grandson is 35.

You will have to identify trustees who will administer the land, rent it out and maintain it. You could stipulate that the rent of the land after the costs goes to you grandson. The cost of setting this up and the cost or running it would have to be carefully looked at as they could eat up a large share of the rental.

A second option is to put a legal charge on the land. This could be a stipulation that while the land goes to your grandson after you die, if he sells it before he is, for example, 35 he has to pay you daughters a set amount.

Let us assume the land is worth €10,000 per acre, or €250,000 in total. You could set up a legal charge that if you grandson sold it before he was 35, he would have to pay €50,000 each to your daughters, or €100,000 in total. This means he would only get €150,000 before any capital gains tax.

The tax considerations should also be looked at. As you will have died, there is no capital gains tax implications. Because he is your grandchild, he falls into group B for Capital Acquisitions Tax (CAT). This means he can get €30,150 from you free of CAT. If the land was valued at €250,000, then taking away that amount, this would leave €219,850 eligible for CAT at 33%. Leaving him with a tax bill of €72,550.

This would be a big sum for him to find and he might have to sell some land to pay it off. It might also trigger any legal charges. Of course, he could get agricultural relief, which would reduce the value by 90% and make the tax bill disappear. To get this relief, his agricultural assets would have to be more than 80% of his total assets.

I am always concerned when trying to cover different situations that might arise from beyond the grave. For one, tax situations can change over time. Sometimes we can overthink things.

I would also like to find out more about the grandson who you want to give the land to. Why is he asking you for money in the first place? And, more importantly, why are you giving it to him if he just comes back asking for more. What does he spend it on? Although I could probable guess (or I hope I could) at that age.

As you do not know when you will die, maybe the time might be better spent educating him on the value of money and the value of land. At the very least, he should be working for any money he gets from you. In time, I am sure he will mature. If you are that concerned that he might just sell the land and squander it, then maybe leaving it to your daughters, or just his mother, is the safest bet. Let them see what is best at a later stage. But as I always say, these are your assets and, with no husband, once you actually make a will you can leave them to whom you please. A will can also be changed at a later date if you feel the situation has changed. CL