Child with settlement money. Any advice appreciated !!!

[Juggler]

My step daughter was 3 when I married her mother. Her biological Dad was killed in an MVA a number of years back. She is currently 16 and will received a lump sum of over $450k from a settlement to his heirs. She has full access to the money the day she turns 18.
The money is currently in CD's ( this was mandated by the courts as a condition of the settlement).
She has no clue yet this is coming .
However, at some point in the near future we will need to broach the subject.
I have always taught her about frugality and responsibility and avoiding debt and how investments work.
Any advice on how and when to tell her?
Anyone ever experienced anything similar ?
Any good literature on the subject ?
Thanks for any input.

[The White Coat Investor]

The court mandated investments and lack of a trust really suck. This could have been so much more invested in a more diversified portfolio and put into 529 + UGMAs and maybe even some in a VA for retirement. the best thing to do now is to maximize that financial education and start planning for the windfall. I don't think hiding it and then springing it on her at 18 is a good idea. Better to start preparing now.

[jfoxcpacfp]

WCI is right on. I have seen this so many times and the kids always end up frittering the money away. Courts typically have no clue about how the money should be handled in the interim, although I have seen a bit more latitude than simply CDs. AWFUL. Unfortunately, a lot of guardians/parents have also spent frivolously "FBO" the child so that the money is gone by the time he/she is eligible to receive, hence the tight controls.

You may have inadvertently made a wise decision by not telling her earlier, however. She is now old enough to understand money concepts and you can set guidelines that, as long as she is living at home and under your control, she has certain restrictions. It also might help to meet with a fee-only financial planner who can provide some visuals as to what certain decisions will yield for her future. Just pay the planner for a few hours of time with the understanding that you are not meeting as a prospective investment client.

[Juggler]

Thank you both for your input. Great advice!!! Fortunately she has a good head on her shoulders and hopefully will do the right things.

[Joseph]

This is an interesting situation.

Why don't you role play and ask her "What would you do with $20,000 if you got it tomorrow?"  ... and then expand into a life goals/planning session.

[jz]

Whoa! deja vu.

My niece met a new friend during her  9 months in county jail (selling oxycontin). Friend inherited a settlement  after the MVA death of her mother.  Within a few years  it was spent on cocaine.

[Hatton]

I have thought about this post for a couple of days.  Do you have other children?  If you do I worry about jealousy down the road.  I have no idea how to prevent that.  My mother was widowed with two young boys when my Dad married her.

[NauticalRounder]

Begin the education process ("teaching her to fish"). Suggest Bill Bernstein's excellent:."If You Can...", free for download, with parental involvement and guidance. With an excellent syllabus, as well. She's old enough to begin to grasp these concepts, and yet not "dumbed down". Marvelous read.

Beware what a sudden windfall often does to even the most loving and stable families. Regrettably, "Money is Thicker Than Blood"

Discussed with long-term trusted individual, acting in a fiduciary capacity, whether it be an attorney, CPA, or fee-only financial advisor. Not the "new kid on the block"

Remember what happened to Charles Foster Kane when he came "of age" in the classic 1941 film, "Citizen Kane". Good luck and Stay the Course.