When you think about trust funds and managing inherited money correctly, it is hardly surprising to learn that different siblings can handle money differently. Money that is left from one generation to another is intended to not just help with financial responsibilities but also to grow so others can enjoy it.
In the case of one Redditor posting in r/fatFIRE, whose father left a multi-million dollar inheritance to him and his sibling, they have handled the money very differently. More specifically, the Redditor is very concerned about his brother, who has already burned through a $1.4 million trust and is still going.
This is a harrowing story to read as it’s clear that the brother is a runaway train with money and doesn’t seem to have any brakes.
The Inheritance Scenario
This Redditor tells us that he and his brother, both lawyers, received a trust from their father. However, issues with the brother and money had already appeared before the father’s passing.
While the father was still alive, he had provided the Redditor’s brother with money to be used for the brother’s kid’s education. Unfortunately, the brother and his wife at the time used the money for their own purposes and depleted the funds, which led to a divorce, drug use, and loss of a home.
Fast-forward to the father’s passing and both brothers receive an eight-figure inheritance. The brother, who has two college kids, has remarried and already bought a million-dollar home with a $600,000 mortgage.
As a result, the brother has depleted a $1.4 million trust with a burn rate that shows no signs of slowing down. Adding luxury vacations with extended family and interventions with a financial advisor hasn’t done much good.
The Redditor remains very worried about his brother’s spending habits and fears that he’s witnessing “shirtsleeves to shirtsleeves in three generations.”
The Big Mistakes
It wouldn’t be a mistake to argue that the father knew his son, the Redditor’s brother, was already showing signs of being irresponsible with money and should have restricted the cash.
However, barring this reality, the son made immediate mistakes when he was first handed money that should have been used for his kid’s education. This is an all too common red flag among those who inherit or who grow up in wealth, and that it eventually led to an addiction is a major red flag.
The reality here is that you can put some of the blame on the dad for not enacting more ground rules with the trust in terms of how it must be spent. This said, buying a million-dollar home with a large outstanding mortgage is a major mistake of the Redditor’s brother. He’s not responsible enough with money to maintain such a house. Any house this size has significant upkeep, taxes, and insurance, so it’s not just the large mortgage that will deplete money but the rest of the house expenses.
Beyond this, taking the extended family on vacation is a serious waste of cash. Not only are they taking advantage of this individual, but they will come to expect more and more vacations with their hands out and never reaching into their wallet. This is a major mistake in setting up unreasonable expectations for the future.
A Financial Intervention
While the Redditor points out that the first intervention with a financial advisor didn’t work, he needs to try again and again. There needs to be a serious wake-up call for the brother to show him that his burn rate is unsustainable.
The bottom line is that some people aren’t built to handle large inheritances, as they are not responsible enough to have millions of dollars at their disposal. Alternatively, the Redditor has, by all accounts, financial discipline and is looking to create generational wealth with his trust.
At the end of the day, if things keep going as they are, the brother will come to the Redditor in disgrace, looking for a handout. Things would only get worse from there, so the hope is to try and create an absolutely solid financial plan before it’s too late.
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