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  #1  
Old 03-26-2008, 02:12 PM
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OK, here's one for all you financial genius'

I had a quantity of cash (few thou.) entrusted to me to help ensure the welfare of a couple of my friends kids (so unscruplous people don't get hold of it).

This person has passed away and now the kids are approaching college age, I have to figure out how to dole it out to them. My chief concern is that they don't blow it on beer and partying. I'd like to see it spent on books or other school supplies.

Is there some kind of card I can "charge" up with money for them to use? Is there any way to restrict where it's used? How about gift certificates?

Another thing is that they live in another state and it's hard for me to keep an eye on things. What would you all do?

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  #2  
Old 03-26-2008, 02:34 PM
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huh?
 
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Quote:
Originally Posted by KarTek View Post
I had a quantity of cash (few thou.) entrusted to me to help ensure the welfare of a couple of my friends kids (so unscruplous people don't get hold of it).

This person has passed away and now the kids are approaching college age, I have to figure out how to dole it out to them. My chief concern is that they don't blow it on beer and partying. I'd like to see it spent on books or other school supplies.

Is there some kind of card I can "charge" up with money for them to use? Is there any way to restrict where it's used? How about gift certificates?

Another thing is that they live in another state and it's hard for me to keep an eye on things. What would you all do?
Use it to pay for college tuition. You could wire it directly to the college of their choice.
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  #3  
Old 03-26-2008, 02:37 PM
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I had money given to me when I reached 18, big mistake, I did exactly what an 18 year old would do, drank, partied and bought a corvette.

I don't think many 18 year olds are responsible enough to handle it. I would suggest that you hold the money and let them tell you what they need it for. They need books, you buy them or make out a check to the bookstore, they need money for tuition, make the check out to the school.

If it were my kids, that's what I would want.
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Old 03-26-2008, 02:39 PM
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I guess it depends upon the kids. The foregoing sounds like pretty good advice, though.
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  #5  
Old 03-26-2008, 02:42 PM
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I'm no financial guru, but I'll pass along a concept I heard some smart really rich people are using for their kids: performance based trusts (or something like that).

The idea is, you tell the kid, "I have a lot of money I'm willing to pass along to you. But the amount you get will depend on your achievements. If you do well, I'll make you very comfortable. If you choose to be a bum, you'll get much, much less."

Then you set up goals for them. It encourages them to apply themselves which, in reality, is the best thing for them to do in the first place. I think a lot of people would have trouble motivating themselves to do their best (in whatever they choose to do) when they've got a pile of money waiting to be delivered to them.

Sounds like the amount of money you are talking about may not justify a full blown trust, but maybe you can still use the idea.
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Old 03-26-2008, 02:49 PM
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Being out of state, I can't really manage things to closely but I like the idea of wiring the money to a college for tuition! I hadn't thought of that.
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  #7  
Old 03-26-2008, 02:57 PM
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You might want to consider a 529 plan. There are two basic types; college savings which in a sense prepurchase college tuition, kinda like a cemetary plot, or a college savings plan. Check and see where these kids are going to college, then figure out which one fits their needs the best. These plans vary from state to state. Be sure to see an expert. The one piece of advice I can give you is that since these kids are almost of college age, do not put it into a savings plan where you may lose any of the principle.
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Old 03-26-2008, 03:22 PM
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You’ve stated:”…approaching college age,...”
Are they for sure going to college?
Do they know of this money?

If so – I’d do as some have stated here. Sit down with them, and tell them the story.
Tell them you have the money (DO NOT tell them the total amount), but that it’s for school expenses only. That you will send the money to the school for their tuition accounts. But you need to know the costs/rates prior to enrolment. That way you don’t start them somewhere they can’t finish. Then maybe put some on a debt card for their books. If they blow it elsewhere, too bad for them. It’s gone. You did what you felt was right.

The problems that I can see coming up though, are how to be fare with the division of the cash if they go to different colleges with different tuition and book costs.
Also – If one of them doesn’t go to school and claims they should get their share too, regardless. After all, it was left for them both, and “ensure the welfare” doesn’t have to be done with a college education.

If they don’t know anything about it:
As they are not in college yet - What you may want to try doing is feeling out what plans they have for themselves.
Sit down with both of them and start asking questions. If they don’t know about the money, DO NOT bring it up. Just get a feel for where they are heading. This alone, may give some insight as to what to do with it. One plans on college, and the other is serious about opening a retail or repair/service business? Help one with tuition, the other with getting the door open.

Regardless – I’d first try to seek out what they have plans for themselves before you step up and say you have their parent’s money for them. That might open a nasty can of worms.

It sucks to be in this sort of a situation where you’ve been entrusted to “do the right thing” for someone else’s kids. Hats off to you for being the type that can be trusted in this way.
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Old 03-26-2008, 03:24 PM
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Put the money insome type of interest bearing account and present them with a check at graduation.
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  #10  
Old 03-26-2008, 03:37 PM
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Thats a sticky situation. Depending on how much it is setting up a trust would probably be a good idea. But if its not much like under $50k I doubt that its worth it.

I'd be tempted to tell them its for school first and try to write the checks right to the school. If they complain give it to them and let them blow it, their problem.

The problem is that once the figure out how much their is they are going to "need" a lot of stuff. A new car, pricey cell phone, cloths etc. Kids blow money like drunk sailors!
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Old 03-26-2008, 04:13 PM
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I am in a work environment where I see the gamut of how people provide for their kids. My underlying thought is to make sure there is some incentive for them.
You don't say how much money there is and it probably doesn't matter from my perspective. My suggestion: Divide it equally now; don't tell them it's there or how much is there.
If there's more than enough to pay for college, pay for it (directly to the school, landlord, bookstore, etc) and give them the balance when they show you a diploma. If there's not that much, figure out where they want to attend and calculate what percentage of college you will be able to afford, then pay that percentage. If they don't go to college, set up a sort of matching plan that you will match whatever they earn (up to a point-say the equivalent per-year of college expenses) or, if there's not enough you can match whatever they save in a long-term investment (Roth IRA for instance).
Were I in this situation I would try to treat them as if they were my own kids. You are in a position to impact their view of money in a way that their parents may never have done and that will stay with them for life. Eventually they are going to have to learn for themselves but you can protect the money and them from some heartache if you have a solid plan and stick with it.
Just my *********, er........ opinion.
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  #12  
Old 03-26-2008, 06:25 PM
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Lots of good advice here.
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  #13  
Old 03-26-2008, 07:09 PM
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I'd say don't let them know. I see a lawsuit coming.
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  #14  
Old 03-26-2008, 07:59 PM
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My fraternity gives away many scholarships at my college and we have made an arrangement where the check goes directly to the college into the individuals bursor account. The only thing I cannot answer is what happens when an individual drops classes and gets a refund? However, that should only happen one quarter or semester without you finding out about it and having a heart to heart. Good Luck
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  #15  
Old 03-27-2008, 06:36 AM
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Thank you all for your insight... I'll investigate their plans and probably in the future, their tuition will "magically" get paid by some benevolent soul... I don't think I need to let on where the money comes from.

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