I recently went on a course for accountants.
This inevitably leaves you with visions of boring grey people hunched over tables, all keeping themselves to themselves.
Except this one wasn’t quite like that.
It was quite engaging, partly because there were some good key speakers.
One of them was a brain expert talking specifically about the working of our minds and breaking habits. Now, if you know me, I have spent years studying what makes people tick and how to change mindsets. It is one of the reasons we are so successful in making changes in businesses for the better. So, this talk for me was fascinating.
It also made me realise that what he was telling me has a profound effect on my client’s estate planning and, in particular, how Wills and powers of attorneys should be set up.
It appears that our brains are not fully developed until about the age of 27. I was under the impression it was about the age of 22, but apparently not. In the US, you cannot join the army for combat after age 22. That is because, under the age of 22, boys tend to accept what they have been told and do not have a fully conscious mind, so they do not always realise the consequences of killing. In other words, a young, undeveloped brain does not always realise what they are doing or if what they are doing is right or wrong.
But it gets even more interesting.
Because the age at which a brain is fully developed depends on the sex and the order of birth. Okay, I realised we are going into sexist territory, but I think I might be Okay. But I also realise I will not be covering LGBTQ identities, which means I will get into big trouble, and that means ultimate cancellation. Anyway….
Basically, females who are first will develop brains earlier than first-born males. First-born females have fully formed brains between the ages of 18 and 22. A male’s brain that is second, third, or fourth-born does not have a fully developed brain until the age of 28 and 33.
So, if you are wondering why you cannot understand your 2nd born son aged 25, this may be the reason.
Think back to when you were 18. If someone turned up at your doorstep with a cheque (do people still use these?) for $1M as an inheritance, what would you do? I know what I would have done. I would have immediately bought a Lamborghini, not because it is any good but because I could, and then off to the University bar to show off and have the night of my life. I would have no idea who drank what or what I had, but it would be a night to remember for me and for all who knew me (or did not know me).
And then I would probably crash the Lambo.
After that, the money has probably gone.
What would be the chances that at age 18, I would be willing to sit down with an adult to talk about financial management and look after my future? Err…. Probably no chance at all.
And even though I admit I was a bit wild at 18, there is a chance most kids at 18 would end up doing the same. We call it irresponsible. It is probably not. It is probably because they do not have fully developed brains and are incapable of working out what they should do.
You can probably see where this is going, but let’s look at Wills and Powers of Attorney one by one.
Powers of Attorney (POA)
You can have 2 powers of attorney. One is for financial matters, and one is for health. Whoever you appoint can make decisions on your behalf.
Here’s the elephant in the room. If you have given your child, aged 20, a POA over your health, and you are involved in an accident, and they have to decide if the plug should be pulled, how happy are you going to be knowing they may end your life but not understand what they have been asked to do?
Now I know my kids. They would pull the plug instantly if it gets their hands on my money – so I have told them that they will get control of my inheritance and they will get control of my POA, but only when they reach the age of 50. By then, I can rest assured they will have a fully developed brain!
I have covered this above. This reason is why we always recommend a testamentary trust for inheritances. Not only does it give asset protection, but it also stops young children from blowing your money to smithereens.
But the question then moves to if you do have a testamentary trust, at what point do you transfer control to your children? In the past, I have said 25 is a good age. But having learned the above, maybe we need to make decisions based on age, sex, and order of birth.
But then that leads to something more sinister. How do I, for instance, explain to my two boys that the first child can take control at, say, 25, but the younger one aged 33? See what I mean? It is not as easy as that.
Whatever you decide, this is what I will say. Your children do not have an automatic right to your inheritance. Only you have the right to decide who gets what.
But if you decide to give it away, it is your responsibility to ensure it is protected and used wisely. This is money you worked hard for. This is money you sacrificed things for. This is money that should be respected.
Inheritances and POA are step 9 of our 9 steps to work less, more income and more wealth. If you would like to know more, contact Hitesh at firstname.lastname@example.org or Ros at email@example.com or call 1300 440 316.