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Let's talk estate planning...
Posted on 1/11/21 at 11:17 am
Posted on 1/11/21 at 11:17 am
For those of you with small children, how have you structured estate/trust distributions to your kids?
I've got two small kids, and between between the assets, investments, property, and life insurance my wife and I have, there will be a sizeable estate.
I'm trying to decide how to structure distributions to the kids in the event wife and I were 6 ft. under while they are still minors AND how I'd like the estate to be invested/used to support them until they are old and wise enough to take the reigns. At what ages do I want them to take distributions, and how much? For obvious reasons, I don't want to hand each kid 7 figures on their 18th birthday.
My initial thoughts are to have a set amount drawn from the estate annually to support the kids (and their guardian, a relative) until they are college aged, then cover their educational expenses. At age 21, or upon the completion of college, receive a single distribution each of 100k out of their share. Then at 25, receive 25% of the balance of their share of the estate, at age 30, receive 50% of the balance, and at 35 receive the remainder.
Is this too much control "from the grave?" Thoughts? Too much too soon is dangerous, but as I see it, there's not an obvious structure that makes sense, especially without knowing the maturity level/life situation with each kid.
I'd appreciate any thoughts/discussion on this topic.
I've got two small kids, and between between the assets, investments, property, and life insurance my wife and I have, there will be a sizeable estate.
I'm trying to decide how to structure distributions to the kids in the event wife and I were 6 ft. under while they are still minors AND how I'd like the estate to be invested/used to support them until they are old and wise enough to take the reigns. At what ages do I want them to take distributions, and how much? For obvious reasons, I don't want to hand each kid 7 figures on their 18th birthday.
My initial thoughts are to have a set amount drawn from the estate annually to support the kids (and their guardian, a relative) until they are college aged, then cover their educational expenses. At age 21, or upon the completion of college, receive a single distribution each of 100k out of their share. Then at 25, receive 25% of the balance of their share of the estate, at age 30, receive 50% of the balance, and at 35 receive the remainder.
Is this too much control "from the grave?" Thoughts? Too much too soon is dangerous, but as I see it, there's not an obvious structure that makes sense, especially without knowing the maturity level/life situation with each kid.
I'd appreciate any thoughts/discussion on this topic.
9
Posted on 1/11/21 at 11:58 am to Costanza
See a lawyer who specializes in this. They will go over the various strategies with you. Don't know how much you have, but with the Dems in control you may end up with a taxable estate.
Posted on 1/11/21 at 12:08 pm to Costanza
I do think it’s too much control from the grave. Since this is a plan that may never be needed, as it only comes into play if both you AND your wife are deceased while kids are still minors. Waiting to distribute the remaining 50% of your estate until they reach 35 is a long way off. The ages you have picked are arbitrary....why not tie the release of funds to specific life goals? IOW, release of funds upon completion of a bachelors degree or training program. It might take one kid 3 years to complete, and another one might take 5 years. Release of funds after reaching such a goal then puts offspring in a position to pursue the next goal—like graduate school or opening their own business based on the skills training they’ve completed.
Age 25-35 is important and sets them on a path for growth: if they’re undercapitalized then, they may delay doing big important things until the “rest” of their money is available. Wouldn’t you want funds released to pay for med school, or law school, or to purchase a first home? Or to pay startup costs for a business?
Reminds me of the growing trend of young, wealthy ppl giving away substantial fortunes: LINK
Age 25-35 is important and sets them on a path for growth: if they’re undercapitalized then, they may delay doing big important things until the “rest” of their money is available. Wouldn’t you want funds released to pay for med school, or law school, or to purchase a first home? Or to pay startup costs for a business?
Reminds me of the growing trend of young, wealthy ppl giving away substantial fortunes: LINK
Posted on 1/11/21 at 12:29 pm to Costanza
Heirs become co-trustees until certain age. Full trustee at a certain age. Stays in trust with rights to access. Protects against creditors for their life.
Posted on 1/11/21 at 12:29 pm to Costanza
I do this for a living. Tough to talk specifics without knowing estimated amounts your kids will receive. I like lifetime trusts where kids can be sole trustees at a specific age. Depending on your jurisdiction they can be used to protect assets from creditors/divorces, etc. And the kid has full control.
Posted on 1/11/21 at 12:30 pm to Costanza
Someone would likely have to serve as trustee for a long time to take it until the kids are 35. If it’s a bank or trust company, that’s a lot of time for fees to eat away at it. If it’s an individual who does it for no compensation, that’s a long time to saddle them with that responsibility and hassle.
I would keep it simple and shorter term. But I would start by asking around for a good estate planning lawyer in your area and consulting them.
I would keep it simple and shorter term. But I would start by asking around for a good estate planning lawyer in your area and consulting them.
Posted on 1/11/21 at 12:34 pm to Costanza
We are doing as my M-I-L did for my wife..Non-Revocable Living Trust..picking a Trustee is the question. My wife is currently in that position, after she passes my oldest son assumes the position. The majority of assets are in real estate that are/can be income producing. The easiest route is accomplished if there is no mortgage involved.
Posted on 1/11/21 at 5:55 pm to Costanza
Seems reasonable.
I met with an attorney who does this all the time.
30 is a decent age for control.
At his suggestion, I’m using a bank as the trustee. It can create strain on families to have a family member serve as trustee.
I met with an attorney who does this all the time.
30 is a decent age for control.
At his suggestion, I’m using a bank as the trustee. It can create strain on families to have a family member serve as trustee.
Posted on 1/11/21 at 9:00 pm to makersmark1
Run far, far away from a bank serving as trustee. They will just suck money out of the trust. And they're a nightmare for beneficiaries to deal with.
Have seen it time and time again.
Attorneys who recommend banks get referrals from those banks. It's as simple as that. Also, find a new attorney.
Have seen it time and time again.
Attorneys who recommend banks get referrals from those banks. It's as simple as that. Also, find a new attorney.
This post was edited on 1/11/21 at 9:01 pm
Posted on 1/11/21 at 9:26 pm to TheOcean
quote:
Run far, far away from a bank serving as trustee. They will just suck money out of the trust
Horrible advice. If, as stated in the original post, there is large money involved then a corporate trustee is a great option. I’ve seen families torn apart by friends and relatives serving as trustees.
Posted on 1/11/21 at 9:48 pm to 1609tiger
Someone works for a bank or trust department.
Posted on 1/11/21 at 11:36 pm to TheOcean
quote:
Someone works for a bank or trust department.
Well there are a number of factors that go into the decision of whether to use an institutional trustee. Not all families have suitable candidates to step into that role if Mom and Dad get wiped out. Go over it with a reputable lawyer who specializes in this kind of work.
Posted on 1/11/21 at 11:59 pm to TheOcean
Quite the blanket statement.
The very top rate we charge is 0.75%, and it’s tiered so it drops from there. No extra fees or commissions of any kind.... and that’s for actively managed accounts with local, in-house CFA portfolio managers and estate lawyers to handle any requests. I’d say that’s well within reason and I’m sure we aren’t the only bank that does that.
The very top rate we charge is 0.75%, and it’s tiered so it drops from there. No extra fees or commissions of any kind.... and that’s for actively managed accounts with local, in-house CFA portfolio managers and estate lawyers to handle any requests. I’d say that’s well within reason and I’m sure we aren’t the only bank that does that.
Posted on 1/12/21 at 7:49 am to Twenty 49
Some of the fee structures aren’t that terrible. You can shop around and ask for the trust company’s fee. Best thing to do is to give your current trustee the power to appoint a successor if you don’t have one in mind now.
This post was edited on 1/12/21 at 10:06 am
Posted on 1/12/21 at 8:57 am to MSTiger33
The reality OP, is this is going to change over time. What you should do next year, in 5 years, in 10 years, etc. can very easily vary and change.
The most important thing is to get a basic plan in place as soon as possible, and go from there.
There are so many variables such as how your kid is and if you have multiple kids they could be completely different in what they need.
People say don't use an institution but there's plenty of family and friends that could screw you over as trustees also. There's no perfect solution.
The most important thing is to get a basic plan in place as soon as possible, and go from there.
There are so many variables such as how your kid is and if you have multiple kids they could be completely different in what they need.
People say don't use an institution but there's plenty of family and friends that could screw you over as trustees also. There's no perfect solution.
Posted on 1/13/21 at 3:37 pm to Costanza
quote:
Is this too much control "from the grave?" Thoughts? Too much too soon is dangerous, but as I see it, there's not an obvious structure that makes sense, especially without knowing the maturity level/life situation with each kid.
You answered your own question with this statement.
Everyone is different, but as long as you live long enough for your small children to mature, you'll know what the answer is.
I have 2 female relatives that BOTH received in excess of $1M in cash and homes valued between 200k and 600k each. The mother received everything at once at age 62 and had spent all of the money and also lost the home before she was 70. She now lives on Social Security in a small apartment that was built inside of a horse barn. Her daughter was given payments at age 30, 35, and 40. She also bought things for other people ( in their names - not hers ) she had NOTHING to show for it before she reached 45. Even though her money was in a trust, that didn't matter. The trustee couldn't save her from herself.
Posted on 1/13/21 at 8:31 pm to 1609tiger
quote:
I’ve seen families torn apart by friends and relatives serving as trustees.
This happenenrd to my best friend over the last 18 months and it has been gut wrenching to witness.
Posted on 1/14/21 at 6:46 am to Costanza
I do some estate planning, and generally, unless you have a particularly well-adjusted child, I haven’t seen many 21yo’s do anything productive with 100k. Even if you have a really good kid, grief from losing someone can make people behave irrationally.
Bottom line, you should go see an attorney. Any atty worth their salt will walk you through risks and benefits in their experience. They will look at your situation and needs and tell you what they recommend, but you can choose what you end up doing. After they’ve given the advice, you can tell them to write up whatever you want.
Also, EP’s are one of the cheaper services an attorney will provide and most should offer to do a power of attorney and/or a healthcare POA alongside the will.
Bottom line, you should go see an attorney. Any atty worth their salt will walk you through risks and benefits in their experience. They will look at your situation and needs and tell you what they recommend, but you can choose what you end up doing. After they’ve given the advice, you can tell them to write up whatever you want.
Also, EP’s are one of the cheaper services an attorney will provide and most should offer to do a power of attorney and/or a healthcare POA alongside the will.
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