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Estate Planning - Middle school aged children
Posted on 6/1/21 at 9:20 am
Posted on 6/1/21 at 9:20 am
If you and your spouse were to die today and leave 2 children (middle-school aged) behind with an estate worth about $1 million. How would you set it up to be distributed?
Attorney asked this question and said they typically set up 3 draws.....and I didn't like that option at all...
Attorney asked this question and said they typically set up 3 draws.....and I didn't like that option at all...
6
Posted on 6/1/21 at 9:35 am to AUjim
Just went through something similar and to be honest, there isn't a whole lot of great options. I set mine up to where they have partial access for college at 18 and then at 25 they have access to the remaining amount. If they are trying to buy a house at that time or get their adult life started I wouldn't want to prevent that.
It's hard to know what your kids are going to be like 15-20 years from now so I get it.
It's hard to know what your kids are going to be like 15-20 years from now so I get it.
Posted on 6/1/21 at 10:09 am to Triple Bogey
Agreed.
I'd like for them to get to the end of college with no debt, but I don't want to fund a 4 year party.
I'd be fine with them buying a 25K car at graduation, and I'd be totally fine with a 20% down payment on a house.
Whatever is left over after that could vary widely...and I'm not sure what level of access I'd want them to have.
I'd like for them to get to the end of college with no debt, but I don't want to fund a 4 year party.
I'd be fine with them buying a 25K car at graduation, and I'd be totally fine with a 20% down payment on a house.
Whatever is left over after that could vary widely...and I'm not sure what level of access I'd want them to have.
Posted on 6/1/21 at 10:13 am to AUjim
quote:
I'd like for them to get to the end of college with no debt, but I don't want to fund a 4 year party.
I'd be fine with them buying a 25K car at graduation, and I'd be totally fine with a 20% down payment on a house.
couldn't you just put some type of "note" in the estate planning? Basically tell them "I want you to spend this money on college and essentials. (Please don't waste this money on alcohol) or whatever you want to say"
Just saying, my parents have told me what they don't want me to do with what I get. So there's no way I'm going to go against there wishes.
Posted on 6/1/21 at 10:26 am to AUjim
In general, for minor children the selection of a guardian is extremely important.
IF the guardian is suitable, they could also serve as trustee.
As long as you choose the right guardian, the rest is details.
I have it where my kids get everything at 30.
They have a trustee until then who is to use the monies for their benefit- which is fairly broad.
I’ll be dead so IF they blow the money, it’s on them. I think they will do fine. Both are frugal.
However, I don’t really want to iterate every possible expense after I die.
IF the guardian is suitable, they could also serve as trustee.
As long as you choose the right guardian, the rest is details.
I have it where my kids get everything at 30.
They have a trustee until then who is to use the monies for their benefit- which is fairly broad.
I’ll be dead so IF they blow the money, it’s on them. I think they will do fine. Both are frugal.
However, I don’t really want to iterate every possible expense after I die.
Posted on 6/1/21 at 10:43 am to AUjim
We have an 11-year old. We've named a guardian and a separate trustee. The trustee has broad discretion to use the trust for her benefit until she's 30. Then she gets it all. We really didn't want to put a bunch of cash in her hands at 18 or 25 when her brain is still developing. I don't *think* she'll end up an addict or a loser, but then there are a lot of other parents out there who thought the same thing. I have no solution for what happens if she's an addict/loser at 30. We'll have to revisit the plan if she does a 180 and seems inclined to that path as she's in her teens/ early adulthood.
Posted on 6/1/21 at 11:05 am to NCTigerFan
quote:
The trustee has broad discretion to use the trust for her benefit until she's 30.
Sounds like what you and makersmark1 are doing would be a very good fit for us.
We plan on making guardian/trustee the same. We trust them with literally everything. Their ideals and philosophies are almost completely in line with ours. That would give some discretion in giving the kids some start up money if they want to start a business/buy a house/whatever....
Posted on 6/1/21 at 11:07 am to NCTigerFan
quote:
trustee has broad discretion to use the trust for her benefit
This is the key. It is not possible to anticipate or control every possible situation from the grave.
Some people put handcuffs on their money. Even good intentions can lead to odd consequences.
I remember a man who left cash for a scholarship for “graduates of X high school.”
X High School closed and was demolished. Money was tied up for several years.
Posted on 6/1/21 at 11:59 am to AUjim
I just redid my will last month to modify the addition of a 3rd child.
In my will, if both my wife and i have passed, then my assets are split three ways and distributed into a trust. I named guardians for my children, and a secondary set of guardians in case the 1st set couldnt take my children. I also set an executor for the estate (and secondary executor), with sole discretion in distributions until my children are 35, when the whole of the trust becomes theirs outright.
Also, added a clause that the executor can release the whole of the funds in the trust should the executor deem they are mature enough.
my wife's will basically says the same thing should i proceed her in death at the time of her death.
EDIT: executor may have been a trustee. may be mixing the two legal terms. either way, i picked someone (very, very close family member, who is financially well off already) to be in charge of the trust funds separate from the couple i would grant guardianship to. I did this to protect the guardians from resentment for holding funds back while also trying to be parents. the Executor/trustee would get that responsibility.
EDIT: just looked at copy of will, its trustee not executor
In my will, if both my wife and i have passed, then my assets are split three ways and distributed into a trust. I named guardians for my children, and a secondary set of guardians in case the 1st set couldnt take my children. I also set an executor for the estate (and secondary executor), with sole discretion in distributions until my children are 35, when the whole of the trust becomes theirs outright.
Also, added a clause that the executor can release the whole of the funds in the trust should the executor deem they are mature enough.
my wife's will basically says the same thing should i proceed her in death at the time of her death.
EDIT: executor may have been a trustee. may be mixing the two legal terms. either way, i picked someone (very, very close family member, who is financially well off already) to be in charge of the trust funds separate from the couple i would grant guardianship to. I did this to protect the guardians from resentment for holding funds back while also trying to be parents. the Executor/trustee would get that responsibility.
EDIT: just looked at copy of will, its trustee not executor
This post was edited on 6/1/21 at 12:11 pm
Posted on 6/1/21 at 12:16 pm to boomtown143
Most any trust work will allow minor access to the principal with regards to “HEMS” (health, education, maintenance, and support).
You want to restrict further access from them throwing a $100k crack party.
You want to restrict further access from them throwing a $100k crack party.
Posted on 6/1/21 at 12:21 pm to AUjim
This was a long time ago on the trust I'm on with my parents, but the way the set it up when I was growing up was I had no access to the liquid assets till I would be 18, at that point in time the clause was I could not take any money out other than to pay for college related expenses and I could not take out more than what my gross income was the previous year on tax returns. So basically, if I didnt work, once I was 18 the only way I could get money out was through paying for college expenses. Any work I did do, and claim on my taxes, I could take up to that amount the next year from the trust (in liquid assets). In case you're wondering what they did with less liquid assets like cars/home. That was to be sold upon their deaths and proceeds go into the trust as well IIRC. So it's not like I could have just made some bank off the sale of their home or vehicles quickly.
It was their way of ensuring I got an education after high school and also would work when I was young. All that got taken off later on and I just have full access to it upon their death now, but looking back it was a smart way to help motivate self-success.
It was their way of ensuring I got an education after high school and also would work when I was young. All that got taken off later on and I just have full access to it upon their death now, but looking back it was a smart way to help motivate self-success.
This post was edited on 6/1/21 at 12:55 pm
Posted on 6/1/21 at 12:51 pm to makersmark1
quote:
I have it where my kids get everything at 30. They have a trustee until then who is to use the monies for their benefit- which is fairly broad.
I’ve seen situations like this end up in a lot of turmoil. Both of the child’s parents died. One of the child’s aunts was the custodian When she wouldn’t let the child spend the money on things (car and nice apartment) the child and custodian would fall out. Custodian finally just gave everything to child after college. Don’t blame her.
There’s no perfect way and nobody knows how much getting unearned money changes or may change people.
This post was edited on 6/1/21 at 12:59 pm
Posted on 6/1/21 at 1:10 pm to go ta hell ole miss
quote:
There’s no perfect way and nobody knows how much getting unearned money changes or may change people
It is definitely tricky. I can poke a pretty significant hole or at least identify an opportunity for significant headache in every single scenario I've thought through.
I almost want to just get them through college, give them a car upon graduation, and give the rest to charity.
Posted on 6/1/21 at 1:35 pm to go ta hell ole miss
quote:
One of the child’s aunts was the custodian
I’m using a bank for the trustee. It’s an expense.
I don’t want people to be mad at each other and destroy the family over this.
Posted on 6/1/21 at 2:11 pm to Shepherd88
quote:
Most any trust work will allow minor access to the principal with regards to “HEMS” (health, education, maintenance, and support).
That's what I typically see with my high net worth clients.
HEMS distributions allowed at any time - trustee has to approve but has a lot of leeway to approve.
1/3 of remaining trust assets distributed at age 25 - without restriction
1/2 of remaining trust assets distributed at age 30 - without restriction
All remaining trust assets distributed at age 35 - without restriction - trust terminates
Posted on 6/1/21 at 2:35 pm to go ta hell ole miss
quote:
I’ve seen situations like this end up in a lot of turmoil. Both of the child’s parents died. One of the child’s aunts was the custodian When she wouldn’t let the child spend the money on things (car and nice apartment) the child and custodian would fall out. Custodian finally just gave everything to child after college. Don’t blame her.
this is why i have guardian/custodian separate from trustee of trust. hoping (god forbid i ever need to go this path) that having separation from the two takes away a layer of animosity.
Posted on 6/1/21 at 3:06 pm to LSUFanHouston
I honestly don’t think this is something to lose sleep over, and I think it’s well worth having discussions with your kids about. The reality is IMO the more restrictions you have to place then likely the less time you are spending talking to them and parenting them to be good custodians of it in the future.
I’ve never understood the 25 or 35 or later time frame. This is coming from someone that’s married to someone with a significant trust. The fact is most people are either going to be good custodians of the money when they are 18 and 35 or bad when they are 18 and 35. I’m not sure how many would actually learn in those 18 or so years, all the while they’ll just think poorly of you for delaying their satisfaction and not trusting them.
If they are really young that’s one thing, but once they are 10 or so and you can have some life talks with them I just don’t see the point in delaying them access to money after they graduate college or whatever post HS program they go into. You can always allow them access WITH guidance on how you would prefer they invest/ spend/ enjoy the money.
I’ve never understood the 25 or 35 or later time frame. This is coming from someone that’s married to someone with a significant trust. The fact is most people are either going to be good custodians of the money when they are 18 and 35 or bad when they are 18 and 35. I’m not sure how many would actually learn in those 18 or so years, all the while they’ll just think poorly of you for delaying their satisfaction and not trusting them.
If they are really young that’s one thing, but once they are 10 or so and you can have some life talks with them I just don’t see the point in delaying them access to money after they graduate college or whatever post HS program they go into. You can always allow them access WITH guidance on how you would prefer they invest/ spend/ enjoy the money.
Posted on 6/1/21 at 3:14 pm to baldona
I don't know....I kinda like delaying any lump sum distributions because I don't think there is any comparable substitute for life experience in making a plan and actually managing money to pursue that plan.
I flipped my primary house in my early 20's and netted 52,000. I didn't entirely blow it, but I definitely didn't make the best use of it. Used about 35,000 paying off 2 cars we honestly shouldn't have owned at the time. The other paid off my graduate school (12K) and a small student loan (3K) of my wife's.
I flipped my primary house in my early 20's and netted 52,000. I didn't entirely blow it, but I definitely didn't make the best use of it. Used about 35,000 paying off 2 cars we honestly shouldn't have owned at the time. The other paid off my graduate school (12K) and a small student loan (3K) of my wife's.
This post was edited on 6/1/21 at 3:44 pm
Posted on 6/1/21 at 4:22 pm to AUjim
Sounds like you made the best decision you could have at the time. I wouldn’t beat myself over it. Yeah, the cars might have not been the best move previously, but you paid them off and hopefully they gave you years of service. At least you cleared the debt instead of buying the fancy new bass boat.
Posted on 6/1/21 at 5:52 pm to AUjim
quote:
I don't know....I kinda like delaying any lump sum distributions because I don't think there is any comparable substitute for life experience in making a plan and actually managing money to pursue that plan.
I'm by no means telling you what to do, everyone can have a different idea and everyone be right here.
If I had more money when I was younger I would have owned a lot more rental properties when prices were ripe from 2010-2014. I passed up quite a few because I didn't have a reasonable down payment and didn't want to go into a crazy debt scheme when I was young.
Something else to consider, is the government is taxing the hell out of trusts now and in the future. So any investments in a trust get the highest tax bracket. While someone making $50k out of college is in the lowest. Not to mention you could request they place X amount into a retirement fund every year to boost that.
I just don't agree that withholding the money through a trust is always as beneficial as a parent thinks. I think that good parenting and good written and discussed guidance about what you'd prefer they do with the money can go a long way with someone of good character. If they aren't of good character, well you are fricked anyway right?
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