Testimentory trust for minor children - what terms would you put on it?

[Anonymous]

We're going to specify in our will that the assets left in our estate plus our life insurance payouts will find a trust for each of our minor children. We are talking about when the trust would provide funds. If you anticipated a million to a million and a quarter in each trust, what would you specify and why? Simple lump payout at a certain age? Payouts at multiple ages? Allow guardians to cover educational expenses? Something else?

Just curious what people's preferences or recommendations would be. Tips and experiences?

[Anonymous]

These are the exact sort of things where I love to crowd source ideas. Saves the money from paying so called experts.

[Anonymous]

We have some kids still in elementary school and some who have graduated college so our needs may be different than yours.

Basically, the trusts are governed by an executor. There are payouts at staggered stages from 18 to 55, in incremental amounts with stipulations about use (or nonuse) of the funds). Each increment is predicated on the success (we spell out the criteria) in managing the prior increment. We also tried to build in some safeguards to help our kids avoid gold-diggers or people (strangers, friends, relatives) with sticky fingers.

If one of us dies, the other cannot change the trust or will.

If a beneficiary contests the will, that person immediately loses all funds that have been paid or will be paid and is no longer a beneficiary of our will/trusts. My husband has actually told our executor that he wants a "scorched earth" attitude about anyone who contests. We are being more than fair and equal. We cannot imagine a scenario in our current status that would cause anyone to contest, but we also realize that life happens.

We have been very clear to the kids because we want them to give the warning to anyone who gets involved with them - do NOT plan on benefitting from our will because our kids' hands are tied so go do your gold-digging elsewhere.

[Anonymous]

Anonymous wrote:We have some kids still in elementary school and some who have graduated college so our needs may be different than yours.

Basically, the trusts are governed by an executor. There are payouts at staggered stages from 18 to 55, in incremental amounts with stipulations about use (or nonuse) of the funds). Each increment is predicated on the success (we spell out the criteria) in managing the prior increment. We also tried to build in some safeguards to help our kids avoid gold-diggers or people (strangers, friends, relatives) with sticky fingers.

If one of us dies, the other cannot change the trust or will.

If a beneficiary contests the will, that person immediately loses all funds that have been paid or will be paid and is no longer a beneficiary of our will/trusts. My husband has actually told our executor that he wants a "scorched earth" attitude about anyone who contests. We are being more than fair and equal. We cannot imagine a scenario in our current status that would cause anyone to contest, but we also realize that life happens.

We have been very clear to the kids because we want them to give the warning to anyone who gets involved with them - do NOT plan on benefitting from our will because our kids' hands are tied so go do your gold-digging elsewhere.

I just reread my post. I sound harsh. I want to be clear that my husband and I are self-made. We both come from families that have money but what we have done, we did starting from $0. We want our kids to do the same thing. We've read all the studies about what happens in families where kids get too much too soon. We don't want to see our grandkids living trust fund lives. We want everyone working and being productive. So we are keeping a tight hold on the money even after we're dead so that everyone is, indeed, working and being productive.

[Anonymous]

You started from zero, and you want your children to do the “same thing”? You seem confused.

[Anonymous]

Our trusts provided support for our child until the age of majority. Thereafter, it provided for an income equal to the amount the child earned from employment, with a very modest floor amount payable to prevent actual destitution regardless. The idea was to encourage gainful employment - earn more, receive more from the trust. Don't work, or barely work, and the trust will ensure the child didn't actually starve, but would not fund a comfortable life as a dilettante. The trust paid out lump sums at specified intervals as the child aged, so the incentive was limited to relatively early, formative years. There were provisions to change the trust's payout structure in the event of the child's disability which prevented gainful employment, and the trustees were also empowered to fund the starting of a business if backed by a well-conceived and thought-out business plan.

[Anonymous]

Ours would probably be about the size of OP’s, maybe a bit larger, and IIRC we basically provided for support education, down payment, marriage and then chunks to be disbursed along the way with everything done by 40 or 45.

I remember making the will and thinking I was old enough to manage my money and there was no reason not to trust my kid at the same age.

OTOH I know a lawyer who I respect a lot who thinks trusts should never terminate because that way a child who gets married and divorced will keep that money separate. Maybe if we had more money we’d worry about that but I had no desire to make my kid deal with a trust for life in case they got a divorce.

[Anonymous]

Anonymous wrote:Our trusts provided support for our child until the age of majority. Thereafter, it provided for an income equal to the amount the child earned from employment, with a very modest floor amount payable to prevent actual destitution regardless. The idea was to encourage gainful employment - earn more, receive more from the trust. Don't work, or barely work, and the trust will ensure the child didn't actually starve, but would not fund a comfortable life as a dilettante. The trust paid out lump sums at specified intervals as the child aged, so the incentive was limited to relatively early, formative years. There were provisions to change the trust's payout structure in the event of the child's disability which prevented gainful employment, and the trustees were also empowered to fund the starting of a business if backed by a well-conceived and thought-out business plan.

Are you one of those parents who can easily afford to pay for college but will only do so if the student takes the classes you like?

[Anonymous]

Anonymous wrote:We have some kids still in elementary school and some who have graduated college so our needs may be different than yours.

Basically, the trusts are governed by an executor. There are payouts at staggered stages from 18 to 55, in incremental amounts with stipulations about use (or nonuse) of the funds). Each increment is predicated on the success (we spell out the criteria) in managing the prior increment. We also tried to build in some safeguards to help our kids avoid gold-diggers or people (strangers, friends, relatives) with sticky fingers.

If one of us dies, the other cannot change the trust or will.

If a beneficiary contests the will, that person immediately loses all funds that have been paid or will be paid and is no longer a beneficiary of our will/trusts. My husband has actually told our executor that he wants a "scorched earth" attitude about anyone who contests. We are being more than fair and equal. We cannot imagine a scenario in our current status that would cause anyone to contest, but we also realize that life happens.

We have been very clear to the kids because we want them to give the warning to anyone who gets involved with them - do NOT plan on benefitting from our will because our kids' hands are tied so go do your gold-digging elsewhere.

Is there a therapy fund written into the trust? Your kids will need it for the money-control dynamic you and your husband wielded in life and then from the grave. This is insane.

[Anonymous]

Anonymous wrote:You started from zero, and you want your children to do the “same thing”? You seem confused.

What am I "confused" about? I want my kids to work and be productive. I don't want them or their kids or their kids' kids to be sitting on their duffs like a bunch of lazy doofuses. It isn't mentally or physically healthy. I don't want them to starve to death, either. So they get a little money doled out in increments. Over time it is a lot of money but split up, well, it is going to be hard to lead a dilettante lifestyle!

We know a lot of people who are very wealthy and we've watched what they have or have not done with their kids and money. The kids of the super wealthy people who are the happiest and who are the most successful in life are the ones who don't rely on their trusts, who stand on their own two feet, and who are responsible for generating their own wealth. That's what we want and that's why we've set up our trusts the way we have. Basically we want our kids to be the type of people that we would want to meet, strong and independent go-getters with sound values, and not the type of people that we would walk away from rolling our eyes and saying "yuck."

[Anonymous]

After seeing first hand how difficult it can be to find a trustee, we give control our kids control of their own trusts/inheritance at age 30. It isn't worth it for a family member to be in control of a trust that they don't benefit from because it is a lot of work. I'd do it for minor kids but there is no way that I'd want to do it for grown nieces/nephews or other family members. Doing it for a friend would be even worse. Institutional trustees seem great but we've really had trouble with them.

[Anonymous]

Anonymous wrote:After seeing first hand how difficult it can be to find a trustee, we give control our kids control of their own trusts/inheritance at age 30. It isn't worth it for a family member to be in control of a trust that they don't benefit from because it is a lot of work. I'd do it for minor kids but there is no way that I'd want to do it for grown nieces/nephews or other family members. Doing it for a friend would be even worse. Institutional trustees seem great but we've really had trouble with them.

Executors can be paid from the trust if you set it up to do so. That way the work they do is paid for and you also can make it worth their while to do so.

[Anonymous]

Are you going to just have the guardians use their own funds to care for the kids until they are a certain age?

[Anonymous]

Your lawyer should be answering this. HEMS is standard. You’ll void yourself using too much precatory bs.

[Anonymous]

OP here. We will be talking to the lawyer, but we wanted to prethink what we might want to ask about in order to focus the conversation. We don't have any prior experience with this kind of planning so we don't want to come into the conversation too lost.

I think we want the funds to be free enough that the kids can be supported in their goals easily, but we want to protect them from gross misuse of the funds by their own poor decisions or from pressure from a friend with terrible advise. I figure we're talking about enough money that it can really help, but it's not enough to be more than a leg up for a young adult who is making strategic decisions.

We were considering giving the guardians access to a small amount up front and then access to pay for extras (education related expenses, like music lessons). I assume (but will check) that the social security payments for support of minors would also fall to them. How much up front is an interesting question.

Then we were thinking that the rest of the funds should sit until the child reaches college, at which point they could access the trust to pay for tuition or training. After that, they could access it again to pay for a house. If any remains after this, they get access to the rest at a certain age.

Or, we thought about just specifying access to a portion at different ages. That way they can do whatever they want, but they won't blow the entire amount at once. They'd have to stupid three times to loose it all.

I thought about directing it be invested and only pay out income, but we're not talking about that much money. I figure we run strong risk of one of kids needing to access the principal to cover college or that they might wisely just want to buy a house outright.

Anyway that's the source of our questions. Very interested to know what works in real life for families that can leave something, but not millions.

I appreciate the cross section of perspectives.