Establishing lifetime trust accounts for young adult children

[Anonymous]

Question on financial planning for your children.

We have 529s etc fully funded - so college and any grad school will be fully funded with no student loans. Have 3 kids (oldest age 16) and we have about $25m liquid/savings in various investment accounts. We are both still working and make generally high W-2 incomes.

Talking to planners next week but wondering if it makes sense for kids to start to get some trust distributions when they turn 21 ($3-5k/month) - to help them become independent/manage their own money/so they can choose careers they are passionate about/full recognition of no lump sum coming late in life. They would also know they can’t come to us for money otherwise.

Has anyone done this? I’ve heard horror stories of parents who have college graduates who continue to come to them for help during their 20s for leases, house down payments, car purchases, you name it. I definitely don’t want to do any of that and want them to stand on their own 2 feet but recognize that we do have resources and it might be better to share with them now than at some future point after we pass away. Especially given inflation is likely to remain and be persistent for decades, while the cost of everything just continues to go up (and wages don’t seem to be).

Has anyone structured something similar (or been the recipient of something similar)? How has it worked out?

[Anonymous]

I think it depends almost entirely on your kid so tough to give a cookie cutter answer.

I know someone who gave his kids ~$80k/yr so they'd be able to choose a career without financial pressure. All three kids are doing well (Harvard med school, consulting, business school). Then you hear stories where the kids wind up being coked up party animals.

[Anonymous]

Anonymous wrote:I think it depends almost entirely on your kid so tough to give a cookie cutter answer.

I know someone who gave his kids ~$80k/yr so they'd be able to choose a career without financial pressure. All three kids are doing well (Harvard med school, consulting, business school). Then you hear stories where the kids wind up being coked up party animals.

Agree with that for sure.
What year did the distributions start? Is 21 too early?

[Anonymous]

I think it was after college graduation - but of course the parents paid for their college and living expenses so money was already moving in that direction.

[Anonymous]

I got this and will likely do the same for my kids. Guaranteed basic income.

[Anonymous]

Anonymous wrote:I think it depends almost entirely on your kid so tough to give a cookie cutter answer.

I know someone who gave his kids ~$80k/yr so they'd be able to choose a career without financial pressure. All three kids are doing well (Harvard med school, consulting, business school). Then you hear stories where the kids wind up being coked up party animals.

I think they would be like this regardless.

[Anonymous]

Anonymous wrote:I got this and will likely do the same for my kids. Guaranteed basic income.

Was it tied to CPI or Cost of Living? Or did the amounts just go up overtime or stay steady for your lifetime? Do you children get the same from any residual amount?

[Anonymous]

Anonymous wrote:Question on financial planning for your children.

We have 529s etc fully funded - so college and any grad school will be fully funded with no student loans. Have 3 kids (oldest age 16) and we have about $25m liquid/savings in various investment accounts. We are both still working and make generally high W-2 incomes.

Talking to planners next week but wondering if it makes sense for kids to start to get some trust distributions when they turn 21 ($3-5k/month) - to help them become independent/manage their own money/so they can choose careers they are passionate about/full recognition of no lump sum coming late in life. They would also know they can’t come to us for money otherwise.

Has anyone done this? I’ve heard horror stories of parents who have college graduates who continue to come to them for help during their 20s for leases, house down payments, car purchases, you name it. I definitely don’t want to do any of that and want them to stand on their own 2 feet but recognize that we do have resources and it might be better to share with them now than at some future point after we pass away. Especially given inflation is likely to remain and be persistent for decades, while the cost of everything just continues to go up (and wages don’t seem to be).

Has anyone structured something similar (or been the recipient of something similar)? How has it worked out?

Why wouldn't you want them to come to you if you are still alive? We put $$ in trusts for our kids, should we die, but until then we will manage how we gift them $$. One is becoming independent (out of college and employed). We pay for them to join us on vacations, paid to setup their apartment (3k miles from us), gifted them their first car, and most importantly we gift them their Roth IRA contribution and 401K contributions each year. By the time they are 30 they will have enough "saved for retirement" to have over $2M at age 60. Otherwise they want to manage themselves, but know if an emergency hits we would obviously help---why wouldn't we if we an afford it? But they also know we aren't gonna help if they quit their job, sell the 10 yo car with only 60K miles and buy a new one, do other not financially smart choices. As long as they are contributing to society and employed and being a normal college grad for their age, we will help if the need arises. However, we wont fund expensive vacations (unless they are with the family), if they want $400 tickets to a concert that's on them, etc.

[Anonymous]

My parents did this for my brother. He overdosed. YMMV.

[Anonymous]

Hard to see how giving 21-year-olds $60,000 a year tax-free would help them become independent -- wouldn't that be something they do by, you know, getting a job?

I wound up getting some large gifts from my grandparents before they died (several hundred thousand dollars), but it wasn't until I was nearly 40, and I didn't know about them ahead of time. I will also at some point (hopefully many years from now) inherit a share of my parents' significant wealth. But I don't know that I'd have been better off getting all that money at a younger age.

I did choose a career that I was passionate about (and one that didn't pay particularly well), but I also then lived within the budget my income provided. By the time I got all this additional money, it was mostly just extra savings. Which makes me very lucky, but I also think it was valuable to have made it work on a salary of under $100,000 a year well into my 30s.

[Anonymous]

The people I know who got money young never established any kind of career. The amount you are considering giving is more than many first jobs pay.

[Anonymous]

Do what you want, its your money, but geez that is a lot of money to give to (presumably) able bodied people capable of supporting themselves. Don't really think of myself as a socialist but it does seem weird to read about it in black and white like that.

[Anonymous]

I’ve heard horror stories of parents who have college graduates who continue to come to them for help during their 20s for leases, house down payments, car purchases, you name it. I definitely don’t want to do any of that and want them to stand on their own 2 feet but recognize that we do have resources and it might be better to share with them now than at some future point after we pass away.

I'm confused... you think that giving them the occasional gift is "a nightmare", but giving them a STEADY GUARANTEED INCOME is them "standing on their own two feet"?

[Anonymous]

I come from a large, wealthy family with lots of cousins who got substantial annual payments. They’re all over the map, even the siblings. I don’t think this is as big a factor as people like to believe. It’s a factor for career choices, housing, etc and a big relief to me in terms of having my own kids. But I don’t think it turned anyone from Achiever to N’er-do-well or visa versa.

In terms of your relationships, whatever you decide just communicate it clearly and don’t give them money with strings. Either give something and trust them or don’t. The most unhealthy dynamic imo is trying to control them with money once they’re adults. Don’t give the gift if you’re going to be mad if they do something different with it than you think is right. A 25 year old might travel the world to party for a year. You may not approve, but that’s a long way from being a junkie under a bridge. If you would feel really upset about something like that, just keep it.

[Anonymous]

There are worse things that can happen to your kids than “never establishing a career.” As long as they’re doing something meaningful to them and have enough money, does it matter? A lot of careers kind of suck.