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

[Anonymous]

Anonymous wrote:

Anonymous wrote: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?

I am the named executor of a sibling's trust (single parent). The way it was setup, kids will get 4% each year of the what they inherit (will be about $2M each if that event happens today) until age 35 (Kids are 16 and 14 now), at which point they just the whole thing. There's a separate bucket of money for healthcare (insurance premium, etc. One of the kids has health issues; this bucket will be funded by Life insurance proceeds). College expenses, will be paid for over and above the 4%. Don't recall if the accounts just transfer over at age 35 or if the trust splits into two. As executor I'll have the liberty to invest the money as I deem fit as well as pay out additional amounts if appropriate..

OP. Your mom's plan makes a lot of sense. Thanks for explaining it. I can see something like this working well.

[Anonymous]

OP

We are not a fan of institutional trustees. Our family has had problems with them plus they are expensive. We found they are out for themselves. They also charge a lot for preparing the trust tax returns each year...i.e. it is also a profit center.

We prefer a family member to be trustee.

If your state allows for portability of the trust funds to another financial institution either at the beneficiary's request or beneficiary and trustee request I'd recommend that option. We are trapped into working with a national bank that is in the news for all kinds of wrongdoing but the trust specified a local bank that has since been through about 6 acquisitions. I've been through 3 investment guys and 3 trust managers in the past 12 months as they keep finding other jobs (to get away from the bank with the bad reputation.)

[Anonymous]

I"m 20:24 poster

IF your state allows portability of funds to other financial institutions write that into the trust documents to allow for portability.

[Anonymous]

Anonymous wrote:

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.

If I was the recipient I would walk away from the money. The controls are insulting. So your kids have to justify their income to some outside executor (I'm assuming paid from the trust) ? I would not subject myself to this and would live a moderate life of my own making.

[Anonymous]

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

NP

We declined to be guardians for family members who thought they were SO clever with all kinds of controls on the money, which would leave us guardians on the hook for fancy things, like, you know…health insurance premiums, therapy costs, increased hosing expenses and food.

The backstory is that the husband had his father pass away while he was in college and he got a windfall in life insurance. They couple wanted the same for their kids, should the worst happen. We told them that was fine, but they’d need more insurance to cover necessities in the meantime. We thought their attitude towards the would-be guardians was really appalling. I’m glad we declined and I feel badly for whoever was financially illiterate enough to agree to their you-foot-the-bill terms.

[Anonymous]

Can we keep this thread going for newcomers? I don’t want to hijack if your OP wasn’t sufficiently addressed. Seeking others with young adults. My son is 19, so I’m starting over without executor/trustee with him involved in draft and meeting with attorney. He’s a rising college sophomore, responsible with money, on his second internship, pays his cc in full each month from his own earnings, has a decently performing small portfolio that he funds. My only concern is he’s overly generous, so some protections need to be established. College tuition is funded separately.

[Anonymous]

Anonymous wrote:Can we keep this thread going for newcomers? I don’t want to hijack if your OP wasn’t sufficiently addressed. Seeking others with young adults. My son is 19, so I’m starting over without executor/trustee with him involved in draft and meeting with attorney. He’s a rising college sophomore, responsible with money, on his second internship, pays his cc in full each month from his own earnings, has a decently performing small portfolio that he funds. My only concern is he’s overly generous, so some protections need to be established. College tuition is funded separately.

All the points raised in previous posts apply to your situation as well.

[Anonymous]

Anonymous wrote:

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."

Ironic.

[Anonymous]

This is actually a good thread. I have elementary-aged kids and a trust already established. I need to work on the incentive provisions though, so reading ideas is really helpful.

[Anonymous]

Money can do the most good early in adult life, whether for education, a home, starting a business. Plus I tend to think that trying to shape an adult’s character thru a trust fund has its own issues. For those reasons we did have some limitations and phases but they were fairly limited.

[Anonymous]

Trustee (a professional, not family) can disburse what they see fit at any point; kid is entitled to half of what is there at 30 and the other half at 40.

[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.

So if a productive kid ends up needing an experimental out of pocket potentially life saving treatment, SOL?

[Anonymous]

Anonymous wrote:Trustee (a professional, not family) can disburse what they see fit at any point; kid is entitled to half of what is there at 30 and the other half at 40.

Those professional trustees take a large payoff for their work.

[Anonymous]

Anonymous wrote:Trustee (a professional, not family) can disburse what they see fit at any point; kid is entitled to half of what is there at 30 and the other half at 40.

Professional trustees suck and I wouldn’t want them to decide what they see fit.

[Anonymous]

You need to name a trustee who has great judgement, and understands your wishes. I might say that education should prioritized over other expenditures , once the children are 18 and have been housed, clothed and fed.

You could give ages at which subsequent funds are disbursed…but if you gave an excellent trustee then let them decide based upon how the kid is doing in life, their needs, maturity, etc.