Difficult trust and estate decisions

We decided on no age/requirements beyond legal adulthood.  We're raising our children to understand budgets and responsible financial decision making.  Neither of us, had we gotten a windfall, would have had trouble with investing and choosing wisely... and we expect the same of our children.  Yes, neither age nor educational achievements equals financial responsibility.  Nor does "good parenting" guarantee that our values will instill in them, but that's the best we've got.

My parents set-up mine (and we are doing the same for our daughter) with incremental disbursements at certain ages. It started at 22 and went up to 35. There were no education achievements tied to it.

These are super important considerations! My father-in-law held multiple conversations with us before making the decisions for the maturity date of the trust for the grandchildren. Both my husband and I were able to purchase homes at age thirty because of family money that arrived at that time, and that really struck him. As there was already "grandma's trust" set up for education, he decided to add to that trust for the education portion. And for his trust, he went with late twenties/early thirties. His reasoning was that after finishing their education, the grandchildren could use his trust money to either buy a house or start a business. I hope this helps.

We are deciding this too and went with a third at 30, 35, and 40 with the idea being that by 40, your character is well and truly set so it won't "corrupt" in the way it might at a young age. Also, it gives them a few chances to get it wrong first. 

The "selected guardians will not need to dip into the funds for living expenses"?  Are you sure about that?  Two kids can cost a lot of money, but I'll assume you have that angle covered. 

We went with 30 years, but we set up the trust & guardianships when kiddo was a high school freshman.  We had a physical guardian so she could finish high school at her chosen school and a financial guardian [my brother across the country] to handle the money.  We now have a very responsible 27-year-old grad student, and I;m thinking it's time to update and scrap that financial oversight as no longer needed.  I would NOT tie it to a "post-graduate degree in a professional field"; my kid is doing great but that doctorate still may take a while, and I think you would be making a big mistake thinking that a JD or whatever is the standard for maturity. 

We had our trust written so that the kids get a gradually increasing percentage of the trust corpus at various milestone birthdays. I can't remember the exact ages and percentages, but an example would be: 20% at age 25, 30% at age 30, remainder at age 35. Your attorney should also include a clause permitting the trustee to withhold a corpus distribution if the trustee reasonably believes the beneficiary will squander the money (the actual language is more formal - but you get the idea). That way if your kid is partying hard at age 25, the distribution can be withheld until kid gets his/her act together. This is all only in the event both of us parents are dead, of course, which we hope not to be. We also were very careful to choose a trustee that we totally trust (trustees should be trustworthy!) and whose values and judgment align very closely with ours. Good for you for getting this done - if the unthinkable happens, your family will be so grateful. 

Congratulations on early planning. It can be difficult but a wise decision. My wife and I were faced with the same situation a few years ago and decided to form a trust which would hold the proceeds of our assets after they were sold. We stipulated that the children would receive 25% of their share at 25 years of age, 35% at 30 and the remaining 40% at 35. We felt, as do you, that the children should not receive all of the funds at once as there are too many people who would want to take advantage of them and they should learn how to deal with an unusual amount of money slowly.. In addition, we believed that they would become wiser, hopefully, as they aged and would be better able to make better decisions.

From what I remember...Some trusts break up the distribution.  One done early, say around 21 and another at 30. Keeping property in the trust is helpful and you can have an atty do the taxes.  Long term leases can be helpful for income and based on inflation raises.  And I think you'll need a Trustee. Trustees are entitled to 3 percent, each year of the value of the Trust or it may be the income of the Trust.

Its important that the kids are given copies of the trust at some point.

we set ours up so our kids receive 1/3 of their inheritance when they are 25, 1/2 the remainder at 30, and the remainder at 35 (so basically 1/3 at each time point). As you said, someone will be controlling the purse strings and could decide to give them more earlier if it is needed for a down payment or something but I feel better spreading it out and those ages seemed to us to be reasonable.

I suggest the age of 35, with exceptions for down payment on a home and education.  That way they won't fritter it all away.

What a great question. I ponder the same things. One thing that I was considering was putting some kind of matching provisions in the trust before my daughter gets control of it. So if my daughter wants to buy a house, she would need to save half of the down payment on her own and the trust would match her savings. I'm not sure how realistic that is but it's something that I've considered to keep her motivated.

Another thing that worries me is me dying first, my husband remarrying, and his new wife taking control and not wanting to spend money on our daughter. My dad married a shrew and I know exactly what happens when weak men get remarried. I want to set up a separate trust for my daughter with my brother as the executor that would have enough in it for all schooling expenses (through graduate school) with enough left over for a down payment. But I have no idea what the amount should be. I don't want it to be too little but I also don't want it to be too much. The trustfunders I grew up with are mostly unhappy losers who have accomplished very little. I don't want my daughter to turn out like that. But I also don't want the money that I've worked so hard for not being used for my daughter's needs. I know that I sound paranoid but I've lived through it and want to protect my daughter. My husband makes very fast decisions without thinking through the long-term consequences and I have no doubt that he'd be remarried within a year of my death to the first woman who came along who was nice to him.

We put age 30 as the age that the kids can get the trust money.  The reason for this is that in the event we are gone, I want our kids to have to earn money and learn too be independent before they are given a lump sum. I think the biggest disservice some kids are given is that they aren't given the opportunity to struggle just a bit to learn the value of money, resilensce, budgeting and sacrifice.  By age 30, those lessons will hopefully be learned and some extra money could help with purchasing a house, raising children, and otherwise lightening the financial load during a decade when it tends to be the most pronounced 30-40 for those with families.
 

I come to this from the perspective of someone whose kids are now 19 and 22 (and I need to get in and update my estate plan!).  I would say, sure, other things being equal, you don't want a 22 year old or 24 year old to be making the decisions as to how to manage a large sum of money.  But this is only going to be a problem in the unlikely event that you both die when your kids are young.

Would I be happy to hand over my 22 year old's inheritance to her right now and leave her on her own to manage it? No.  In the unhappy event of my death, do I think it is appropriate and necessary to leave her waiting and dependent on someone else's decisions about what to do with what will be her money?  Also no.  It will be a burden on her, for sure, and I wouldn't yet make her executor/successor trustee (although she tells me I should!) but she's an adult, out of school (albeit with the possibility of grad school) and by and large managing her own affairs.  

19 year old still in college, different story.  So I'd say, distribute each child's share when he/she hits 21 or 22 -- whenever they'll be out of college. And know that it's unlikely that you'll be dead by then, and that if you are, that will pose all kinds of challenges for your kids.

I've thought of this often myself. My sibling was left quite a sizable asset and was suddenly 'courted' by someone who had shown little interest in her before - flash forward 15 years, he married her and convinced her to sell so that he could retire at age 45 and basically sit around (while she continues to work), sigh. So hard to say, but I think you are on the right track looking at around 30. t's an age where most adults are really maturing and looking forward in their lives. II think it will also involve a lot of conversations with your kids about what it all means, and the responsibility that goes along with it - I would say that is key. Whatever you decide good luck!

One thought is to liquidate in stages starting at say, age 25, 30, and 35. Another would be to give a good amount of discretion to whoever your Trustee is (e.g. say the child needs money for a down-payment). Hopefully none of this is ever needed, but we have been Administrators for family trusts, and have some experience with making those difficult decisions. Every young adult is different, so flexibility makes sense.