Trust Funds & Age?

[fire&ice]

We are in the process of redoing our will. I *absolutely* want to put the inherited money into a trust for the recepients. What age do we release the funds? Since we will be dead, we can not make the detemination on each individual & their stage in life. So, perhaps with Mara's help I can set up a poll. My hubby & I are in fierce disagreement. I say release the money at 22/23 perhaps 25. He feels that 30-35 years is more appropriate for the maturity to handle the influx of cash. My feeling is that if they blow through the money then so be it. I know we could have used that money in our 20's. But, then maybe we would not be the same people if we didn't have to work hard for what we have.

I have to plan as if we die tomorrow.

I'm torn. What are your thoughts? Older folk? You young kids - do you think you could handle the responsibility? This isn't chump change. It's enough to make a difference in someone's life.

Perhaps a compromise (I call it a cop out w/ more red tape), release part at 23 ish & part at 32ish. This would involve more involvement from the executor.

 

[glitterata]

I'd say 30. Believe it or not, 30 is still young, and that gives them all of their twenties to learn what money's like when you work for it. Of course, it's not quite the same when you know that working for a living is just temporary. If only they didn't have to know the money's coming eventually.

Just make sure they can get tuition money if they want to go for an advanced degree in their 20s. Although (thinking aloud here) would it be such a bad thing for them to take on school loans? At least they wouldn't be paying them off for the rest of their lives, and it might teach them some responsibility.

 

[Arlington]

As someone who is turning 30 next Thursday (yes, I'm a turkey this year) I feel 30 is about the appropriate age although I would make a college tuition exception if that is possible. It's easy to say that younger adults (20-25) definitely may have life events where they could wisely use the money (buying a house, wedding, etc.) but I'm a big believer in learning the value of money the hard way. People need to learn to survive on their own income first, and then they can make intelligent choices on what to do with the extra that comes their way.

 

[fire&ice]

----------------
On 11/21/2003 11:24:14 AM glitterata wrote:


Just make sure they can get tuition money if they want to go for an advanced degree in their 20s. Although (thinking aloud here) would it be such a bad thing for them to take on school loans? At least they wouldn't be paying them off for the rest of their lives, and it might teach them some responsibility.----------------

Geez, you must be a Libra also. I'm constantly seeing the pros & cons. Unfortunately, nothing is as final as death. We've got to pick one. And, life is such an intangible! Not like picking a diamond!

Since we have decided to distribute amoung my quite a few neices & nephews (we have no children), it's certainly not enough to retire on. At least in my view.

I hear you about the college tuition in both respects. But, with the more exeptions you have the more control goes to the parent. My fear is that the power to use the money for tuition, emergencies, etc could be abused. I forget the legalise; but, it would be at the parents discretion. Then the loosey goosey nature of an "emergency" or tuition for that matter.

 

[fire&ice]

----------------
On 11/21/2003 11:41:51 AM Arlington wrote:

People need to learn to survive on their own income first, and then they can make intelligent choices on what to do with the extra that comes their way.
----------------

Wow, thanks. And, my 20's leanings is exactly for the downpayment for the house & not having the stuggles for money early on. But, your point is *extremely* well taken & a very valid one.

I just want to be fair. I want the inheritance to be a good thing & not a curse. Funny, Hubby & I are having arguments about all this stuff. We disagree quite often; but, this is a real negotiation of give & take. I have no plans on dying any time soon; but, have actually been asked for items to be passed to them.

 

[aljdewey]

I'd cast a very loud vote for 30. Speaking from personal experience, I think money ruled me until I was 30, when I finally learned how to rule money.




I think there's value in letting a young adult figure out how to come up with college tuition on his own, or how he's going to fund a goal of his own. It makes him consider more seriously what he REALLY wants to do instead of "experimenting" just because there is money to do so. The 20s are also a time of learning and making financial mistakes.....those mistakes are the best education one gets in how to manage money wisely. Even the most responsible of individuals still have a few mis-steps, and I know a slew of people in their 30s who wish they could do some things differently financially now that they "know better".




There is just no substitute for life experience, and by the time one is 30, they've made enough choices to have learned well from them. It's also still plenty young enough to help fund a downpayment, etc.




30 also avoids the whole "parent interference" concern.

 

[fire&ice]

Wow, dare I say, you all agree w/ my husband. Maybe the 20 somethings aren't awake yet.

Say I died now. One is too young to know what money really is. The majority are either in their 20's or approaching very shortly. Do you think they would view the holding back until 30 as unfair?

 

[Arlington]

----------------
On 11/21/2003 12:27:09 PM fire&ice wrote:


Say I died now. One is too young to know what money really is. The majority are either in their 20's or approaching very shortly. Do you think they would view the holding back until 30 as unfair?----------------

Maybe, but hopefully they would (or will at some point) understand that thing money is a GIFT not a inalienable right. You could give the whole kit and kaboodle to charity if you wanted. So, it's not really a question of fairness in my opinion.

 

[fire&ice]

Maybe, but hopefully they would (or will at some point) understand that thing money is a GIFT not a inalienable right. You could give the whole kit and kaboodle to charity if you wanted. So, it's not really a question of fairness in my opinion.

----------------[/quote]


I like your attitude. Some of the receiptients are of your like mind. But, people are funny about money. And, no good deed goes unpunished.

 

[Arlington]

----------------
On 11/21/2003 12:50:50 PM fire&ice wrote:


I like your attitude. ----------------

Really? Would you consider putting aside a little something for me, too, then????

 

[Kay]

Estate planning is one of the areas in which I practice. We frequently draft trusts where the principal distributions to beneficiaries are staggered in 2 or 3 payments at different ages. The trust will become irrevocable at the death of the second to die of the husband and wife. At that time, the amount to be allocated to a class of beneficiaries is divided into equal shares (or you can set a predetermined percentage or dollar amount to be given to various individuals) and each beneficiary's share is thereafter treated as a separate trust. As each beneficiary obtains the age of 21, he or she receives 1/3 of the trust balance, another 1/3 at 30, and the remaining balance at 35. You can dictate whatever ages you think are appropriate based on the amount of money to be given to each; some clients use 18/25/30, others 25/35/45, or any combination. We usually have income accumulated until age 18 or 21, and thereafter income is distributed annually to the beneficiary (individuals usually pay a lower tax rate on the income than the trust would if it is not distributed). We also allow the trustee to make discretionary distributions of income and/or principal if needed for the beneficiary's health, education, maintenance or support. You can define these terms in the trust instrument as you wish. "Education" can just include college, or it could also include private secondary schools, trade schools, and music or other private lessons. "Support" frequently includes money for a down payment on a first home or to help the beneficiary begin a trade or business for which he or she appears well suited. Talk with your attorney about the options available.

 

[mike04456]

I was going to post something like that, but Kay is exactly right. There are a nearly infinite number of ways you can structure a trust depending on what you want to accomplish. This isn't an either/or question.

 

[Hest88]

I definitely vote for leaving them the bulk of the money at 30-35. F&I, we know you were mature for your age, but I don't think that's the norm. Even if your beneficiaries are unusually mature and will handle the money well, there is still a great value in learning how to earn and manage one's own money without the benefit of a huge safety net.

 

[aljdewey]

----------------
On 11/21/2003 12:27:09 PM fire&ice wrote:





Say I died now. One is too young to know what money really is. The majority are either in their 20's or approaching very shortly. Do you think they would view the holding back until 30 as unfair?
---------------

If you are giving the gift, it should be on your terms. If you want to give them the money when they turn 30, that's *your* choice.....it's your money. Pardon my bluntness, but they should be thankful they're getting anything at ANY time. If they don't like the stipulations of your gift, they are certainly free to decline the gift, right?

When you're young, *everything* is unfair. It only becomes more fair the older one gets, when we learn that life isn't fair and we aren't *entitled* to anything we didn't work for.

 

[aljdewey]

----------------
On 11/21/2003 12:50:50 PM fire&ice wrote:

But, people are funny about money. And, no good deed goes unpunished.
----------------
Yes, and both are very good reasons not to disclose any gift intentions in advance. No arguments, and they can find out about it when and if the eventuality arises. Your good deed cannot be punished that way, and you don't have to listen to dissent with your sound judgment.

 

[kathio22]

You are a wonderful and generous Aunt. You are leaving a gift of cash, let it be on your terms. How about you and hubby compromise. You say 23-25, he says 3-35. Why not do it in percentages? The first draw at age 25 then 30 then final at 35?

If your siblings can not afford college tuition for their children, there is always student loans. They can pay the student loans off as soon as they receive the gift. You can also make it a term that they must pay student loans off and whatever is left over is for their own discretion.

I am 26 years old, just got engaged, and just learned a lesson about diamonds . I took student loans and continue to pay them monthly, I bought my car(s) myself, paid for EVERYTHING in my home myself, etc. My fiance and I have not had any financial assistance from anyone, nor will we. It is because of this that I am so money conscious. We are paying for our own wedding and building a home at the same time. All of this from our hard work. I don't do bad at all for my age, but I appreciate everything because of it. Will they? It all depends on the person. If you are not around to assess their maturity then I say gift them in increments. Plus it is not one lump sum which forces them to manage it better and continue working. You would be surprised at the responsibility a 25/26 year old has when always forced to work to survive.

One more thought, even at the age of 40 people over spend. Look at Michael Jackson, he just spends all of his money with no thought...he is near bankruptcy, so they say.

 

[Mikesgirl]

Hi, Fire & Ice.

My will doles it out in increments at 18, 25, 30 and 40. I have one child who chose college and one who chose a family first, and would not want to tell either that their choice was unwise based on what I would or would not finance. What I do like to do is match funds. If one of them wants to hit the trust for a down payment on a house, for example, they can only have the equvalent of what the themselves put down (and not from borrowed money). I think it's very important for them to work for what they want. Everything in my life that I work for is more valuable to me.

I have taken this approach in life as well, expecting my son, for example, to pay one third of his college costs. This helped him to make better choices about which school to go to when considering cost/benefit.

I think you're very generous to do this for your nieces and nephews, but I hope you live long enough to spend their inheritance!

 

[fire&ice]

----------------
On 11/21/2003 1:36:16 PM Kay wrote:

Talk with your attorney about the options available.----------------

I have. I'm even more confused w/ raising of questions. I have a document I'm reviewing that is papes & what I call chapters deep. We have set up a living trust. Probate taxes are not high here; but, if we died within the next few years, estate taxes is a problem. If I recall correctly they will be phased out by 2010 - just to be reviewed again. We thought this living trust a great idea. Then, I realized that if hubby dies, I don't have full control to buy a houseboat for instance. What we have decided is not to fund it except w/ minimal amounts. What if I die & hubby marries and has a family of his own? It wouldn't be fair to have him be tied to my wishes (in the form of leaving money to neices & nephews) when my true & only wish is that he (hubby) is happy - and visa versa. I know we can change the will; but, neither of us are the type.

So, you can see - ignorance was bliss. Our old will left equal shares to his mom & my parents. This isn't prudent anymore b/c of the size of the estate & my parents are elderly at this point. We do not want to leave the money to our sisters & brothers for various reasons. Hence the quandry about the age for distribution of money to the neices & nephews.

Also, given some history, I do not trust an institution to be the executor . Some real odd things went on w/ the trusts from when hubby's father died (at a very early age). I want everything very cut & dry - family fighting is inevidable. Hence my apprehension to giving the money to them when they are 30. Granted, they may not have the maturity; but, at least their money is their money. Spending it on what they wish. Read between the lines - there exists one sibling who would be a problem w/ the carte blanche of what qualifies as education/medical emergencies, etc. Again, my reason for just dispursing at a younger age then 30.

We have quite a few decisions to make that our attorney can not make them for us. This one question being one of them.

Heck, I'll be dead. I don't think I'm going to worry about it then. But, I'm sure making my head spin now. I need a drink. Fortunately, I'm not going to worry my pretty little head about it tonight - headed for a good meal.

Also, you attorneys understand all this mumbo jumbo. My hubby understands better than I do. But, you also know that the difference between the word on a document saying "may or should" are night and day.

Kay, I am one of those clients that loses sleep over this stuff. My hubby isn't. We are your worst nightmare.

Edited to insert Living *trust* not will. Although, we have one of those to.

 

[fire&ice]

Thanks for all your advice. Kathie - your perpective was most interesting being only 25.

This is cathartic. I guess I am more concerned w/ the abuse of *their* money prior to the distribution. I just want to be fair & do the right thing. I can't control that after I'm dead. Maybe I shouldn't. I can't go into specifics; but, some funny stuff has already been pulled regarding another trust. Someone trying to access it. In the end they couldn't. But, the intention of the trust was not *their* intention. Hubby knew the intention & did not try to get around it. So, I'm gun shy. I want to make sure they are taken care of if the money is needed for school, emergencies, etc. But, I don't want any abuse.

I guess what I am hearing from you'all regarding the age is that the abuse could easily happen by the intended receipiants if dispersed to young.

WEll, off for that drink & meal - I promise this time!

 

[mike04456]

----------------
On 11/21/2003 6:03:56 PM fire&ice wrote:











Also, you attorneys understand all this mumbo jumbo.

We do? News to me.

My hubby understands better than I do. But, you also know that the difference between the word on a document saying 'may or should' are night and day.

----------------

F&I, you have no idea. There are cases on the books in which the disposition of an entire estate hinged on the absence of a single comma. There are mistakes you can make in structuring your will that can make the difference between losing half of your estate to taxes and paying nothing. If you ever read Dickens's Bleak House, things have not greatly improved from the days when the Jarndyce estate was entirely consumed by legal fees during probate. And let's not get started on dying without a will. (Note to all you prospective brides and grooms: drafting one should be the first thing you do after getting back from your honeymoon.)

This is why I went into a nice, simple area of law like intellectual property.

 

[isthree00]

F&I,

i didn't have the patience to read every post but i'll put in my $0.02

i'm 23 and getting married next spring. while the financial stress of a wedding, honeymoon and home ownership is at times overwhelming, i'd rather have it this way than a silver spoon in my mouth. i'd agree with the other posts in that learning the value of a dollar and making it on your own is an important part of life and will effect these kids for the rest of their lives.

here's a question - how well off are these kids?

my $0.02 is this - why not give the majority of the money away to charities that you agree with? if you had kids of your own this would be my logic. . . if you give them the necessities growing up and are good parents to them and you give them a great college education, you've given them MORE than enough and all that they need to make it on their own. that's my parents logic and i agree. they won't leave me much of anything behind but i don't care. i'd rather have the money go to people who really NEED it. i'll be just fine no matter how difficult things get with a house, wedding etc.

Sounds like you have enough money to really make a difference in some people's lives. Think about the joy that would bring knowing that you've given someone an opportunity that they otherwise may never have had.

just a thought to chew on. . .

 

[Richard Sherwood]

How about a certain amount of money being doled out each year, with the balance received at age 30?

 

[fire&ice]

----------------
On 11/21/2003 11:56:33 PM isthree00 wrote:

Think about the joy that would bring knowing that you've given someone an opportunity that they otherwise may never have had.

just a thought to chew on. . .----------------

It's a thought I have chewed on. But, family is family and despite not being close to all members, I am very close to several. We do have an allocation for our favorite charities. As with most families, some do better than others. Except the young one, all are in college. So, I don't feel as though I have to. I want to.

Also, Al - they no nothing. They have no clue. Remember, we don't live lavishly. We don't have big fancy cars & showy houses. Think what conclusions a 20 year old will draw (although the one's we are close to have a clue). The only family member I have discussed anything with is my father. I trust his sound judgement.

Rich, your idea in theory is a good one. I'm trying to minimize costs to the estate and simplify stuff.

Lawgem - yeah - that's why I'm scared to death - pardon the pun. The attorney drawing the will is an estate specialist & quite well respected. I guess you got to put your faith somewhere.

Thanks for all your suggestions. I'm leaning towards 1/4 at 23 to pay off student loans & give them some seed money to start life. The remainder at 30. Whether I give some wiggle room for emergencies is something I need to think about.

I didn't think death would be this complicated.

Another thing when we first got into this, one can leave an assigned list of items to be passed on. At first glance this is a great idea. I plan on writing down what my wishes for items like my 3c. But, I don't plan on formalizing it. What if I die from a long illness that drains our funds? I want hubby to have sole discretion.

And finally, to Arlington - I do have a smart, pretty elegant niece of marrying age; but, you are taken. So, you're out of the line of an inheritance.

 

[hoorray]

Hi F&I,

Just a late addition -- lots of good advice here. I'm your age and am going through the same will process as you. We've talked to lots of people. Our attorney is against dragging it out do to executor work and fees. My neighbor has a trust fund she can't really control, and she could really use the money which she can't get to. But...I grew up in a neighborhood full of wealthy families. (we weren't one of them...). many of the kids had everything they ever wanted from day one, and it amazes me how lost many of them were when they got out on their own. They had never wanted for or had to work for anything, and didn't really know what to do when the day came. There is a valuable lesson that Arlington has talked about.

I think I'm going to try to help provide for the education, and delay the rest until 30 or so. Even if it means they can't buy a house until then, I think knowing they have to develop a career and get control of their lives and their future is important for motivation, and can then be one of lives big accomplishments.

good luck!

 

[fire&ice]

----------------
On 11/21/2003 4:18:30 PM Mikesgirl wrote:

Hi, Fire & Ice.
What I do like to do is match funds. If one of them wants to hit the trust for a down payment on a house, for example, they can only have the equvalent of what the themselves put down (and not from borrowed money).
--------

Can one do that if one is dead? Is there some sort of language in the will that allows it. Again, I would be concerned about abuse. I think this would be easier if they were all my children.

 

[fire&ice]

----------------
On 11/22/2003 8:13:43 PM lop wrote:

Hi F&I,

Our attorney is against dragging it out do to executor work and fees. My neighbor has a trust fund she can't really control, and she could really use the money which she can't get to.
good luck! ----------------

Yes, that's why I want the will to be as simple as possible. The living trust is only there to get around estate taxes which may be a non-issue in a few years. Which brings up my next dilema - Who should be the executor? Our attorney isn't on board to be - and she said this will be costly. My father has been the executor; but, he is 80 & I wouldn't want that burden put on him. I am leaning towards my life long forever friend. Her hubby is an attorney. I may choose him or both. The estate will pay him a nominal fee which I know he will not abuse. My thinking is that they will be the most unbiased. Money is being left to both sides of our family which could lead to biased if I made a family member other than my Dad the exec.

 

[hoorray]

Your friend and/or husband sounds perfect. I'm lucky to have a younger (much) brother who is an attorney, so I've asked him to be the executor. My plan is to sit down and talk through my real wishes and goals with him. My husband and I have agreed to also write those down in a letter, but so far haven't mustered up the courage to write a letter like that. I think the nominal fee is fair, and the idea of having someone objective and at least somewhat knowledgable in the area of trusts, taxes, etc is really appealing to me. it's such a complicated area, and I'm not convinced that will change unless we all die on just the right date!

btw...I'm looking at one of those educations trusts for an initial disbursement since they have preferable tax treatment. Have you looked at or considered those?

 

[fire&ice]

----------------
On 11/23/2003 7:41:17 PM lop wrote:


btw...I'm looking at one of those educations trusts for an initial disbursement since they have preferable tax treatment. Have you looked at or considered those? ----------------

Yes, at the time I looked, though, it's my understanding that one has to be parent or legal guardian.

Many of my friends have opted for the pre-paid tuition which seems to be a great deal.

 

[magna2]

fire&ice,

If you still having quite come to agreement with hubby on when to disburse funds in the trust, not setting up the trust is still an option. One of your intent was to avoid estate taxes but since the limits that can be passed without estate taxes is going up, just letting them inherit it the old fashion way is still a viable alternative. Granted that your heirs will have to go through probate first - but since you will be long gone that will not be a concern of yours.

My opinion is that if you are planning to leave a substantial amount of cash it is best to do so if the beneficiary is well matured enough to handle a sudden influx of money.

Just food for thought.

 

[hoorray]

Hmmmm....I thought my attorney has been telling me I could do an educational trust for my niece and nephew any time. I know their grandmother has started one for them. It is probably under their parent's control tho. I'll have to check again.