I'm working my way through big life decisions this week (first my car situation from my post on Monday) and now my estate planning. We had trust agreements drawn up by a lawyer which provide that if my husband and I die, then the trustee of our estate would pay for things that are in the best interest of the children until such time that the youngest child turns 25. After the youngest child turns 25, the trustee would divide the estate into equal shares that are paid to the children as follows: (1) one third after 25 years of age; (2) one half after 30 years of age; and (3) the balance after age 35. I guess my question is whether you would agree with those arbitrary ages. I'm assuming the trustee would deem their education (college, grad school, etc.) to be in their best interest. Do you think there is a good reason to delay the final payment until age 35? Would it make more sense to do 1/2 at 25 and 1/2 at 30? I just think that in my own life, the money would have been much more helpful at 25 or 30 when I was saving to buy a house rather than at 35. I think that if your kids aren't financially responsible at age 30, then maybe that's just who they are... Just curious as to what others think...
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Oh wow...I've never heard of delaying it like that. I'm 32 with 3 kids...personally I think a lump sum would have been most beneficial to me at 30? Or even 25. Is there a reason to break it up at all? I'd be tempted to say all of it at like...27.
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We have ours set up for 35,40,45 I believe however they can request money earlier for approved reasons such and education or buying a house.
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We broke ours in thirds, so 1/3 at 18, the next at 22, the final third at 26 (I think). I looked at it as a financial boost before college (if that's what they chose), a boost when they graduated, and a boost when they are starting to set up their adult life. Hopefully the money that they received at 18 wouldn't be wasted away. I do agree that the final payment at 35 seems a bit late and agree that who you are fiscally at 30 is probably who you'll be at 35.
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@LadyDi: Oh I like that breakdown!! Makes total sense.
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@bees_knees: Yeah, I think the idea is so they don't squander all of it when they are too immature. I have a cousin who inherited $1M from his grandma (not related to me - on the other side) at age 21/22 and he proceeded to live off that money for several years after college with no job, no ambition, etc. He eventually went to grad school and is a successful working professional now but I guess the idea is that you wouldn't want to be bankrolling that lifestyle.
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That seems really late to me. I would want the last payment to be by 30 at the latest, but even that seems late to me. I'm still in my late 20s, with my first kid on the way. My husband and I already bought our house too. I think the money would have been most useful to me for college, and then when we were buying a house. I feel like by 30 a lot of people are already established.
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@Lahela017: Their educations (including postgraduate education) are covered separately. This would just be for the portion that they can do whatever they want with (like buying a house, etc.). I agree... we bought our first place before 30.
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@Shantuck: I understand not wanting them to squander it, but I do think to a certain extent that's based on the person and not necessarily the money. A friend of mine and her two siblings inherited a lot of money when they were pretty young when their father died. Two of them, my friend included, have used it responsibly. One sibling didn't, but she wasn't responsible or mature to begin with and probably wouldn't have used the money wisely regardless of when it was received. I think at a certain point you just have to cross your fingers, haha.
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My ex had a similar set up. It really screwed him. His siblings were younger and their payouts were when he was 31 and 36. At 31 he was married and had gone to school on scholarship. He was working and trying to support his kids in a tiny house. Had they had the trust, he would've had a bigger house and his wife would've stayed home with their kids.
His middle sister went to private school and med school and drained most of the trust. His littlest sister used up a huge chunk going from school to school without getting a degree.
By the time my ex was 36 he was divorced and just going back to school. The trust didn't pay for it out of the top because it had been divided. His view is that it would've been much fairer to split the estate into trusts when the oldest turns 18. Then the trust can pay for schooling or whatever until each kid is 25 and then that kid can get whatever in their own pot that is left.
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I guess it depends what your goals for the money would be. Would you want it to allow them a lifestyle they couldn’t afford otherwise? Or just to be a safety net? Most people are saying 35 is too late, but if you want them to totally stand on their own 2 feet, buy a home that can afford, etc. than 35 seems like a good age to put the money towards ‘’extras’’ like their kids college or private school, nicer vacations, etc.
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Ours is:
1/3 of total at 35yo
1/2 of what remains at 40yo
All that remains at 45yoWe didn’t want them to have the money any earlier. Of course the trustee can disperse money sooner at their discretion. But we didn’t want them getting large sums for no real reason before 35, when they should be established on their own.
ETA: same as the OP, education is already covered separately. -
@Pollywog: That's an interesting thought. With the 4 year age gap between my two, the first could go to med school or law school and incur an extra $500k in educational expenses and then after it is depleted, the second would get screwed because they would then need to split the pot after the first depleted it. Maybe the way to fix that is to only provide that undergraduate expenses can come from the "family pot" and then once everyone gets their share, they can choose to pay off med school loans, buy a house, etc. That wouldn't fix the situation of the kid who spends 8 years at college but there were valid 5 year programs at my undergraduate university (for example, architects had to do a mandatory 5 year program) and I also had a friend who had take a break mid-semester when she was diagnosed with cancer and then ended up taking an extra year. I'd be worried about limiting the time frame within which they would have to finish their degree.
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@Shantuck: I know it's hard to project the costs, but maybe outline that each kid gets $50k? towards undergrad? That's a random number, but see up a formula like x percentage of average cost of an undergrad program (like 150% of the average for public or private?).
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We're still figuring ours out but our lawyer provided some options:
1) Split it into thirds (3 kids), expenditures, college, etc come out of their bucket and then at certain ages they get disbursements/remainder.
2) Set a max college per kid and then divide remainder into third. Any unused college goes to the remainder fund to then get divided evenly for whatever the disbursement schedule is.He basically explained that these all have tradeoffs but the options above prevent one kid from essentially draining it especially if there's a large age gap.
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