[USER]

Spouse and I are in our early 40s.
We have a daughter who is 13 years old.
We are in process of setting up a revocable living trust.

Spouse and I will be primary beneficiary for each other. But if something were to happen to both my spouse and I at the same time, we want our daughter to be the beneficiary of all the assets in the trust.

Questions:
1. When daughter would turn 18 in future, what would be the best way to give her access to the money from the trust? (She is only 13 right now).

Goal is to prevent her from not knowing what to do with all the money and thereby blowing it away by making bad decisions and to also prevent other people from taking advantage of her young age.

Proposed solution:
From ages 13-18, trustee/guardian will have access to funds in the trust to support her living expenses until she is 18 years of age.

At 18 years of age- she would have direct access to 25% of assets/funds in trust

At 21 years of age- access to another 25%
At 25 years of age- access to remaining 50%.

Has anyone tried this staggered approach?

Pros and cons?
2. What checks and balances did you setup for your own trust so that the trustee does not use money for their own advantage?

Thanks

[Laura]

When I set up my revocable trust, lawyer said I can do whatever and however I want. Honestly even requiring a drug test or completion of bachelors degree.

Curious to know what others have done.

I personally would space out the distribution.
18 for higher education costs
25 for first home

40 for X, Y, Z
I want my kid to still have grit to work towards a rewarding career.

[Lori]

Some thoughts.
I believe the assets that are held in a trust (ie after your and your husbands passing but before your daughter can access the funds) suffer an accelerated tax rate schedule.

I believe you could throw off the income to her each year maybe such that they’re at her tax rates? But not sure, so ask the question.

If she’s in early career her tax rate could be much lower.

There’s also things I’d love to support my kids doing while they’re young, have health, and (more) freedom.

For example I’d love to put in an amount that can be used for travel if their heart desires, or maybe to start a business, or… who knows

I would just say don’t overcomplicate/try to control too much from the grave, and leave her with a financial education and a financial mentor that you trust to talk through her decisions.

It’s so tricky. But end of the day it’s her money in this unfortunate circumstance and if whether she or the trustee have ill intentions; they’ll find a way.

[Sarah]

Our trust is set up very similar to what you have outlined above. Our kids are now 19 & 16. We also allowed the trustee freedom to provide for education and medical expenses, etc.

if needed beyond the % allocation by age.

They don’t get the first portion until about 25 and I think we used 35 to get the remaining balance, assuming this is when they would be more mature to handle the windfall.

[Rick]

I believe you would not make the daughter the beneficiary but the trust the beneficiary of your assets and then the daughter the beneficiary of the trust.

You would need a trustee if you and wife died together

What you propose age wise can work but I expect it’s uncommon to give the give access to the assets at those young ages.

More common is to give access to a % of assets (easier than % return as we all know this can vary wildly per year).

Something like 4% of the year end asset value of the trust assets.

Sometimes people step this up from 1% – 4% to keep it from being a total windfall and help the child ease into receiving money annually.

And then you pick an age your daughter may receive the full funds remaining in the trust.

This varies a lot by trust but many people try to choose an age of maturity in person, in career, and maybe even in family so they will go with age 35 or 40.

[Michael]

In the trust that I set up for my girls… 50% at 30 and 50% at 35 with a trustee managing until then.

[Lacey]

I work in the estate planning industry and have set up thousands of revocable trusts. Your situation and desire — that is, to the extent your child is young at the time they become a beneficiary, and requiring assets be held in trust until a certain age (with sprinklings at certain age milestones) — is common.

Ages and whether or not 18 is too young to come into a larger sum of money is highly subjective… But overall I think the staggered approach does force the younger beneficiary into exercising some restraint.

Regarding your question about the successor trustee and safeguarding against their own self-dealing … typically trusts also require trustees to provide to beneficiaries (in the case of minor beneficiaries, to their legal guardian) annual accountings of the trust’s activity.

Usually these are informal with small family rev trusts like yours. However, also an option is to require court supervised accountings (filing with the court, having a judge approve them).

Obvious con to having a court involved with trust administration is that it’s going to drive the cost (which will come from the funds in your kids’ trust) way up with attorneys fees to deal with the formalities and procedures.

In addition, your lawyer will tell you there are laws in every state that are very clear about fiduciary duty (the trustees legal requirement to act in the best interest of a beneficiary) and the consequences for violating it.

So, if your trustee is taking money and/or producing false accountings, that’s a great way to get sued by a beneficiary.

That’s just high level summary and not legal advice.

Dive into that topic more with your lawyer, and appoint a successor trustee you really trust to do right by your kiddo.

[Noreen]

We set up a trust last year (but have a toddler) that has ages staggered similarly (but older).

We elected (if we’re both gone) to have 3 trustees (close friends who have slightly different ideas and emphasis on money) so there was a check and balance.

The guardians are completely separate people for us to have a check and balance there as well.

[Anna]

Our trust is set up to transfer to our son at the age of 25. A trusted family member is the trustee.

[Leslie]

I think your proposed ages are too young. Keep it in trust with a trustee having discretion to make distributions.

Your daughter could be a co-trustee when she attains age of majority.

[Author]

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