Making distributions to heirs.

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RadAudit
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Making distributions to heirs.

Post by RadAudit »

I would appreciate any guidance you would wish to share on how to make distributions to heirs from our assets / estate.

We have a small estate which should allow DW and I to live in moderate comfort in retirement, travel some, help out the kids to some extent prior to our demise and still have something left over after our deaths - although nothing is certain. Both of the kids are college educated. Both graduated without debt - thanks to the bank of Mom and Dad. Both have full time jobs. One is married and we have a grandchild. Neither kid / family unit has special medical needs. We'd like to help to some extent with the grandchild's college education. But that desire raises questions concerning unequal distribution of funds to the kids' family units. How and when to tell one / both of the kids about our intentions to help out on college costs. (Too soon they may slack off saving. Too late and they may have struggled unnecessarily.) I don't want to cause tension between our kids about one family unit / kid getting more money than another.

And, of course, there's always the limitation on how much money can be distributed in any one year due to SWR.

Any personnel insight / recommendations for books on how to distribute money to the kids / family units?
FI is the best revenge. LBYM. Invest the rest. Stay the course. Die anyway. - PS: The cavalry isn't coming, kids. You are on your own.
2stepsbehind
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Re: Making distributions to heirs.

Post by 2stepsbehind »

My advice is to leave money to the kids equally and include a note that you hope the money will help fund any grandchildren's college expenses. Any unequal distribution among the kids is likely to cause tension. Moreover, your unmarried child may get married and have children and/or adopt one day.
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Raymond
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Re: Making distributions to heirs.

Post by Raymond »

Equal distribution, without any stipulations (although you might make a suggestion as mentioned above.)

In my opinion, any other method is likely to cause rancor between your children.
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BL
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Re: Making distributions to heirs.

Post by BL »

FWIW:
I figure if I give each grandchild (including step-s) an equal Christmas present, they also deserve the same if we should decide on a grandkid distribution. Granted the Vanguard secondary beneficiaries only have per stirpes and that is not quite what I prefer, especially for steps. So for college expenses set up while I am alive, I would consider individuals rather than family units. Age ranges could make that difficult,also. I need to think more clearly about this, so am interested in advice given on this topic.

I like 2stepsbehind plan as well. Sometimes simple is best.

I bought the book Beyond the Grave, recommended here. Might be worth reading to find out what can happen.
Quickfoot
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Re: Making distributions to heirs.

Post by Quickfoot »

If you want the money to page for college you can always fund 529's for existing grandchildren. You can also setup a 529 for your child that doesn't have children because the money can be transferred between beneficiaries (including their future children) to pay for college. If they have a child they can use it to pay for their child otherwise to further their own future education or they can pay the 10% fee + income taxes and withdraw the money. It grows tax deferred so 10% isn't too horrible of a fee but enough an incentive not to pull the money unless they really need it.

You also could start a trust for each child and start contributing to that. Trusts give you control (if you want it) over how and when the money is spent and also provide additional protection against judgments, bankruptcy, and future ex spouses. People think they'll never get divorced, most people do at least once. People never think divorce will be ugly, it almost always gives a new definition to ugly.

You can do an attorney or use a solution like Kiss Trust. My life insurance for my 7 year old daughter is configured to go to her Kiss Trust (don't trust my ex), pays for college, down payment for a house, distributes 2% per year starting at 30, full control at 50. Distributions automatically frozen for a period of time in case of not graduating high school, college, or a drug / alcohol conviction.
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RadAudit
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Re: Making distributions to heirs.

Post by RadAudit »

Thanks for the replies. They should help a lot.
FI is the best revenge. LBYM. Invest the rest. Stay the course. Die anyway. - PS: The cavalry isn't coming, kids. You are on your own.
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Steelersfan
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Re: Making distributions to heirs.

Post by Steelersfan »

I have three adult children, two married with kids and one not. All are doing well in life. Each child gets an annual gift to do with as they please. One goes straight to a 529 plan for their kids, one puts most but not all in a 529 plan for their kids, and the one without kids uses it for things that make their live more fulfilling and enjoyable. Equal all the way.

OTOH - when one of the children was sick and unable to work for an extended period of time, I had no hesitation to give him extra money to live on that year. That will never be equalized. I feel no need to ever explain that situation to the others.
Ybsybs
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Re: Making distributions to heirs.

Post by Ybsybs »

The OP or his wife could still be alive when the grandchild is ready to start college. That could necessitate deciding about funding or not funding college while alive.

In keeping with spirit of the advice in Beyond The Grave, the OP could talk with the kids about wanting to fund the grandkid's college. To keep them equal, he could gift the non parent an amount equal to the grandkid's tuition during the years of the grandkid's schooling. That assumes the parent of the grandkid wouldn't rather have the money than have it go to the grandkid. And it assumes the OP lives to see the grandkid in college.
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Donnie Baseball Fan
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Re: Making distributions to heirs.

Post by Donnie Baseball Fan »

Equal amounts for both kids. How they decide to live their lives should bear no influence on how much they get.
The only exception I would make for this is if one were sick or had special needs.
user5027
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Re: Making distributions to heirs.

Post by user5027 »

Mom's will left her estate to three sons. Dad had passed 2 years earlier. She left unequal amounts to the three. I figured it was based on the grandchildren. One family had 3 grandchildren, one had two and the third had one. Adding it up she had 12 heirs with the sons, daughter in laws and grandchildren. One son got 5/12, another 4/12 (1/3) and the third got 3/12 (1/4).
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ixohoxi
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Re: Making distributions to heirs.

Post by ixohoxi »

That's called "per capita". The alternative (4/12 to each) is "per stirpes".
user5027 wrote:Mom's will left her estate to three sons. Dad had passed 2 years earlier. She left unequal amounts to the three. I figured it was based on the grandchildren. One family had 3 grandchildren, one had two and the third had one. Adding it up she had 12 heirs with the sons, daughter in laws and grandchildren. One son got 5/12, another 4/12 (1/3) and the third got 3/12 (1/4).
Henceforth, content shall be my aim, and anticipation my joy. -Alfred Billings Street
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celia
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Re: Making distributions to heirs.

Post by celia »

OP, What if you don't die for 30+ years? A lot can happen in that time and you may not think of amending your will/trust. Your grandkids could be done with college and have kids of their own. Someone in your descendents could die before you. Your 10 grandkids might be born over a 30-year range. You never know what might happen!

Unless you have a specific reason to do otherwise, leave everything equally to your children. If one of them should die before you, their share can be left equally to their issue per stirpes.
A dollar in Roth is worth more than a dollar in a taxable account. A dollar in taxable is worth more than a dollar in a tax-deferred account.
dolphinsaremammals
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Re: Making distributions to heirs.

Post by dolphinsaremammals »

More grandkids can appear, including adopted. Grandkids and kids can pass away. I would write things in general terms.
Topic Author
RadAudit
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Re: Making distributions to heirs.

Post by RadAudit »

Again, thanks to all for sharing their experiences and providing insights.

Obviously, my situation is nowhere as complex as some - yet. But you've given me some stuff to think about.
FI is the best revenge. LBYM. Invest the rest. Stay the course. Die anyway. - PS: The cavalry isn't coming, kids. You are on your own.
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