How much/little money to give kids in will so they continue to work

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remomnyc
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How much/little money to give kids in will so they continue to work

Post by remomnyc » Wed Jan 10, 2018 6:47 pm

The "trusts for adult children" thread prompted me revisit our wills. They distribute everything to a trust to pay out 10% at age 25 and the balance at 30 plus health, education, maintenance and support (HEMS). When we made the wills, we didn't have a penny saved for college, The bulk of the estate was life insurance proceeds to be paid to the trust for their HEMS. Now, the amount of money involved is sufficient to be a disincentive to work. The kids are young. I have no idea what kind of adults they will be, whether or not they will choose their spouses well, whether or not they will remain healthy, etc. College is covered. What is the maximum a typical 25-year old could inherit without the money changing their work ethic? How would you structure the remaining payout(s)?
Last edited by remomnyc on Wed Jan 10, 2018 10:20 pm, edited 1 time in total.

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Pajamas
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Re: How much/little money to give kids so they continue to work

Post by Pajamas » Wed Jan 10, 2018 6:49 pm

remomnyc wrote:
Wed Jan 10, 2018 6:47 pm
What is the maximum a typical 25-year old could inherit without the money changing their work ethic?
Depends on the individual. I have known people who wouldn't show up for work the next day if you gave them $100 to spend on beer and weed.

jwaxjwax
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Re: How much/little money to give kids so they continue to work

Post by jwaxjwax » Wed Jan 10, 2018 7:06 pm

Upfront I want to say that I don't have kids, but here's my two cents anyway based on my personal experience:

* I would pay for their education so they can avoid student loan debt. I would also consider paying for a good part of their expenses during college, although I believe that it's a good idea that they work part-time for at least a couple of years of college.
* I would not generally plan to give them any money while they are in their 20s or 30s. However, if something specific came up, I would help them.
* I would let them know that they should not rely on, but would likely receive an amount of money as inheritance. It would be enough for them to help pay off their house, put money toward savings, take a nice vacation, and start a college fund for their children (i.e., $500K-1 mil). But it would not be enough for them to suddenly quit their jobs or deter them for pursuing a career. The rest of my money would go to charity.

The goal would be to provide some level of security and a little bit of comfort, but not to diminish their character or drive to work hard.

There was a recent thread on here (if anyone can find it) of a 20-something young man who did not feel like working because he received money from his parents (6 figures/year). He was content to go to coffee shops, make iTunes playlists, go to bars, and date various women. That is fine for him, but I think that before anyone considers leaving any substantial amount of money to a young person, they should read that thread! :moneybag
Last edited by jwaxjwax on Wed Jan 10, 2018 7:08 pm, edited 1 time in total.

randomguy
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Re: How much/little money to give kids so they continue to work

Post by randomguy » Wed Jan 10, 2018 7:07 pm

Pajamas wrote:
Wed Jan 10, 2018 6:49 pm
remomnyc wrote:
Wed Jan 10, 2018 6:47 pm
What is the maximum a typical 25-year old could inherit without the money changing their work ethic?
Depends on the individual. I have known people who wouldn't show up for work the next day if you gave them $100 to spend on beer and weed.
And others will take 10 million and start a business to try and get a billion.

If you are concerned, don't give the kids money til 40. They will be who they will be at that point of life.

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Pajamas
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Re: How much/little money to give kids so they continue to work

Post by Pajamas » Wed Jan 10, 2018 7:11 pm

One thing you could do to avoid moral hazard is to tell them they aren't going to be getting anything other than family furniture and jewelry because you have brought them up right and educated them and know that they can make their own way in the world and that everything will be going to charity. Then leave it to them anyway.

mega317
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Re: How much/little money to give kids so they continue to work

Post by mega317 » Wed Jan 10, 2018 7:21 pm

randomguy wrote:
Wed Jan 10, 2018 7:07 pm
And others will take 10 million and start a business to try and get a billion.
This resonates with me. You can't predict what anyone will do in a new circumstance. I am in my 30s and I consider myself a pretty hard worker. If I inherited a large sum tomorrow I wouldn't stop working--I like my job--but I sure would reduce my hours. I also like spending time with my family and traveling. Does that mean my work ethic changed? Is it a bad thing?

JeffAL
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Re: How much/little money to give kids so they continue to work

Post by JeffAL » Wed Jan 10, 2018 7:25 pm

Pajamas wrote:
Wed Jan 10, 2018 7:11 pm
One thing you could do to avoid moral hazard is to tell them they aren't going to be getting anything other than family furniture and jewelry because you have brought them up right and educated them and know that they can make their own way in the world and that everything will be going to charity. Then leave it to them anyway.
Who would play such cruel mental games with their children?

delamer
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Re: How much/little money to give kids so they continue to work

Post by delamer » Wed Jan 10, 2018 7:37 pm

remomnyc wrote:
Wed Jan 10, 2018 6:47 pm
The "trusts for adult children" thread prompted me revisit our wills. They distribute everything to a trust to pay out 10% at age 25 and the balance at 30 plus health, education, maintenance and support (HEMS). When we made the wills, we didn't have a penny saved for college, The bulk of the estate was life insurance proceeds to be paid to the trust for their HEMS. Now, the amount of money involved is sufficient to be a disincentive to work. The kids are young. I have no idea what kind of adults they will be, whether or not they will choose their spouses well, whether or not they will remain healthy, etc. College is covered. What is the maximum a typical 25-year old could inherit without the money changing their work ethic? How would you structure the remaining payout(s)?

Well, if you consider the amount “a disincentive to work” then your kids may too.

The more that we’ve accumulated, the more we have restricted our kids’ access to their inheritance. Full access does not happen until 40, with plenty of provisions to help with key expenses like home purchase or medical expenses, of course.

As someone mentioned in the other thread, emphasizing that the money is a family legacy that is not to be spent on trivialities or wasted is important (although no guarantee). That is a discussion we’ve had with our kids and will continue to impress on them.

HIinvestor
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Re: How much/little money to give kids so they continue to work

Post by HIinvestor » Wed Jan 10, 2018 7:44 pm

So much depends on the individual circumstances. We have one child who has 6 figures of tax-advantaged retirement accounts and 6 figures of regular investments in low cost broad index funds. The other has a medical disability and it is uncertain whether she will ever be able to hold a full-time job due to fluctuating stamina issues; she has very little savings. We gift the one with a job enough to fully back-door fund his roth IRA (or 401K) every year (depending on our mood and income for the year) and provide full living expenses for the other. We enjoy seeing them being able to live more comfortably and enjoy the gifts we are able to share with them.

The one who has invested has done very well but still enjoys working and challenging himself. The one with the medical disability is not worried about whether the medical or other bills will be paid, as she knows there are sufficient assets that all HEMS bills are well covered. We still have enough to be very comfortable for ourselves and travel, plus enough for whatever care we will need in the future.

We will be revisiting this question about how much/little to give our kids and aren't sure that there's any perfect answer. The thread about the guy who gets 6 figures every year from his folks (expecting to inherit a lot more) and spends his time visiting coffee shops and dating college women was very off-putting to me.

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Sandtrap
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Re: How much/little money to give kids so they continue to work

Post by Sandtrap » Wed Jan 10, 2018 7:45 pm

Pajamas wrote:
Wed Jan 10, 2018 6:49 pm
remomnyc wrote:
Wed Jan 10, 2018 6:47 pm
What is the maximum a typical 25-year old could inherit without the money changing their work ethic?
Depends on the individual. I have known people who wouldn't show up for work the next day if you gave them $100 to spend on beer and weed.
Outstanding!

Actionable Example:

I have a trust set up with provisions for distributions based on "merit" and incentives for education, career advancement, as well as helping in legitimate emergencies, etc.
I also have set up an "educational trust" for descendants. I don't every want a child to end up working at a lower job because he/she could not afford med school. This is my "priority in retirement", to grow this fund as much as possible.


The books: "Beyond the Grave" and "Wills, Trusts, and Estates" in addition to legal counsel was invaluable.
Books on Wills, Trusts, and Estates

Beyond the Grave: The Right Way and the Wrong Way of Leaving Money to Your Children (And Others)
https://www.amazon.com/gp/product/08873 ... UTF8&psc=1

Wills, Trusts, and Estates
https://www.amazon.com/gp/product/14548 ... UTF8&psc=1
j :D
Last edited by Sandtrap on Wed Jan 10, 2018 7:50 pm, edited 1 time in total.

MrNewEngland
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Re: How much/little money to give kids so they continue to work

Post by MrNewEngland » Wed Jan 10, 2018 7:46 pm

mega317 wrote:
Wed Jan 10, 2018 7:21 pm
randomguy wrote:
Wed Jan 10, 2018 7:07 pm
And others will take 10 million and start a business to try and get a billion.
This resonates with me. You can't predict what anyone will do in a new circumstance. I am in my 30s and I consider myself a pretty hard worker. If I inherited a large sum tomorrow I wouldn't stop working--I like my job--but I sure would reduce my hours. I also like spending time with my family and traveling. Does that mean my work ethic changed? Is it a bad thing?
I agree with this. If I won the lottery or suddenly acquired a huge amount of money I would quit working (at least at first). I would take a year and volunteer for Water For People somewhere. I would take some time and do something that interested me with the Peace Corps.

I do work hard at my job and I am trying to squire wealth... but the wealth isn’t my end game. I want to someday be at a point where I can do whatever I want with my life. I guess I’m not one of those people that would take 100 million and try to make a billion. But I’m also not one of those people that would put it all up my nose or into my arm.

remomnyc
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Re: How much/little money to give kids so they continue to work

Post by remomnyc » Wed Jan 10, 2018 7:55 pm

We have told the kids that we expect to fund college, but their inheritance will be that they won't have to support us. They know I had to pay my way through school and that we support my parents, so not having these financial burdens resonates with them. College is covered by 529 accounts. So far, I've heard not to give them anything until 40 and let them draw from the trust for home purchase as well as HEMS.

HIinvestor
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Re: How much/little money to give kids so they continue to work

Post by HIinvestor » Wed Jan 10, 2018 8:02 pm

We did fund college so both could graduate debt-free. We have no regrets about that. I like that we were able to help them now, so they can enjoy the compound interest of investing for S and D can get the medical care she needs so hopefully she will be able to heal. Waiting another decade until they were 40 seems a very long time and arbitrary, depending on the situation and kids. I did put "Beyond the Grave" on hold at the public library and will be reading this with H before we meet with our estate attorney later this year (or next) to review based on the changes in tax law and how the kids are doing today compared to when we set things up some years ago. We have told the kids that their main benefit is that they will NOT have to financially support us as we age and they are happy about that.

TravelforFun
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Re: How much/little money to give kids so they continue to work

Post by TravelforFun » Wed Jan 10, 2018 8:08 pm

Google 'Warren Buffett Inheritance'.

TravelforFun

delamer
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Re: How much/little money to give kids so they continue to work

Post by delamer » Wed Jan 10, 2018 8:10 pm

remomnyc wrote:
Wed Jan 10, 2018 7:55 pm
We have told the kids that we expect to fund college, but their inheritance will be that they won't have to support us. They know I had to pay my way through school and that we support my parents, so not having these financial burdens resonates with them. College is covered by 529 accounts. So far, I've heard not to give them anything until 40 and let them draw from the trust for home purchase as well as HEMS.
I did not say nothing until 40; I said not complete access until 40 — periodic payouts with the final one at 40.

My expectation is that we’ll revisit everything within 10 years. As long as we are still alive, we can make changes as circumstances change.

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Pajamas
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Re: How much/little money to give kids so they continue to work

Post by Pajamas » Wed Jan 10, 2018 8:11 pm

JeffAL wrote:
Wed Jan 10, 2018 7:25 pm
Who would play such cruel mental games with their children?
Your question presumes that it is a cruel mind game. Others might think that doling out an inheritance in dribs and drabs from a trust over an adult's lifetime is a cruel mind game that reminds the child over and over again that their parents went to their graves not trusting them to be responsible adults.

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aspirit
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Re: How much/little money to give kids so they continue to work

Post by aspirit » Wed Jan 10, 2018 8:12 pm

JeffAL wrote:
Wed Jan 10, 2018 7:25 pm
Pajamas wrote:
Wed Jan 10, 2018 7:11 pm
One thing you could do to avoid moral hazard is to tell them they aren't going to be getting anything other than family furniture and jewelry because you have brought them up right and educated them and know that they can make their own way in the world and that everything will be going to charity. Then leave it to them anyway.
Who would play such cruel mental games with their children?
I would, every family has different dynamics. 9/10ths of the time extra capital is not likely to be oppressively burdensome. :wink:
Time & tides wait for no one. A man has to know his limitations.

NotWhoYouThink
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Re: How much/little money to give kids so they continue to work

Post by NotWhoYouThink » Wed Jan 10, 2018 8:20 pm

Pajamas wrote:
Wed Jan 10, 2018 8:11 pm
JeffAL wrote:
Wed Jan 10, 2018 7:25 pm
Who would play such cruel mental games with their children?
Your question presumes that it is a cruel mind game. Others might think that doling out an inheritance in dribs and drabs from a trust over an adult's lifetime is a cruel mind game that reminds the child over and over again that their parents went to their graves not trusting them to be responsible adults.
Both sound like cruel mind games to me. I might live to 100 and spend all my money on 20 years of 24 hour care. Or get hit buy a snowplow tomorrow and leave my kids pretty darn rich for a couple of millennials. But if they squander it, I'll be dead and won't care. And if they build a huge successful business, I'll still be dead and won't care, but the rest of you may benefit. You're welcome.

KlangFool
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Re: How much/little money to give kids so they continue to work

Post by KlangFool » Wed Jan 10, 2018 8:38 pm

OP,

Why would you only give out money when you die? Won't it makes a lot more sense to give out some of the money while you alive? Then, you could see how it had been used and decide what to do next.

I come from a multi-generation business family. We believe in training/teaching/coaching our kids on managing their money since they are young. And, we could not do that if we do not give our children some money to manage and make mistake on their own.

We started by giving $25 each for their birthdays and X'mas. Then, when they started working during summer while in high school, we matched their earning and contribute to their Roth IRA. They probably will graduate from college with about 10K to 20K worth of mutual funds. One of my family members gave 200K to each of his kids before they graduated college.

1) IMHO, it is better to know and help your children before you die. You can do something different if it does not work out.

2) How could/would your kids manage a large sum of money if they had never managed a smaller amount before?

KlangFool

staythecourse
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Re: How much/little money to give kids so they continue to work

Post by staythecourse » Wed Jan 10, 2018 8:48 pm

I have not set up trusts yet for my minors (5 and 2), but will be shortly. I have slowly started thinking about this. Just curious for those in the know (ahem Bsteiner) can't you just stipulate money to be left in the trust and only be used for something like health and education. Other then that how about just matching a % of their salary, such as: "to receive 25% of their gross income"? That would be seem the ideal way, no? You stipulate for important stuff, i.e. health and education (make a comment it is for only 5 years of college education or 8 years of college+ grad school so they can't just extend it forever) and the rest is matching funds based on their own success.

Good luck.

p.s. A great way to keep the trust growing forever creating a dynasty trust.
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” | -Jack Bogle

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Re: How much/little money to give kids so they continue to work

Post by AlohaJoe » Wed Jan 10, 2018 8:56 pm

remomnyc wrote:
Wed Jan 10, 2018 6:47 pm
What is the maximum a typical 25-year old could inherit without the money changing their work ethic?

I don't think there is a maximum. If I look at the lists of "richest people in the world", a fair number of them inherited substantial wealth at a young age -- the Koch brothers, the Walton family, James Packer, Andrew Forrest, Ernesto Bertarelli, and so on -- and still appear to have a pretty good work ethic.

If you look at the how "traditional rich families" worked, you were inducted into the family business at a young age. That gave the parents years/decades to see how you handled money and continue to teach. In that way, it was never really a "windfall"; it wasn't a single event where someone went from nothing to rich. It was a gradual process over years. That seems like a better way to disburse an estate.

delamer
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Re: How much/little money to give kids so they continue to work

Post by delamer » Wed Jan 10, 2018 9:04 pm

KlangFool wrote:
Wed Jan 10, 2018 8:38 pm
OP,

Why would you only give out money when you die? Won't it makes a lot more sense to give out some of the money while you alive? Then, you could see how it had been used and decide what to do next.

I come from a multi-generation business family. We believe in training/teaching/coaching our kids on managing their money since they are young. And, we could not do that if we do not give our children some money to manage and make mistake on their own.

We started by giving $25 each for their birthdays and X'mas. Then, when they started working during summer while in high school, we matched their earning and contribute to their Roth IRA. They probably will graduate from college with about 10K to 20K worth of mutual funds. One of my family members gave 200K to each of his kids before they graduated college.

1) IMHO, it is better to know and help your children before you die. You can do something different if it does not work out.

2) How could/would your kids manage a large sum of money if they had never managed a smaller amount before?

KlangFool
Well put.

A major consideration in setting up the trusts is to provide the financial assistance that we’d hoped to provide if we were still alive.

So if we aren’t here when a kid is 30 and needs a down payment for a house, then the trust will provide that instead. Same, maybe, for the eventual grandkids’ eventual educations.

We have goals for our money, regardless of whether we are alive to implement them or not.

fourwheelcycle
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Re: How much/little money to give kids so they continue to work

Post by fourwheelcycle » Wed Jan 10, 2018 9:10 pm

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Last edited by fourwheelcycle on Thu Jan 11, 2018 8:57 am, edited 1 time in total.

JBTX
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Re: How much/little money to give kids so they continue to work

Post by JBTX » Wed Jan 10, 2018 9:12 pm

Depends on the individual, but 25 seems kind of young. In the other thread I mentioned when our children were born we made the age 30, but more recently we changed the documents and basically kept the money in the trust throughout their lives and have a trusted relative as a trustee.

You can make the trust as liberal or strict as you like. After a certain age you can make the child the co-trustee, such that they have a great deal of latitude but still some token oversight of the trust.

remomnyc
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Re: How much/little money to give kids so they continue to work

Post by remomnyc » Wed Jan 10, 2018 10:16 pm

To be clear, I am talking about how to structure our will to distribute money to kids who are now 14 and 12 should we die before they are self-supporting. It will be easy to dole out the money if we are still alive because then I can see what kind of people they turn out to be. Our existing will, written 14 yrs ago, bequests 10% at 25 and the balance at 30, which would now make them millionaires at a very young age, and I have no idea now how they will handle it. When we wrote our wills, we did not imagine there would be so much to potentially distribute. So, I'm looking for ideas to structure their inheritance in a way that encourages them to work and contribute to society.

KlangFool
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Re: How much/little money to give kids so they continue to work

Post by KlangFool » Wed Jan 10, 2018 10:24 pm

remomnyc wrote:
Wed Jan 10, 2018 10:16 pm
To be clear, I am talking about how to structure our will to distribute money to kids who are now 14 and 12 should we die before they are self-supporting. It will be easy to dole out the money if we are still alive because then I can see what kind of people they turn out to be. Our existing will, written 14 yrs ago, bequests 10% at 25 and the balance at 30, which would now make them millionaires at a very young age, and I have no idea now how they will handle it. When we wrote our wills, we did not imagine there would be so much to potentially distribute. So, I'm looking for ideas to structure their inheritance in a way that encourages them to work and contribute to society.
remomnyc,

But, you could start by giving each one of your kid $1,000 now and let them manage the money. You can start somewhere now.

KlangFool

KlangFool
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Re: How much/little money to give kids in will so they continue to work

Post by KlangFool » Wed Jan 10, 2018 10:28 pm

OP,

My family goes back 2000+ years. We had been poor and we had been rich. Through the years, we have never been irrelevant and not a significant contributor to the world at large. It is never about money.

KlangFool

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Sandtrap
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Re: How much/little money to give kids so they continue to work

Post by Sandtrap » Wed Jan 10, 2018 10:30 pm

KlangFool wrote:
Wed Jan 10, 2018 8:38 pm
OP,

Why would you only give out money when you die? Won't it makes a lot more sense to give out some of the money while you alive? Then, you could see how it had been used and decide what to do next.

I come from a multi-generation business family.
We believe in training/teaching/coaching our kids on managing their money since they are young. And, we could not do that if we do not give our children some money to manage and make mistake on their own.

We started by giving $25 each for their birthdays and X'mas. Then, when they started working during summer while in high school, we matched their earning and contribute to their Roth IRA. They probably will graduate from college with about 10K to 20K worth of mutual funds. One of my family members gave 200K to each of his kids before they graduated college.

1) IMHO, it is better to know and help your children before you die. You can do something different if it does not work out.

2) How could/would your kids manage a large sum of money if they had never managed a smaller amount before?

KlangFool
Well said, "Klangfool".
Same path.
#1,#2. Yes. Teach them while you can. My sons now have a "Bogle" portfolio. Both grew up helping out at my company before going out on their own.

OP: I had provisions in my trust to take care of my children's education and support them in a way to best develop their capabilities and ability to be financially independent, and responsible adults. The successor trustee and co-corporate trustee were to carry that out per trust provisions if I had passed on while the children were young. Of course take care of DW. The focus is on developmental and nourishing vs otherwise.

I hope this is helpful.

mahalo,
j :D

remomnyc
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Re: How much/little money to give kids so they continue to work

Post by remomnyc » Wed Jan 10, 2018 10:37 pm

Sandtrap wrote:
Wed Jan 10, 2018 10:30 pm
KlangFool wrote:
Wed Jan 10, 2018 8:38 pm
OP,

Why would you only give out money when you die? Won't it makes a lot more sense to give out some of the money while you alive? Then, you could see how it had been used and decide what to do next.

I come from a multi-generation business family.
We believe in training/teaching/coaching our kids on managing their money since they are young. And, we could not do that if we do not give our children some money to manage and make mistake on their own.

We started by giving $25 each for their birthdays and X'mas. Then, when they started working during summer while in high school, we matched their earning and contribute to their Roth IRA. They probably will graduate from college with about 10K to 20K worth of mutual funds. One of my family members gave 200K to each of his kids before they graduated college.

1) IMHO, it is better to know and help your children before you die. You can do something different if it does not work out.

2) How could/would your kids manage a large sum of money if they had never managed a smaller amount before?

KlangFool
Well said, "Klangfool".
Same path.
#1,#2. Yes. Teach them while you can. My sons now have a "Bogle" portfolio. Both grew up helping out at my company before going out on their own.
mahalo,
j :D
I need to set up something in case I don't have enough time to teach them. They've each had savings accounts since they were 5. They've had investment accounts since they were 10, but that is a far cry from inheriting money that could generate six figures annually. I'm hoping to be around to teach and to distribute while I'm living, but I need make contingency plans in case I'm not so lucky.

remomnyc
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Re: How much/little money to give kids so they continue to work

Post by remomnyc » Wed Jan 10, 2018 10:46 pm

Sandtrap wrote:
Wed Jan 10, 2018 10:30 pm
KlangFool wrote:
Wed Jan 10, 2018 8:38 pm
OP,

Why would you only give out money when you die? Won't it makes a lot more sense to give out some of the money while you alive? Then, you could see how it had been used and decide what to do next.

I come from a multi-generation business family.
We believe in training/teaching/coaching our kids on managing their money since they are young. And, we could not do that if we do not give our children some money to manage and make mistake on their own.

We started by giving $25 each for their birthdays and X'mas. Then, when they started working during summer while in high school, we matched their earning and contribute to their Roth IRA. They probably will graduate from college with about 10K to 20K worth of mutual funds. One of my family members gave 200K to each of his kids before they graduated college.

1) IMHO, it is better to know and help your children before you die. You can do something different if it does not work out.

2) How could/would your kids manage a large sum of money if they had never managed a smaller amount before?

KlangFool
Well said, "Klangfool".
Same path.
#1,#2. Yes. Teach them while you can. My sons now have a "Bogle" portfolio. Both grew up helping out at my company before going out on their own.

OP: I had provisions in my trust to take care of my children's education and support them in a way to best develop their capabilities and ability to be financially independent, and responsible adults. The successor trustee and co-corporate trustee were to carry that out per trust provisions if I had passed on while the children were young. Of course take care of DW. The focus is on developmental and nourishing vs otherwise.

I hope this is helpful.

mahalo,
j :D
Sandtrap, that is exactly what I'm looking for highlighted above. How much? When? Subject to what? How do I structure the trust to encourage them to be independent, responsible adults?

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Sandtrap
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Re: How much/little money to give kids so they continue to work

Post by Sandtrap » Wed Jan 10, 2018 10:56 pm

remomnyc wrote:
Wed Jan 10, 2018 10:46 pm
Sandtrap wrote:
Wed Jan 10, 2018 10:30 pm
KlangFool wrote:
Wed Jan 10, 2018 8:38 pm
OP,

Why would you only give out money when you die? Won't it makes a lot more sense to give out some of the money while you alive? Then, you could see how it had been used and decide what to do next.

I come from a multi-generation business family.
We believe in training/teaching/coaching our kids on managing their money since they are young. And, we could not do that if we do not give our children some money to manage and make mistake on their own.

We started by giving $25 each for their birthdays and X'mas. Then, when they started working during summer while in high school, we matched their earning and contribute to their Roth IRA. They probably will graduate from college with about 10K to 20K worth of mutual funds. One of my family members gave 200K to each of his kids before they graduated college.

1) IMHO, it is better to know and help your children before you die. You can do something different if it does not work out.

2) How could/would your kids manage a large sum of money if they had never managed a smaller amount before?

KlangFool
Well said, "Klangfool".
Same path.
#1,#2. Yes. Teach them while you can. My sons now have a "Bogle" portfolio. Both grew up helping out at my company before going out on their own.

OP: I had provisions in my trust to take care of my children's education and support them in a way to best develop their capabilities and ability to be financially independent, and responsible adults. The successor trustee and co-corporate trustee were to carry that out per trust provisions if I had passed on while the children were young. Of course take care of DW. The focus is on developmental and nourishing vs otherwise.

I hope this is helpful.

mahalo,
j :D
Sandtrap, that is exactly what I'm looking for highlighted above. How much? When? Subject to what? How do I structure the trust to encourage them to be independent, responsible adults?
i worked with 5 different law firms over a long period of time to get it right. I have seen poorly written trusts with substantial wealth "go bad" many times in my extended family, relatives, so I was cautious and diligent. My trust is not boilerplate nor "cookie cutter". The provisions are targeted and precise. As if I were still alive and caring for my family. The "spirit" of the trust reflects my intent.

Actionably: Read "Beyond the Grave" by Condon, and as much else as you can. The most important consideration is family dynamics now. . and projected dynamics with wealth and your absence.

Find the right estate attorney that will do more than give you the standard $2500 package deal revocable trust with your details inserted in a trust build software template. And, don't settle for less than what "you want". Be prepared. Make a list of exactly what you would do as your children age and become adults after your passing.

If one legal counsel is not attendant to your needs, get another.

There is no such thing as a "standard trust or will" nor is there a limit to detail or length. But, like hiring an architect to design your dream home, you have to know what you want first to guide him what to do. The same goes for an estate attorney. They can build what you want. But you have to know what you want. And, the more detail the better.

mahalo,
j :D

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Re: How much/little money to give kids in will so they continue to work

Post by Phineas J. Whoopee » Wed Jan 10, 2018 11:13 pm

I'd say leave them as much or as little as you want, with the rest going wherever you choose. I think what they eventually do as adults, including working or not, after your death should be up to them, not you.
PJW

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Re: How much/little money to give kids so they continue to work

Post by randomguy » Wed Jan 10, 2018 11:25 pm

staythecourse wrote:
Wed Jan 10, 2018 8:48 pm
I have not set up trusts yet for my minors (5 and 2), but will be shortly. I have slowly started thinking about this. Just curious for those in the know (ahem Bsteiner) can't you just stipulate money to be left in the trust and only be used for something like health and education. Other then that how about just matching a % of their salary, such as: "to receive 25% of their gross income"? That would be seem the ideal way, no? You stipulate for important stuff, i.e. health and education (make a comment it is for only 5 years of college education or 8 years of college+ grad school so they can't just extend it forever) and the rest is matching funds based on their own success.

Good luck.

p.s. A great way to keep the trust growing forever creating a dynasty trust.
So one kid is in a car accident, loses 2 legs and can't work much anymore so you give them 10k/year. So they get no money. Mean while your other kids is a doctor and your giving him an extra 150k/year? That might not be what you intended. What about incentiving someone to take a 200k/year job instead of spending a decade building a business that then pays them 500k/year. Your daughter and her hubie are both working and making 100k/year. Do you really want to make the choice for them that he should quit and stay home since they get another 25k/year that way? Incentives are really hard to get right. Does you offer of a downpayment cause the kid to buy a house at an unwise time? Does paying for education cause them to waste it on a school you wouldn't approve of (i.e. your paying for clown college). And so on.

And yes it is good to start on money skill early but 20 bucks at christmas and their birthday or even 25k on graduating college is far different than getting say 5 million dollars. One buys a car. The other is life changing.

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Re: How much/little money to give kids in will so they continue to work

Post by knick17 » Wed Jan 10, 2018 11:38 pm

I think paying for education is a great thing, so is heath and such. I believe 25 is a good age or money, but how much is "safe" it really depends on the person, and as u said, u will never know what type of person they will beome

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Re: How much/little money to give kids so they continue to work

Post by barnaclebob » Wed Jan 10, 2018 11:52 pm

JeffAL wrote:
Wed Jan 10, 2018 7:25 pm
Pajamas wrote:
Wed Jan 10, 2018 7:11 pm
One thing you could do to avoid moral hazard is to tell them they aren't going to be getting anything other than family furniture and jewelry because you have brought them up right and educated them and know that they can make their own way in the world and that everything will be going to charity. Then leave it to them anyway.
Who would play such cruel mental games with their children?
Its not a mental game. I knew my family had some decent money but never knew and still dont know what the bulk of the arrangements were for it so I never planned on getting anything. Turns out my brother and I both had low 6 figure utma accounts that were handed over to us without any real instructions when we graduated college. Because we both somehow developed with some financial responsibility neither of us have really touched the money.

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Re: How much/little money to give kids in will so they continue to work

Post by Nearly A Moose » Thu Jan 11, 2018 12:17 am

This is obviously incredibly personal and specific to each kid, family, family dynamic, etc. You obviously have to know your kids, and it sounds like OP's might be old enough to start giving them a little bit of "real" money to learn to manage if that's not being done already. But obviously learning how to a buy Total Stock Market with $1,000 of parent-match money in a Roth is different than managing a $3M estate. Baby steps, I guess.

I'll try to provide my perspective from the "other side" as to what amount of money would make me stop working or lose my drive (different things, by the way). I'm 34, in professional services (as is spouse), am on a good career trajectory but things can always change, and have two young kids. I live in a HCOL city, I work long hours (both in my "work" job and my "Dad" job), and I make what is by any measure a large salary. If $1M fell into my lap today, I might accelerate a pending-in-the-next couple-years home purchase/upgrade (but I'd be doing that anyway), but other than I wouldn't change a thing. $3M and I wouldn't change a thing about my work trajectory; I'd take nice vacations, though. $5M, same thing, but this is starting to approach my "number," but that's after schools and house are paid for, so I couldn't check out. But at this point, my spouse and I would probably start having very real conversations about what we want in life, where we want to focus our time and energy, etc. I would guess that I'd probably stay at my job (because I like it, I'd like to see how well I can do at it, others depend on me so it would be poor form to just walk away anyway, and I would feel compelled to pad the accounts a bit to avoid wasting the inheritance), at least for the foreseeable future. $10M and I'm probably giving notice and putting my time into something civic or philanthropic.

I don't think any amount of money would make me just peace out to a Caribbean island for the rest of my life. If through a windfall I became truly financially independent, I would use that to do some very serious reflection on how I'm prioritizing my contribution to society. If I no longer feel the need to focus on high-earning jobs, I might see myself making a pivot. But I don't think under any circumstances I would "stop working" in the sense that I would stop contributing to society. Maybe I'd do something less corporate like become an archeologist, but I'd certainly view that as "continuing to work."

For what it's worth, I already think in terms of intergenerational wealth - I do anticipate getting a sizable inheritance, hopefully well after the point where it would make a dent in my life, and I want to leave more to my kids. So I don't think that a large sum of money given to a young person is necessarily bad. But it needs to be the right type of young person, and you need to start having these conversations with your kids now.

But this also isn't to say that I'd just sock away every dime inherited. I'm sure I'd start riding a pretty sweet bicycle to work, I wouldn't worry about what vacations cost (within reason), I'd offload more tasks/chores that I don't want to spend time on (e.g., folding laundry), and I'd make sure my home was truly making me happy (I'd insulate between floors!), was minimizing our commutes, etc. And it would be liberating to know that the money is "there" so that I was working at my job because I enjoyed it, not because I had to.

Also, do some reading on White Coat Investor's idea of a "Twenties Fund." The theory is that a young person with a good head on their shoulders could use the money a lot more in their 20s than in their 50s - pay down student loan debt, get a jump on buying a first house, having money to max out retirement accounts. I firmly believe that and want to do something like that for my kids if I can.

Finally, to address the side conversation about whether to tell kids what their "real" inheritance actually will be, I'm strongly on the side of being extremely transparent about the whole thing. It's your money, not theirs, and the expectation should be that it remains that way until it passes and that the kids shouldn't count on it, but they should also be able to make those judgments for themselves. Do you really want your kid selling plasma or living in a bad part of town because they think they need the extra $500 a month, when in reality it's highly likely they'll be getting a seven figure inheritance one day? Building character and discipline is one thing, but I'd be pretty annoyed if information had been withheld that would have let me better optimize my life. Also, broaching the topic of an inheritance early lets you begin the conversation of how to be a good steward of the money.

Okay, back to work...
Pardon typos, I'm probably using my fat thumbs on a tiny phone.

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Re: How much/little money to give kids so they continue to work

Post by Mingus » Thu Jan 11, 2018 12:47 am

JeffAL wrote:
Wed Jan 10, 2018 7:25 pm
Pajamas wrote:
Wed Jan 10, 2018 7:11 pm
One thing you could do to avoid moral hazard is to tell them they aren't going to be getting anything other than family furniture and jewelry because you have brought them up right and educated them and know that they can make their own way in the world and that everything will be going to charity. Then leave it to them anyway.
Who would play such cruel mental games with their children?
Cruel would be raising kids who know they will be inheriting a fortune, therefore they have no drive to improve themselves and be a productive member of society.

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Re: How much/little money to give kids so they continue to work

Post by mouses » Thu Jan 11, 2018 12:59 am

remomnyc wrote:
Wed Jan 10, 2018 10:16 pm
To be clear, I am talking about how to structure our will to distribute money to kids who are now 14 and 12 should we die before they are self-supporting. It will be easy to dole out the money if we are still alive because then I can see what kind of people they turn out to be. Our existing will, written 14 yrs ago, bequests 10% at 25 and the balance at 30, which would now make them millionaires at a very young age, and I have no idea now how they will handle it. When we wrote our wills, we did not imagine there would be so much to potentially distribute. So, I'm looking for ideas to structure their inheritance in a way that encourages them to work and contribute to society.
They might decide not to hold a paying job and spend all their time helping the homeless. That's more contributing to society than many people do.

If I were in the OP's situation, I'd leave a whacking hunk of money to the charities that interest me and most of the rest to the kids when they reach 25, with other provisions to pay their college and medical expenses before then. I would also put some in a trust so that if they waste all that they would still have a cushion.

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Re: How much/little money to give kids so they continue to work

Post by FIREchief » Thu Jan 11, 2018 1:23 am

KlangFool wrote:
Wed Jan 10, 2018 8:38 pm
Then, when they started working during summer while in high school, we matched their earning and contribute to their Roth IRA. They probably will graduate from college with about 10K to 20K worth of mutual funds.
Outstanding!!!! :sharebeer
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.

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Re: How much/little money to give kids in will so they continue to work

Post by remomnyc » Thu Jan 11, 2018 8:03 am

Nearly a Moose: Thank you. I hope my children turn out as level headed as you. I will check out White Coat Investor's Twenties Fund.

Sandtrap: I can find a good attorney. The problem is deciding what I want. In my family, we've never had the luxury of worrying about having money since we had none.

If I live to a ripe, old age, I hope not to leave much as I will spend and give it away while I'm alive. College has been secured by 529 accounts. I want them to access money for graduate school if they so desire, a downpayment on a house, and provide an income if they cannot work for health reasons. I will probably set a limit on the amount available for graduate school (cost of medical/law school) and for a house downpayment (up to 25% of the median cost in a HCOL area). Beyond that, I'm unsure how I want funds distributed.

Thanks for all the replies. I have read Beyond the Grave and welcome recommendations for further reading.

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Re: How much/little money to give kids in will so they continue to work

Post by SrGrumpy » Thu Jan 11, 2018 8:15 am

remomnyc wrote:
Wed Jan 10, 2018 6:47 pm
What is the maximum a typical 25-year old could inherit without the money changing their work ethic? How would you structure the remaining payout(s)?
Depends on how well/badly you raised them.

Maybe a windfall will help them get out of a crappy job that is ruining their health/relationships. So it goes beyond work ethic.

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Re: How much/little money to give kids in will so they continue to work

Post by Cuzz35 » Thu Jan 11, 2018 8:34 am

32 year old, father of 2 soon to be three here.

If I inherited a substantial amount of money I would quit working in a heart beat.

Not because I want to be lazy, just because I don't think the most important thing in life is trying to make a buck. I want to see my kids more and do things with them I can't do now. I would rather spend my time helping others and not working 60+ hours a week to just get by.

I've seen kids inherited mid 8 figures and still have the drive to work hard at what they do or continue the family business and I've seen people inherited the same amount and do nothing but spend it on booze and hookers. To be honest, the ones that blow it all are already living that life style before they received the inheritance.

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Re: How much/little money to give kids in will so they continue to work

Post by remomnyc » Thu Jan 11, 2018 10:19 am

Okay, I read White Coat Investor's 20s Fund. Our kids have 529 accounts sufficient for 4 years of private university and UTMA accounts. I expect the balances of the UTMA will exceed $10k when they are 18. They know we will contribute $1 for every dollar they earn to a ROTH until they are 22 and then we will match every $1 they contribute to a ROTH until they are no longer eligible.

Based on having our money do what it would have done if we were to live, here's what I've come up with as permitted withdrawals.
- If child is eligible for a Roth, the maximum eligible Roth contribution shall be transferred to the child’s Roth account each year until child is no longer eligible or the child is paid out of the trust.
- Cost of tuition for graduate school (limited to four years total)
- Reimbursement for any student loans incurred upon graduation from graduate school
- Up to 25% of the cost of a home purchase
- Up to $10k per year for 529 accounts for grandchildren with child as custodian
- The starting share for each child is 50%. Each withdrawal by a child resets the percentages. For example, if starting balance is $8M, each child’s share is $4M. Child A withdraws $0.2M for medical school. Remaining balance is $8.8M. Child A’s $ share is $4M - $0.2M, or $3.8M and % share becomes 45%. Child B’s share remains $4M and % share becomes 55%.
- Each child’s remaining balance shall be distributed to the child at age 35.

What am I missing? Have I made any fatal errors? Let me know your thoughts. Remember that the trustee (their favorite aunt) is allowed to make withdrawals for health, education, maintenance and support, so if either were to become disabled, they would be supported until they got their full share at age 35.

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Re: How much/little money to give kids in will so they continue to work

Post by Nowizard » Thu Jan 11, 2018 11:41 am

As others have said, the key is the personality of your children, and that will not become evident until later. We are probably saving for our heirs now but have no concern our children would quit work if they inherited huge sums or won the lottery. Their work is enjoyed and not simply a means to financial security. Though others may have different circumstances, this gives us the enjoyment of disbursing some of our assets now rather than through a Trust or at our death, and they can use it more now than later when more financially established. Though no guarantee that your efforts will turn out as you wish, somehow aiding your children in finding work that has meaning will be at least a part of avoiding a potential issue.

Tim

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Re: How much/little money to give kids in will so they continue to work

Post by flamesabers » Thu Jan 11, 2018 11:59 am

remomnyc wrote:
Wed Jan 10, 2018 6:47 pm
What is the maximum a typical 25-year old could inherit without the money changing their work ethic? How would you structure the remaining payout(s)?
I think it really depends on the individual. Regardless of age, most people would quit working upon receiving a large inheritance if they only worked to pay the bills. If on the other hand your adult children really enjoy their work or have some dream job they aspire to achieve one day, I don't think a large inheritance would necessarily make them give up on their professional lives.
remomnyc wrote:
Thu Jan 11, 2018 10:19 am
Okay, I read White Coat Investor's 20s Fund. Our kids have 529 accounts sufficient for 4 years of private university and UTMA accounts. I expect the balances of the UTMA will exceed $10k when they are 18. They know we will contribute $1 for every dollar they earn to a ROTH until they are 22 and then we will match every $1 they contribute to a ROTH until they are no longer eligible.

Based on having our money do what it would have done if we were to live, here's what I've come up with as permitted withdrawals.
- If child is eligible for a Roth, the maximum eligible Roth contribution shall be transferred to the child’s Roth account each year until child is no longer eligible or the child is paid out of the trust.
- Cost of tuition for graduate school (limited to four years total)
- Reimbursement for any student loans incurred upon graduation from graduate school
- Up to 25% of the cost of a home purchase
- Up to $10k per year for 529 accounts for grandchildren with child as custodian
- The starting share for each child is 50%. Each withdrawal by a child resets the percentages. For example, if starting balance is $8M, each child’s share is $4M. Child A withdraws $0.2M for medical school. Remaining balance is $8.8M. Child A’s $ share is $4M - $0.2M, or $3.8M and % share becomes 45%. Child B’s share remains $4M and % share becomes 55%.
- Each child’s remaining balance shall be distributed to the child at age 35.

What am I missing? Have I made any fatal errors? Let me know your thoughts. Remember that the trustee (their favorite aunt) is allowed to make withdrawals for health, education, maintenance and support, so if either were to become disabled, they would be supported until they got their full share at age 35.
If you could see the future and you learned your kids would lose their work incentive upon receiving their full inheritance, would you still be willing to leave your entire estate to them?

As an outsider to this matter, (I don't have kids nor do I expect to get an inheritance) I don't think gifts that have strings attached are much of a gift. Imagine if out of the blue someone gave you a brand new car that you absolutely love. However, the person says you have to wait 5 years until he'll give you the keys because he would be very disappointed if such a nice car got any dents and scratches while it was still a new car. Even once the 5 years has passed, you can only drive the car on the weekends during the sunny months so that it stays in good condition. When the car is 10 years old, you can drive it as much as you want. With all of that said, how much of a "gift" would you consider this to be?

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Re: How much/little money to give kids in will so they continue to work

Post by remomnyc » Thu Jan 11, 2018 1:24 pm

flamesabers wrote:
Thu Jan 11, 2018 11:59 am
If you could see the future and you learned your kids would lose their work incentive upon receiving their full inheritance, would you still be willing to leave your entire estate to them?

As an outsider to this matter, (I don't have kids nor do I expect to get an inheritance) I don't think gifts that have strings attached are much of a gift. Imagine if out of the blue someone gave you a brand new car that you absolutely love. However, the person says you have to wait 5 years until he'll give you the keys because he would be very disappointed if such a nice car got any dents and scratches while it was still a new car. Even once the 5 years has passed, you can only drive the car on the weekends during the sunny months so that it stays in good condition. When the car is 10 years old, you can drive it as much as you want. With all of that said, how much of a "gift" would you consider this to be?
My intention is not to give them so much money so they can do nothing, but if we die early it will happen because we did not use that money to support ourselves due to our early demise. If I were alive and my kids were irresponsible, I would donate all my money to charity or leave it in trust for my grandkids. I would not use it to buy them Ferraris, cocaine, or to take their friends on bingers.

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Re: How much/little money to give kids in will so they continue to work

Post by sciliz » Thu Jan 11, 2018 2:01 pm

remomnyc wrote:
Thu Jan 11, 2018 10:19 am
Okay, I read White Coat Investor's 20s Fund. Our kids have 529 accounts sufficient for 4 years of private university and UTMA accounts. I expect the balances of the UTMA will exceed $10k when they are 18. They know we will contribute $1 for every dollar they earn to a ROTH until they are 22 and then we will match every $1 they contribute to a ROTH until they are no longer eligible.

Based on having our money do what it would have done if we were to live, here's what I've come up with as permitted withdrawals.
- If child is eligible for a Roth, the maximum eligible Roth contribution shall be transferred to the child’s Roth account each year until child is no longer eligible or the child is paid out of the trust.
- Cost of tuition for graduate school (limited to four years total)
- Reimbursement for any student loans incurred upon graduation from graduate school
- Up to 25% of the cost of a home purchase
- Up to $10k per year for 529 accounts for grandchildren with child as custodian
- The starting share for each child is 50%. Each withdrawal by a child resets the percentages. For example, if starting balance is $8M, each child’s share is $4M. Child A withdraws $0.2M for medical school. Remaining balance is $8.8M. Child A’s $ share is $4M - $0.2M, or $3.8M and % share becomes 45%. Child B’s share remains $4M and % share becomes 55%.
- Each child’s remaining balance shall be distributed to the child at age 35.

What am I missing? Have I made any fatal errors? Let me know your thoughts. Remember that the trustee (their favorite aunt) is allowed to make withdrawals for health, education, maintenance and support, so if either were to become disabled, they would be supported until they got their full share at age 35.
You may be missing inflation for college tuition. 10k *18 = 180k. That's "enough" for some colleges, now. Will it be enough for grandkids? How much will it grow in the market? Maybe "10k/year for grandkids with child as custodian up to median cost of private tuition and room and board"?

You may also be missing reliable transit for a job. Would you buy your kids a Toyota Corolla or similar low-cost-of-ownership used car when they were just staring out if it meant they could get a better job? I'm not sure there's a way to structure payout to be quite exactly that restrictive, but they are unlikely to get into too much trouble with early payouts of $10-15k every 3-5 years.

Otherwise, I think these are great :happy

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Re: How much/little money to give kids in will so they continue to work

Post by basspond » Thu Jan 11, 2018 2:17 pm

Some kids, like others have said, will spend everything they have in their pocket. If you taught and a good role model for decent morals and financial intelligence, you shouldn't have to worry. I worry the most about who they chose to be their partner and extended other family. I know this from my sibling's in laws. And in the end if they do something that goes against your wishes, you will still just be pushing up daisies.

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Re: How much/little money to give kids in will so they continue to work

Post by remomnyc » Thu Jan 11, 2018 2:19 pm

sciliz wrote:
Thu Jan 11, 2018 2:01 pm
You may be missing inflation for college tuition. 10k *18 = 180k. That's "enough" for some colleges, now. Will it be enough for grandkids? How much will it grow in the market? Maybe "10k/year for grandkids with child as custodian up to median cost of private tuition and room and board"?

You may also be missing reliable transit for a job. Would you buy your kids a Toyota Corolla or similar low-cost-of-ownership used car when they were just staring out if it meant they could get a better job? I'm not sure there's a way to structure payout to be quite exactly that restrictive, but they are unlikely to get into too much trouble with early payouts of $10-15k every 3-5 years.

Otherwise, I think these are great :happy
Ah, I will add car funding.

Not missing inflation since each 529k contribution should grow. I started contributing 10k/yr and reduced to 5k/yr and stopped at 100k per child (200k total) and have almost 400k total in 529 accounts for 14- and 12-yr olds. Even if my kids have kids young, they will get the bulk of the money before their kids are teenagers, so there will be plenty to pay for college.

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Re: How much/little money to give kids so they continue to work

Post by bsteiner » Thu Jan 11, 2018 3:18 pm

staythecourse wrote:
Wed Jan 10, 2018 8:48 pm
I have not set up trusts yet for my minors (5 and 2), but will be shortly. I have slowly started thinking about this. Just curious for those in the know (ahem Bsteiner) can't you just stipulate money to be left in the trust and only be used for something like health and education. Other then that how about just matching a % of their salary, such as: "to receive 25% of their gross income"? That would be seem the ideal way, no? You stipulate for important stuff, i.e. health and education (make a comment it is for only 5 years of college education or 8 years of college+ grad school so they can't just extend it forever) and the rest is matching funds based on their own success.
...
Thanks for the kind words.

You can make whatever provisions you want (so long as they're not illegal or against public policy). But there's no way to know what the future will bring.

Most of our clients give the trustees discretion to decide on distributions, and select trustees whose judgment they trust. Unless the child's situation makes it inappropriate, most clients provide that upon reaching a specified age, the child gains control of his/her trust. In other words, at that point, among other things, the child can become a trustee, and can remove and replace his/her co-trustee (provided the replacement trustee is not a close relative or subordinate employee).

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