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Kids Inheritance - Lump Sum or SWR?

Posted: Sun Nov 11, 2018 5:55 pm
by ThankYouJack
How's your will / trust set up to transfer your estate to your kids? I know lump sums are common, but I wonder if a SWR say 4% would be better for young adults

Re: Kids Inheritance - Lump Sum or SWR?

Posted: Sun Nov 11, 2018 6:14 pm
by Sandtrap
Subtrusts.

Re: Kids Inheritance - Lump Sum or SWR?

Posted: Sun Nov 11, 2018 6:23 pm
by Tal-
In my (limited) experience, lump sums are actually less common than large chunks. For example, our kids will get two or three large chunks of money between the ages of 18 and 30 (I actually don't remember the specifics, but it's something like that).

I've never heard of anyone doing a % of assets per year over a longer period, such as 4%/year from the ages of 18 to 30. Doing so would put a bit of a strain on the trustee, but it also does some things that I really like, such as teaching a 20-something to get interested in the market.

Also, note that this would be separate trusts, one for each kid/beneficiary.

Re: Kids Inheritance - Lump Sum or SWR?

Posted: Sun Nov 11, 2018 6:24 pm
by delamer
Withdrawals at trustee’s discretion at any time, such as for the downpayment on a home.

Plus percentage of assets distributed at various age milestones until liquidated.

I may change this so that the kids become their own trustees at some milestone rather the trusts being liquidated, based in bsteiner’s comments.

Re: Kids Inheritance - Lump Sum or SWR?

Posted: Sun Nov 11, 2018 6:27 pm
by dwickenh
5 Distributions, One at 90 days, at one year, at two years, at three years, and at five years(skip four years). 20 % per distribution.

Re: Kids Inheritance - Lump Sum or SWR?

Posted: Sun Nov 11, 2018 7:35 pm
by Broken Man 1999
Children's inheritances given in trusts, which hopefully will stay in trust, to protect. Their trusts will not have any age requirements for withdrawals as they are around 40ish at the present. If they haven't learned to manage their finances by now, they will never learn. They can deplete their trusts at any time, trusts are theirs to manage. Fortunately they seem to be doing very well.

For grandchildren, trusts with XX-age to withdraw. Their basic college tuition is paid already, but if they go private route might need some for expenses. At whatever time they are able to withdraw, they will have free rein. Hopefully they will be smart and make the money grow. But it is their burden, not mine.

One half estate to DDs, one half estate to grandchildren. Works for me.

Of course there is a chance DW or I or both of us consume the estate via health issues. Hopefully that won't be the case, but one never knows.

Broken Man 1999

Re: Kids Inheritance - Lump Sum or SWR?

Posted: Sun Nov 11, 2018 7:38 pm
by Jon H
Two questions:

1. What are you doing to cover state estate taxes, if any?

2. What do you think about a “see through” conduit trust for tax deferred accounts with spendthrift clause?

Re: Kids Inheritance - Lump Sum or SWR?

Posted: Sun Nov 11, 2018 7:45 pm
by JustDumb
ThankYouJack wrote:
Sun Nov 11, 2018 5:55 pm
How's your will / trust set up to transfer your estate to your kids? I know lump sums are common, but I wonder if a SWR say 4% would be better for young adults
Leave a plan.
Have the executor pay the tax, then give it to the kids if they are over 18.
Teach them how to handle money while you are with them.
Don't try to control everything after you are gone.

Re: Kids Inheritance - Lump Sum or SWR?

Posted: Sun Nov 11, 2018 8:05 pm
by Big Dog
my kids are nearing 30, so they get it immediately. But no will/trust as all assets, including home, will be in ToD/PoD.

Re: Kids Inheritance - Lump Sum or SWR?

Posted: Sun Nov 11, 2018 8:12 pm
by Dale_G
The kids are in their 50s - so lump sums. If they are not adults now, they never will be.

I confess however, that it has been the same way for the last 30 years.

Dale

Re: Kids Inheritance - Lump Sum or SWR?

Posted: Mon Nov 12, 2018 11:35 am
by aristotelian
If you do SWR, the most common result will be that the kids end up with more money than they started with and they won't be able to touch most of it. If you want to ensure that the money lasts their lifetime, VPW would be a better option.

Personally, I would do a lump sum unless my kids were drug addicts, in which case I would give it all to charity.

Re: Kids Inheritance - Lump Sum or SWR?

Posted: Mon Nov 12, 2018 11:52 am
by denovo
ThankYouJack wrote:
Sun Nov 11, 2018 5:55 pm
How's your will / trust set up to transfer your estate to your kids? I know lump sums are common, but I wonder if a SWR say 4% would be better for young adults
I assume age would be relevant. 20 v 30 v 40, etc.

Re: Kids Inheritance - Lump Sum or SWR?

Posted: Mon Nov 12, 2018 4:39 pm
by RetiredAL
My 3 kids are all in their 30's. Lump Sum, equal amounts.

Grand-kids: UTMA at age 21.

Re: Kids Inheritance - Lump Sum or SWR?

Posted: Mon Nov 12, 2018 5:22 pm
by Iorek
In the will I think it's a lump sum at 25 and one at 30, with maybe a smaller bank account POD? However, the goal would be to do it more SWR-like while alive, by helping with a downpayment, or annual gifts, or grandkid 529s...