Leaving money to kids in a trust (or not)

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LookinAround
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Leaving money to kids in a trust (or not)

Post by LookinAround »

I have a total four great-nieces/nephews with ages ranging from 5 to 9. (Two sets of parents each with two kids). I’m updating my living trust and considering leaving each of four the kids’ money in their own trust. It'll likely be 125K to 150K each. Is it worth it?
  • I’d name the parent as trustee (don't think a need for additional expense of corporate or lawyer for trustee)
  • That would leave each the parent with the responsibility of tax smart investing for a trust to minimize those high trust taxes. Might that be an extra challenge above and beyond normal investing? Each parent would also have to file 2 tax returns, one for each kid’s trust
  • Or do I advise the parent/trustee to simply distribute all trust income each year to avoid trust taxes? Is that better? Or does that miss out on the advantages of getting compounded returns? Of course, parent/trustee would still have to file tax returns for each trust
Or do I simply give the kids money to their parent and state my wishes on how would like it spent (10K on graduation or age 25, another 10K at 30. Parents can use $$ for kids education. Kid to receive any balance remaining at age 35 )

I know a trust also has creditor protection and not part of any divorce proceeding (IMHO extremely low probability of a divorce) Is it worth putting 150K into a kid’s trust? Or just give it the their parents to be used on their behalf?
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Re: Leaving money to kids in a trust (or not)

Post by Gill »

Consider leaving each child’s share to the parent as custodian UGMA. You don’t want to create trusts of this size.
Gill
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Re: Leaving money to kids in a trust (or not)

Post by oldfort »

No way, it's worth dealing with a trust for $125k. This barely covers two years of college at a private or OOS.
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Re: Leaving money to kids in a trust (or not)

Post by Kidneydoc »

How much in assets would you recommend for a trust for a minor? Would gifting to a UTMA/UGMA impact on financial aid rather than an irrevocable trust?
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Re: Leaving money to kids in a trust (or not)

Post by anon_investor »

Gill wrote: Mon Nov 09, 2020 7:00 pm Consider leaving each child’s share to the parent as custodian UGMA. You don’t want to create trusts of this size.
Gill
+1.
Da5id
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Re: Leaving money to kids in a trust (or not)

Post by Da5id »

UMTA is one route. But worth noting that assets in the child's name count massively against college Financial Aid if/when the time comes. That may be kind of harsh on the parents if the money isn't actually used to pay for college. Also income above $2200 will be taxed at a higher rate.

Maybe funding 529s for each grandkid is an option? But if the parents would have paid, that is effectively a gift to the parents, so unclear that serves the purpose of the gift.
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Re: Leaving money to kids in a trust (or not)

Post by JoeRetire »

LookinAround wrote: Mon Nov 09, 2020 6:26 pmOr just give it the their parents to be used on their behalf?
Unless you strongly suspect the parents can't be trusted, do this.
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Re: Leaving money to kids in a trust (or not)

Post by Wanderingwheelz »

Da5id wrote: Mon Nov 09, 2020 8:00 pm UMTA is one route. But worth noting that assets in the child's name count massively against college Financial Aid if/when the time comes. That may be kind of harsh on the parents if the money isn't actually used to pay for college. Also income above $2200 will be taxed at a higher rate.

Maybe funding 529s for each grandkid is an option? But if the parents would have paid, that is effectively a gift to the parents, so unclear that serves the purpose of the gift.
You can fund 529 accounts without the parents knowing, especially if they are not doing it themselves.

My wife and I were well prepared to pay for our child’s college but my dad stepped in before any payments were made and told us he’d take care of it with A 529 that he’d been funding since she was born. He always indicated he’s help out with college but I was surprised he covered all of it. He’s even told my daughter that he’s there for her if she wants to do postgraduate studies.
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Re: Leaving money to kids in a trust (or not)

Post by Da5id »

Wanderingwheelz wrote: Mon Nov 09, 2020 8:12 pm You can fund 529 accounts without the parents knowing, especially if they are not doing it themselves.

My wife and I were well prepared to pay for our child’s college but my dad stepped in before any payments were made and told us he’d take care of it with A 529 that he’d been funding since she was born. He always indicated he’s help out with college but I was surprised he covered all of it. He’s even told my daughter that he’s there for her if she wants to do postgraduate studies.
I'm not sure that keeping it a secret is helpful, unless maybe you somehow don't go thru with it in the end (529s can be repurposed, and are still the property of the owner).

My parents also very kindly/generously paid for my kids college. Told me a few years in advance that they'd do it, was a big relief as college costs are brutal.
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Re: Leaving money to kids in a trust (or not)

Post by NotWhoYouThink »

Da5id wrote: Mon Nov 09, 2020 8:00 pm UMTA is one route. But worth noting that assets in the child's name count massively against college Financial Aid can be used to pay for college if/when the time comes. That may be kind of harsh on the parents if the money isn't actually used to pay for college. Also income above $2200 will be taxed at a higher rate.

Maybe funding 529s for each grandkid is an option? But if the parents would have paid, that is effectively a gift to the parents, so unclear that serves the purpose of the gift.
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LookinAround
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Re: Leaving money to kids in a trust (or not)

Post by LookinAround »

Gill wrote: Mon Nov 09, 2020 7:00 pm Consider leaving each child’s share to the parent as custodian UGMA. You don’t want to create trusts of this size.
Gill
Problem with that, as I understand it, is the child gets the money at 18 or 21 (depending on the state). That's too young
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Re: Leaving money to kids in a trust (or not)

Post by Wanderingwheelz »

Da5id wrote: Mon Nov 09, 2020 8:15 pm
Wanderingwheelz wrote: Mon Nov 09, 2020 8:12 pm You can fund 529 accounts without the parents knowing, especially if they are not doing it themselves.

My wife and I were well prepared to pay for our child’s college but my dad stepped in before any payments were made and told us he’d take care of it with A 529 that he’d been funding since she was born. He always indicated he’s help out with college but I was surprised he covered all of it. He’s even told my daughter that he’s there for her if she wants to do postgraduate studies.
I'm not sure that keeping it a secret is helpful, unless maybe you somehow don't go thru with it in the end (529s can be repurposed, and are still the property of the owner).

My parents also very kindly/generously paid for my kids college. Told me a few years in advance that they'd do it, was a big relief as college costs are brutal.
I wasn’t making the case that my dad was right in not sharing his 529 account size with me. He knew we were in good shape to pay for it so I don’t think he felt there was any reason to tell us more than he did. It didn’t make any difference.
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Re: Leaving money to kids in a trust (or not)

Post by senex »

LookinAround wrote: Mon Nov 09, 2020 8:28 pm
Gill wrote: Mon Nov 09, 2020 7:00 pm Consider leaving each child’s share to the parent as custodian UGMA. You don’t want to create trusts of this size.
Problem with that, as I understand it, is the child gets the money at 18 or 21 (depending on the state). That's too young
This exchange pretty much sums up the tension.

Children cannot hold financial assets. So a child's assets must be held in trust: either in a statutory trust (UGMA/UTMA, very cheap/easy, but grants full access at the state age), or a custom trust (whatever rules/ages you want, but more expensive to setup & administer).

Or, if you trust the parents, you can go the parent route you described.
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Re: Leaving money to kids in a trust (or not)

Post by oldfort »

LookinAround wrote: Mon Nov 09, 2020 8:28 pm
Gill wrote: Mon Nov 09, 2020 7:00 pm Consider leaving each child’s share to the parent as custodian UGMA. You don’t want to create trusts of this size.
Gill
Problem with that, as I understand it, is the child gets the money at 18 or 21 (depending on the state). That's too young
Why is 18 or 21 too young? By the time they reach college age, $125k won't cover 2 years at a mid-tier private. Let them graduate with fewer student loans instead of getting the money when they're 35.
Last edited by oldfort on Tue Nov 10, 2020 7:57 pm, edited 1 time in total.
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Re: Leaving money to kids in a trust (or not)

Post by catdoctor »

Da5id wrote: Mon Nov 09, 2020 8:00 pm UMTA is one route. But worth noting that assets in the child's name count massively against college Financial Aid if/when the time comes.
+1
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Re: Leaving money to kids in a trust (or not)

Post by Broken Man 1999 »

I think the UGMA account is best, if a trust isn't feasible.

I would prefer for the kid(s) to get it and blow it rather than the parents squandering it. Now, of course Bogleheads' children all have above average parents. But, those above average parents die, divorce and remarry, pick up vices, so I think it is a crap shoot relying on parents to disperse legacies to their children. You just don't know who will be sitting around the dinner table. :shock:

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Re: Leaving money to kids in a trust (or not)

Post by JBTX »

An irrevocable trust will be taxed at trust tax rates, which are much higher than personal rates , and a trust tax return will need to be done. That could get pretty expensive for that amount of money.

If UTMA or 529s are deemed not the best option for whatever reason, while typically not the most optimal or cost efficient way to go, perhaps some sort of cash value insurance product may make more sense.
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Re: Leaving money to kids in a trust (or not)

Post by misterjohnny »

oldfort wrote: Tue Nov 10, 2020 2:21 pm
LookinAround wrote: Mon Nov 09, 2020 8:28 pm
Gill wrote: Mon Nov 09, 2020 7:00 pm Consider leaving each child’s share to the parent as custodian UGMA. You don’t want to create trusts of this size.
Gill
Problem with that, as I understand it, is the child gets the money at 18 or 21 (depending on the state). That's too young
Why is 18 or 21 too young? By the time they reach college age, $125k won't cover 2 years at a mid-tier private. Let them graduate with fewer student loans instead of getting the money when they're 35.
Because my friends' daughter is 20 years old and currently in alcohol rehab. At 16 she was a model student. Another friend's son got into drugs while in college. Again, model student. These are good parents. Sometimes the kids get sidetracked and you don't want them to have access to that kind of money. It can kill them.
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Re: Leaving money to kids in a trust (or not)

Post by Stinky »

Gill wrote: Mon Nov 09, 2020 7:00 pm Consider leaving each child’s share to the parent as custodian UGMA. You don’t want to create trusts of this size.
Gill
A follow up question - at roughly what asset size could it make sense to have a trust for a child? $500k? $1MM? Or more?
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Re: Leaving money to kids in a trust (or not)

Post by oldfort »

Stinky wrote: Tue Nov 10, 2020 8:31 pm
Gill wrote: Mon Nov 09, 2020 7:00 pm Consider leaving each child’s share to the parent as custodian UGMA. You don’t want to create trusts of this size.
Gill
A follow up question - at roughly what asset size could it make sense to have a trust for a child? $500k? $1MM? Or more?
In terms of 95% of corporate trustees, expect minimums of $1 million or higher.
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Re: Leaving money to kids in a trust (or not)

Post by oldfort »

misterjohnny wrote: Tue Nov 10, 2020 8:08 pm
oldfort wrote: Tue Nov 10, 2020 2:21 pm
LookinAround wrote: Mon Nov 09, 2020 8:28 pm
Gill wrote: Mon Nov 09, 2020 7:00 pm Consider leaving each child’s share to the parent as custodian UGMA. You don’t want to create trusts of this size.
Gill
Problem with that, as I understand it, is the child gets the money at 18 or 21 (depending on the state). That's too young
Why is 18 or 21 too young? By the time they reach college age, $125k won't cover 2 years at a mid-tier private. Let them graduate with fewer student loans instead of getting the money when they're 35.
Because my friends' daughter is 20 years old and currently in alcohol rehab. At 16 she was a model student. Another friend's son got into drugs while in college. Again, model student. These are good parents. Sometimes the kids get sidetracked and you don't want them to have access to that kind of money. It can kill them.
What a non-sequitur. Alcohol is cheap. You can get 1.75L of vodka for under $20. Did either of these kids receive an inheritance at 18? Otherwise, I don't see the relevance.
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Re: Leaving money to kids in a trust (or not)

Post by Spirit Rider »

LookinAround wrote: Mon Nov 09, 2020 8:28 pm
Gill wrote: Mon Nov 09, 2020 7:00 pm Consider leaving each child’s share to the parent as custodian UGMA. You don’t want to create trusts of this size.
Problem with that, as I understand it, is the child gets the money at 18 or 21 (depending on the state).That's too young
At last count, 37 states allow you to specify an age of termination up to age 21, ten (10) states allow you to specify an age of termination up to age 25 and only three states KY, SC (UGMA) and SD require it to be age 18.
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Re: Leaving money to kids in a trust (or not)

Post by LookinAround »

Stinky wrote: Tue Nov 10, 2020 8:31 pm
Gill wrote: Mon Nov 09, 2020 7:00 pm Consider leaving each child’s share to the parent as custodian UGMA. You don’t want to create trusts of this size.
Gill
A follow up question - at roughly what asset size could it make sense to have a trust for a child? $500k? $1MM? Or more?
fyi... In checking a couple places, I thought Vanguard's Trust Service fee very reasonable at 0.55% but they require $1M minimum. Schwab wants $200K minimum. I forget their fee .
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Re: Leaving money to kids in a trust (or not)

Post by afan »

oldfort wrote: Tue Nov 10, 2020 10:37 pm
misterjohnny wrote: Tue Nov 10, 2020 8:08 pm
oldfort wrote: Tue Nov 10, 2020 2:21 pm
LookinAround wrote: Mon Nov 09, 2020 8:28 pm
Gill wrote: Mon Nov 09, 2020 7:00 pm Consider leaving each child’s share to the parent as custodian UGMA. You don’t want to create trusts of this size.
Gill
Problem with that, as I understand it, is the child gets the money at 18 or 21 (depending on the state). That's too young
Why is 18 or 21 too young? By the time they reach college age, $125k won't cover 2 years at a mid-tier private. Let them graduate with fewer student loans instead of getting the money when they're 35.
Because my friends' daughter is 20 years old and currently in alcohol rehab. At 16 she was a model student. Another friend's son got into drugs while in college. Again, model student. These are good parents. Sometimes the kids get sidetracked and you don't want them to have access to that kind of money. It can kill them.
What a non-sequitur. Alcohol is cheap. You can get 1.75L of vodka for under $20. Did either of these kids receive an inheritance at 18? Otherwise, I don't see the relevance.
Presumably, the implication is that they are not prepared to manage the finances themselves. Cost of drugs or alcohol is not the issue. Sufficiently responsible and have life enough under control to run their financial lives is the issue.
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Re: Leaving money to kids in a trust (or not)

Post by LookinAround »

afan wrote: Thu Nov 12, 2020 3:57 pm
oldfort wrote: Tue Nov 10, 2020 10:37 pm
misterjohnny wrote: Tue Nov 10, 2020 8:08 pm
oldfort wrote: Tue Nov 10, 2020 2:21 pm
LookinAround wrote: Mon Nov 09, 2020 8:28 pm

Problem with that, as I understand it, is the child gets the money at 18 or 21 (depending on the state). That's too young
Why is 18 or 21 too young? By the time they reach college age, $125k won't cover 2 years at a mid-tier private. Let them graduate with fewer student loans instead of getting the money when they're 35.
Because my friends' daughter is 20 years old and currently in alcohol rehab. At 16 she was a model student. Another friend's son got into drugs while in college. Again, model student. These are good parents. Sometimes the kids get sidetracked and you don't want them to have access to that kind of money. It can kill them.
What a non-sequitur. Alcohol is cheap. You can get 1.75L of vodka for under $20. Did either of these kids receive an inheritance at 18? Otherwise, I don't see the relevance.
Presumably, the implication is that they are not prepared to manage the finances themselves. Cost of drugs or alcohol is not the issue. Sufficiently responsible and have life enough under control to run their financial lives is the issue.
+1
Absolutely. Right now they're ages 5,5, 6 and 9 and they're wonderful loving kids. And hopefully I'll be around to see them grow up to be responsible. But don't know what the future will bring. Plus, as i understand it, while I might choose to amend my current trust can state their money goes into a child's trust... and if i'm still here 10 years to watch them grow I can amend my trust as I see fit.
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Re: Leaving money to kids in a trust (or not)

Post by LookinAround »

oldfort wrote: Mon Nov 09, 2020 7:06 pm No way, it's worth dealing with a trust for $125k. This barely covers two years of college at a private or OOS.
Yes. That is true. But right now their ages range 5 -9 so there's 10+ years time even 125K can be put to work and grow. The attorney tells me I can instruct all trust income be distributed every year. That makes trust taxes (and filing their IRS return) simple as each trust will have a $0 tax bill each year. (* EDIT * Also being there's no need for corporate trustee involvement and their fees)

As I see it, it allows me to keep control of the $$ for some time plus the trust is protected from creditors (don't know that will be needed but who knows?!) Since trust tax will be $0 each year, I think the real cost any cap gain growth over the years. The trust must pay 20% cap gain rate. Both sets of parents have to be in the low (> 200K) to mid six figure income range so their tax rate may already be that high.
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Re: Leaving money to kids in a trust (or not)

Post by afan »

Giving $125k to a kid is a great reason to have a trust. This keeps it out of the donor's estate and the parents' estates. Protects it from the sometimes foolish behavior of people in their teens and 20's. Parents can serve as trustee for free.

If invested in VTI and either TBM or VWIUX, the taxable income will be quite low. Maybe $2,000 per year. The trustees can distribute that and let the parents put it into individual accounts for the kids, or just pay the ~$200 in tax. That is 0.16% of the principal. By leaving the money in trust, the $1,800 remaining of the income stays there to grow. The tax liability is not big enough to drive this decision.

Standard consumer software like Turbotax will do trust tax returns. No reason to pay anyone to do them. The tax returns will be easy.

The trust can continue to grow until the funds are needed for college or something else. And it is out of the kids estates as they grow through the relatively high risk teen and 20's years.

It would cost something to set up, but I doubt any lawyer would charge 4x as much for 4 identical trusts. If they did, just buy one and copy the rest, inserting the correct names for the others.

If the trustees have discretionary power, they could decide to simply turn the money over to the kids at some point if that were the best idea. Not sure why it would be a good idea but you lose nothing by having it in trust.

By NOT having it in trust, you lose the asset protection and if it goes to the kids outright at 18 or 21 and they cannot handle it, then what could have been a benefit may be lost or wasted.
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Re: Leaving money to kids in a trust (or not)

Post by oldfort »

afan wrote: Thu Nov 12, 2020 3:57 pm
oldfort wrote: Tue Nov 10, 2020 10:37 pm
misterjohnny wrote: Tue Nov 10, 2020 8:08 pm
oldfort wrote: Tue Nov 10, 2020 2:21 pm
LookinAround wrote: Mon Nov 09, 2020 8:28 pm

Problem with that, as I understand it, is the child gets the money at 18 or 21 (depending on the state). That's too young
Why is 18 or 21 too young? By the time they reach college age, $125k won't cover 2 years at a mid-tier private. Let them graduate with fewer student loans instead of getting the money when they're 35.
Because my friends' daughter is 20 years old and currently in alcohol rehab. At 16 she was a model student. Another friend's son got into drugs while in college. Again, model student. These are good parents. Sometimes the kids get sidetracked and you don't want them to have access to that kind of money. It can kill them.
What a non-sequitur. Alcohol is cheap. You can get 1.75L of vodka for under $20. Did either of these kids receive an inheritance at 18? Otherwise, I don't see the relevance.
Presumably, the implication is that they are not prepared to manage the finances themselves. Cost of drugs or alcohol is not the issue. Sufficiently responsible and have life enough under control to run their financial lives is the issue.
At 18, you can vote, marry, have kids of your own, buy tobacco, sign legal contracts, join the military and make decisions which affect whether you and your fellow troops come home in good health or in a flag-draped coffin. At 21, you can buy alcohol, buy marijuana in states where it's legal, buy a handgun from a licensed dealer, and make critical decisions with potential life/death consequences as a fire fighter, law enforcement officer, or paramedic. At 25, you can be in the US House of Representatives. I know you want to infantilize your kids, but I don't accept the notion some people have where you don't become an adult until your thirties.
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Re: Leaving money to kids in a trust (or not)

Post by misterjohnny »

oldfort wrote: Tue Nov 10, 2020 10:37 pm
misterjohnny wrote: Tue Nov 10, 2020 8:08 pm
oldfort wrote: Tue Nov 10, 2020 2:21 pm
LookinAround wrote: Mon Nov 09, 2020 8:28 pm
Gill wrote: Mon Nov 09, 2020 7:00 pm Consider leaving each child’s share to the parent as custodian UGMA. You don’t want to create trusts of this size.
Gill
Problem with that, as I understand it, is the child gets the money at 18 or 21 (depending on the state). That's too young
Why is 18 or 21 too young? By the time they reach college age, $125k won't cover 2 years at a mid-tier private. Let them graduate with fewer student loans instead of getting the money when they're 35.
Because my friends' daughter is 20 years old and currently in alcohol rehab. At 16 she was a model student. Another friend's son got into drugs while in college. Again, model student. These are good parents. Sometimes the kids get sidetracked and you don't want them to have access to that kind of money. It can kill them.
What a non-sequitur. Alcohol is cheap. You can get 1.75L of vodka for under $20. Did either of these kids receive an inheritance at 18? Otherwise, I don't see the relevance.
It's not the inheritance that is the cause of the alcohol or drug problems, but give someone with those problems lots of money and it can be a much bigger problem. An alcohol problem can quickly turn into a drug problem.
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LookinAround
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Re: Leaving money to kids in a trust (or not)

Post by LookinAround »

oldfort wrote: Thu Nov 12, 2020 5:53 pm
afan wrote: Thu Nov 12, 2020 3:57 pm
oldfort wrote: Tue Nov 10, 2020 10:37 pm
misterjohnny wrote: Tue Nov 10, 2020 8:08 pm
oldfort wrote: Tue Nov 10, 2020 2:21 pm

Why is 18 or 21 too young? By the time they reach college age, $125k won't cover 2 years at a mid-tier private. Let them graduate with fewer student loans instead of getting the money when they're 35.
Because my friends' daughter is 20 years old and currently in alcohol rehab. At 16 she was a model student. Another friend's son got into drugs while in college. Again, model student. These are good parents. Sometimes the kids get sidetracked and you don't want them to have access to that kind of money. It can kill them.
What a non-sequitur. Alcohol is cheap. You can get 1.75L of vodka for under $20. Did either of these kids receive an inheritance at 18? Otherwise, I don't see the relevance.
Presumably, the implication is that they are not prepared to manage the finances themselves. Cost of drugs or alcohol is not the issue. Sufficiently responsible and have life enough under control to run their financial lives is the issue.
At 18, you can vote, marry, have kids of your own, buy tobacco, sign legal contracts, join the military and make decisions which affect whether you and your fellow troops come home in good health or in a flag-draped coffin. At 21, you can buy alcohol, buy marijuana in states where it's legal, buy a handgun from a licensed dealer, and make critical decisions with potential life/death consequences as a fire fighter, law enforcement officer, or paramedic. At 25, you can be in the US House of Representatives. I know you want to infantilize your kids, but I don't accept the notion some people have where you don't become an adult until your thirties.
You're absolutely right. And there are certainly many responsible kids..... But, unfortunately, also a lot of troubled kids. At current ages 5 - 9 they still have a lot of growing up and challenges ahead. I'm just not comfortable committing today in 2020 to unconditionally turn their $$ over to them 10 to 15 years from now.

/* EDIT */
From personal experience my younger brother (now in his early 60's) is a resounding financial success with an excellent career, beautiful home and income. But in the early years at age 20 he was struggling to get by in college, was more interested in partying and would have blown through that $$ quickly on expensive cars and partying no doubt. He dropped out of school for a year. It wasn't till 25 he saw the light, went back to school to get his bachelors and then masters and became the successful career person he is today.
Last edited by LookinAround on Thu Nov 12, 2020 6:24 pm, edited 2 times in total.
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Re: Leaving money to kids in a trust (or not)

Post by FIREchief »

oldfort wrote: Thu Nov 12, 2020 5:53 pm
afan wrote: Thu Nov 12, 2020 3:57 pm Presumably, the implication is that they are not prepared to manage the finances themselves. Cost of drugs or alcohol is not the issue. Sufficiently responsible and have life enough under control to run their financial lives is the issue.
I know you want to infantilize your kids, but I don't accept the notion some people have where you don't become an adult until your thirties.
Hey, I learned a new word today on the internet! :P

That said, I agree with afan on this one. And for many of us, it's not about what we think of the "kids." It's what we see in our own historical selves at various ages through honest self-reflection. It's like the old saying that kids are amazed how much smarter Mom and Dad get as they all get older.
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.
afan
Posts: 5554
Joined: Sun Jul 25, 2010 4:01 pm

Re: Leaving money to kids in a trust (or not)

Post by afan »

Plenty of people who have trouble functioning as independent adults never grow out of it. They would be better off if someone more responsible were to manage any inheritance they may receive. For all of their lives.

Yes, 18 and 21 year old people are legally allowed to make all the decisions listed. But many of them make bad decisions that would have been gotten right by most older people.
Look at the stats on auto accidents and death as a function of age. From the AAA Foundation and NHTSA

https://aaafoundation.org/rates-motor-v ... 20examined.

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Perhaps if you want to wait until people grow up enough to manage their own affairs, give them control when they turn 60?
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oldfort
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Re: Leaving money to kids in a trust (or not)

Post by oldfort »

misterjohnny wrote: Thu Nov 12, 2020 5:59 pm
oldfort wrote: Tue Nov 10, 2020 10:37 pm
misterjohnny wrote: Tue Nov 10, 2020 8:08 pm
oldfort wrote: Tue Nov 10, 2020 2:21 pm
LookinAround wrote: Mon Nov 09, 2020 8:28 pm

Problem with that, as I understand it, is the child gets the money at 18 or 21 (depending on the state). That's too young
Why is 18 or 21 too young? By the time they reach college age, $125k won't cover 2 years at a mid-tier private. Let them graduate with fewer student loans instead of getting the money when they're 35.
Because my friends' daughter is 20 years old and currently in alcohol rehab. At 16 she was a model student. Another friend's son got into drugs while in college. Again, model student. These are good parents. Sometimes the kids get sidetracked and you don't want them to have access to that kind of money. It can kill them.
What a non-sequitur. Alcohol is cheap. You can get 1.75L of vodka for under $20. Did either of these kids receive an inheritance at 18? Otherwise, I don't see the relevance.
It's not the inheritance that is the cause of the alcohol or drug problems, but give someone with those problems lots of money and it can be a much bigger problem. An alcohol problem can quickly turn into a drug problem.
Drug overdoses aren't limited to 18 and 20 year olds. The age group with the highest drug overdose death rate is 35-44, and it doesn't decline much until you hit 55. In the big picture, $125k isn't a large sum for many people. An attorney in big law can gross $200k their first year.
https://www.cdc.gov/nchs/data/databriefs/db329-h.pdf
Da5id
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Joined: Fri Feb 26, 2016 8:20 am

Re: Leaving money to kids in a trust (or not)

Post by Da5id »

FIREchief wrote: Thu Nov 12, 2020 6:21 pm
oldfort wrote: Thu Nov 12, 2020 5:53 pm
afan wrote: Thu Nov 12, 2020 3:57 pm Presumably, the implication is that they are not prepared to manage the finances themselves. Cost of drugs or alcohol is not the issue. Sufficiently responsible and have life enough under control to run their financial lives is the issue.
I know you want to infantilize your kids, but I don't accept the notion some people have where you don't become an adult until your thirties.
Hey, I learned a new word today on the internet! :P

That said, I agree with afan on this one. And for many of us, it's not about what we think of the "kids." It's what we see in our own historical selves at various ages through honest self-reflection. It's like the old saying that kids are amazed how much smarter Mom and Dad get as they all get older.
I agree that there are risks in dumping great gobs of cash on young people without much life experience. When we wrote up our wills, our lawyer suggested in the event we died while they were on the youngish side giving them money from the trusts in 3 chunks, final chunk at 30 or so. My kids are good and level headed, but still seemed like a good plan to us.
Topic Author
LookinAround
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Location: Chicagoland

Re: Leaving money to kids in a trust (or not)

Post by LookinAround »

oldfort wrote: Thu Nov 12, 2020 8:21 pm <snip> In the big picture, $125k isn't a large sum for many people.
If 125K isn't a large sum for you, let me know. I'll send you my venmo :happy :moneybag
halfnine
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Joined: Tue Dec 21, 2010 1:48 pm

Re: Leaving money to kids in a trust (or not)

Post by halfnine »

I would discuss it with the parents first unless that relationship is not important to you.
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