Living Trust, how did you structure distributions.

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StevieG72
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Living Trust, how did you structure distributions.

Post by StevieG72 » Sun Apr 14, 2019 6:00 am

So, I probably should have a living trust set up already. The what and why I understand, the how is what has me perplexed. ( I understand hire a lawyer, transfer assets etc. it is the distribution part that has me stumped) For those that have set up trusts or are familiar with them, how have you decided, if at all, to protect assets from divorce, spendthrift child, uneducated investor etc.

Also who do you select as successor trustee, an institution vs. individual seems ideal even with costs considered.

I have read Beyond the Grave and have a clear picture of what could go wrong. It is easy to lean too much one way or the other. While an overly restrictive trust may not be well received, having a heir lose everything in a divorce, bad business investment, poor financial advice etc. would be even worse.

For me, a Trust that offers access to funds for a down payment on a home, vehicle purchase, child care expenses, tuition for grandchildren (primary or secondary) etc. seems reasonable. Unrestricted access seems ripe for exploitation. That friends business idea, "financial adviser" pushing whole life, a spouse that has no clue, etc.

I really do not want to go overboard attempting to control from the grave, however peace of mind that I have done my best to protect my heirs is my goal. If I die tomorrow it will be a significant trust, if I live until 90 my heirs will wonder why they are receiving pennies quarterly!
Fools think their own way is right, but the wise listen to others.

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dwickenh
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Re: Living Trust, how did you structure distributions.

Post by dwickenh » Sun Apr 14, 2019 7:13 am

My family's trust used a 5 year payout for all of the assets. The first(20%) was 90 days after the death of my father. There was a 1 year(anniversary of death) ditribution, 2 years, 3 years, skipped 4 years, and the final distribution is this year. My father set it up this way due to one of the 5 siblings being unable to control spending. His hope was that this would at least hold him for 5 years without going broke. The other siblings understood the problem and there was no angst involved over the way the payments were distributed.
The market is the most efficient mechanism anywhere in the world for transferring wealth from impatient people to patient people.” | — Warren Buffett

CarolL
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Re: Living Trust, how did you structure distributions.

Post by CarolL » Sun Apr 14, 2019 8:11 am

I have a "Living Trust" question as well. How to deal with an adult child who is the sole beneficiary, and is totally incompetent about financial issues. She is mid 30s, single, no children. Has dug herself deeply in debt. I have refused to give her any money because past "loans" have disappeared and she will not account for their use.
Now to the problem. I am a widow, with a substantial IRA and a house that is paid off. I have no relatives who are willing/able to be the executor of my estate. I am with Fidelity and their rep told me that they can administer the estate for a fee that will only start after my death. How would I be able to structure the way the money is distributed? Can I dictate whether the house can be sold , and the proceeds kept, or put back into the estate? ( House is worth 600K now).
Any, all, information would be welcome.

bradinsky
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Re: Living Trust, how did you structure distributions.

Post by bradinsky » Sun Apr 14, 2019 8:20 am

Good morning to all!
The trust my DW & I have set up specifies that 1/3 of our assets be distributed upon our passing, evenly split between our 3 children. The 2nd distribution of another third will be at 5 years, and the balance will be at 10 years. At this point, I’m not comfortable with how they handle their finances, and that is my solution. I believe our children will understand, and if not, oh well.

Brad

Penguin
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Re: Living Trust, how did you structure distributions.

Post by Penguin » Sun Apr 14, 2019 8:28 am

CarolL wrote:
Sun Apr 14, 2019 8:11 am
I have a "Living Trust" question as well. How to deal with an adult child who is the sole beneficiary, and is totally incompetent about financial issues. She is mid 30s, single, no children. Has dug herself deeply in debt. I have refused to give her any money because past "loans" have disappeared and she will not account for their use.
Now to the problem. I am a widow, with a substantial IRA and a house that is paid off. I have no relatives who are willing/able to be the executor of my estate. I am with Fidelity and their rep told me that they can administer the estate for a fee that will only start after my death. How would I be able to structure the way the money is distributed? Can I dictate whether the house can be sold , and the proceeds kept, or put back into the estate? ( House is worth 600K now).
Any, all, information would be welcome.
You can set up a spendthrift trust in your will.
https://www.nolo.com/legal-encyclopedia ... rusts.html
Get help from a lawyer to craft a spendthrift trust. The lawyer will ask you detailed questions to make sure a spendthrift is right for you and to find out what you want to accomplish with the trust.
Jon

NotWhoYouThink
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Re: Living Trust, how did you structure distributions.

Post by NotWhoYouThink » Sun Apr 14, 2019 9:48 am

Our feeling is that once we're dead we no longer have a firm stake in how the money is spent. Maybe that friend's investment idea is the new Amazon. Our kids can spend as they like once they turn 30.

If you want more control, you can pay a corporate trustee, but that gives you an iron-clad guarantee that one or two percent of the total each year will be spent on administrative costs. If you have a substantial estate and strong feelings about protecting the money, that's an option. Many people do, some of whom post here.

If you expect a relative to be the trustee, see this thread for what you may be putting that person through. viewtopic.php?p=4489485#p4489485

You are not going to change anyone after death that you haven't changed in your lifetime. Either accept that your estate may not be spent the same way that you would have spent those assets, or find a different beneficiary, or put some strong but costly controls in place. Which feels right to you?

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Wiggums
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Re: Living Trust, how did you structure distributions.

Post by Wiggums » Sun Apr 14, 2019 10:11 am

I’d like to think that I am sympathetic to children who have an ongoing drug addiction or have an unresolved Trauma. If I thought my children were going to just squander the money, I’d leave my assets to multiple charities. Inheritance is a privilege not a right.

dbr
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Re: Living Trust, how did you structure distributions.

Post by dbr » Sun Apr 14, 2019 10:12 am

This book offers some perspective on this sort of issue: https://www.amazon.com/Beyond-Grave-Rev ... 162&sr=1-1

NotWhoYouThink
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Re: Living Trust, how did you structure distributions.

Post by NotWhoYouThink » Sun Apr 14, 2019 10:12 am

By the way, you don't need a living trust for any of this. Your will can set up the trust to be formed after your death and distribute assets however you choose.

The reasons to have a living trust would be -
- to avoid probate in states where that matters. In most states probate is not a big thing.
- to make it easier for a co-trustee to take over management of your finances while you are still living. There are benefits and risks to this - you may not want anyone else to have an easy time doing this. Or you may want the peace of mind of knowing that your kids can handle things without having to have you declared incompetent.
- for privacy, since probate is a public process.

bsteiner
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Re: Living Trust, how did you structure distributions.

Post by bsteiner » Sun Apr 14, 2019 10:57 am

NotWhoYouThink wrote:
Sun Apr 14, 2019 10:12 am
By the way, you don't need a living trust for any of this. Your will can set up the trust to be formed after your death and distribute assets however you choose.

The reasons to have a living trust would be -
- to avoid probate in states where that matters. In most states probate is not a big thing.
- to make it easier for a co-trustee to take over management of your finances while you are still living. There are benefits and risks to this - you may not want anyone else to have an easy time doing this. Or you may want the peace of mind of knowing that your kids can handle things without having to have you declared incompetent.
- for privacy, since probate is a public process.
Good points. You can put the same dispositive provisions in a Will. Living trusts make sense in some cases and in some states (the original poster didn't provide any facts to suggest it would be make sense in his/her case), for most people in most states they're not necessary and tend to be a distraction.

Most people's Wills don't contain anything that would be of interest to their neighbors or to the media.

As for the dispositive provisions, it's generally better to make the children's trusts fully discretionary. If you mandate distributions, you destroy the asset protection. If you restrict distributions, you may hamper the trustees' ability to provide for unforseeable future needs.

If the children are capable, and you would have provided for them to receive their shares outright at a specified age, and are only providing for them in trust for asset protection (to keep their inheritances out of their estates for estate tax purposes and to protect against their creditors and spouses, and Medicaid), then you would probably give each child control over his/her trust upon reaching that age. For this purpose, control means the right to become a trustee, the power to remove and replace his/her co-trustee, and the power to appoint (give or leave) the trust assets to anyone other than the child or his/her estate or creditors.

IF it's not appropriate to give a child control over his/her share, then you have to carefully consider who should control that child's share.
StevieG72 wrote:
Sun Apr 14, 2019 6:00 am
...
I have read Beyond the Grave and have a clear picture of what could go wrong. It is easy to lean too much one way or the other. While an overly restrictive trust may not be well received, having a heir lose everything in a divorce, bad business investment, poor financial advice etc. would be even worse ....
You've correctly described one of the shortcomings of that book. The author focuses on the extreme cases (providing for children outright, or providing for them in restrictive trusts), when most of our clients provide for their children in flexible trusts.

You should focus on the age, if any when each child should control his/her share, and until that point who should have control.

dbr
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Re: Living Trust, how did you structure distributions.

Post by dbr » Sun Apr 14, 2019 11:02 am

Well, there is this thread going on even as we speak: viewtopic.php?f=2&t=278543

Gnirk
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Re: Living Trust, how did you structure distributions.

Post by Gnirk » Sun Apr 14, 2019 2:12 pm

CarolL wrote:
Sun Apr 14, 2019 8:11 am
I have a "Living Trust" question as well. How to deal with an adult child who is the sole beneficiary, and is totally incompetent about financial issues. She is mid 30s, single, no children. Has dug herself deeply in debt. I have refused to give her any money because past "loans" have disappeared and she will not account for their use.
Now to the problem. I am a widow, with a substantial IRA and a house that is paid off. I have no relatives who are willing/able to be the executor of my estate. I am with Fidelity and their rep told me that they can administer the estate for a fee that will only start after my death. How would I be able to structure the way the money is distributed? Can I dictate whether the house can be sold , and the proceeds kept, or put back into the estate? ( House is worth 600K now).
Any, all, information would be welcome.
I believe you can set up an irrevocable “ spendthrift” trust for your daughter that specifies how much will be distributed to her each year. Please see a trust attorney for details.

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Sandtrap
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Re: Living Trust, how did you structure distributions.

Post by Sandtrap » Sun Apr 14, 2019 3:04 pm

Protect the hares and also protect them from themselves.
Seek qualified legal counsel to draft a trust that fits you uniquely and exactly.

bsteiner
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Re: Living Trust, how did you structure distributions.

Post by bsteiner » Sun Apr 14, 2019 3:10 pm

Gnirk wrote:
Sun Apr 14, 2019 2:12 pm
,,,
I believe you can set up an irrevocable “ spendthrift” trust for your daughter that specifies how much will be distributed to her each year. Please see a trust attorney for details.
Even if you say it's revocable, after you die, if you amend or revoke your Will, we won't know about it. So it's effectively irrevocable.

You could specify how much will be distributed each year, but it would generally not be wise to do so. You don't know what the future will bring. It's generally better to give the trustees discretion, and focus on the selection of trustees.

CarolL
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Re: Living Trust, how did you structure distributions.

Post by CarolL » Mon Apr 15, 2019 8:38 am

Just wanted to say a big "thank you" to all who posted their thoughts on my question. I will look into all suggestions. Thanks again!

RadAudit
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Re: Living Trust, how did you structure distributions.

Post by RadAudit » Mon Apr 15, 2019 3:30 pm

The kids are now in their 30s and I hope they'll be at least a little older when the trust distributes the assets - maybe 15 to 20 years older. Most of the assets are in mutual funds and could be distributed via beneficiary designation after our deaths. However, we chose a trust to hold and distribute the funds to give the kids the chance to establish their own trusts and maintain control over their money in case of unforeseen events in their marital and personal lives.

Because their spending habits are pretty much established now - and will be more so later own - we have not put restrictions on the timing of the transfer / distribution of funds from the trust.
FI is the best revenge. LBYM. Invest the rest. Stay the course. - PS: The cavalry isn't coming, kids. You are on your own.

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