executor of trust: distribution to great-grandchildren

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piton
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executor of trust: distribution to great-grandchildren

Post by piton »

As the executor of a trust, I’m looking for suggestions as to how to make the distributions to minor great-grandchildren. This is not a lot of money, but not trivial. I’m considering UTMA/UGMA/529b type account. I plan on remaining as the trustee for the accounts. I’m leaning towards 529b since the kids seem to be on the path of going to school and my concern is that the money will be used in a useful way. If you have any links or suggestions, I’d appreciate it.
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FelixTheCat
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Re: executor of trust: distribution to great-grandchildren

Post by FelixTheCat »

What’s the max age in your state for a UTMA? CA is 25.
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DIFAR31
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Re: executor of trust: distribution to great-grandchildren

Post by DIFAR31 »

piton wrote: Fri Jan 24, 2020 11:12 am I’m leaning towards 529b since the kids seem to be on the path of going to school and my concern is that the money will be used in a useful way. If you have any links or suggestions, I’d appreciate it.
By 529b, do you mean a student/beneficiary-owned 529 account? In most states, the owner would get control of the account at age 18. At that point, the owner/beneficiary could use the money for whatever they wanted.
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piton
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Re: executor of trust: distribution to great-grandchildren

Post by piton »

What’s the max age in your state for a UTMA? CA is 25.
for their state, it's 21, sort of young...
By 529b, do you mean a student/beneficiary-owned 529 account? In most states, the owner would get control of the account at age 18. At that point, the owner/beneficiary could use the money for whatever they wanted.
Your comment made me look further. I knew that it was to be used for educational purposes, but didn't realize they could cash out with a penalty


Both good points. Any suggestions?
Broken Man 1999
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Re: executor of trust: distribution to great-grandchildren

Post by Broken Man 1999 »

Does the trust document offer any ideas?

Could it be left in original trust for them until they reach X years of age?

Could the funds be put into a new trust for them?

Broken Man 1999
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NotWhoYouThink
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Re: executor of trust: distribution to great-grandchildren

Post by NotWhoYouThink »

What do you mean executor of the trust? Usually a will has an executor, a trust has a trustee. What does the will or trust direct you to do?

If the money is already in a trust, and the trust document directs the successor trustee to divide the money into separate trusts for the great-grandchildren, you can do that. If it says to disburse the money to them, you probably couldn't set yourself up as trustee. You could disburse it to the ones 18 or older, and maybe have their parents of the younger ones set up custodial accounts.
deikel
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Re: executor of trust: distribution to great-grandchildren

Post by deikel »

I would also suggest to double check that you do not overreach

You are to follow the original will and the spirit of it. Does the will say anything about the money being for education purposes or doe sthe will have any other section talking about family values that would include education ? Otherwise, your assumption of 'used in a useful way' is really not yours to be made.

I would also suggest not to pay out to parents or have them be custodians, many kids have never seen the money again...

And although there might be some concern of kids blowing the money when they get it at 18, you mention the sum is rather small and a lot of kids can be quite responsible when given the chance. Don't assume, follow the will in word or at least in spirit.
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piton
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Re: executor of trust: distribution to great-grandchildren

Post by piton »

What do you mean executor of the trust? Usually a will has an executor, a trust has a trustee.
Thank you for correcting me. I'm the trustee.
Does the trust document offer any ideas?
Could it be left in original trust for them until they reach X years of age?
Could the funds be put into a new trust for them?
I read through the trust and yes, it lists ages for distributions, and refers to a "young person's trust". It does not list any particular investment. This answered some of my questions.

Now I will have to decide between an online trust or going to a lawyer. I really don't want to use a lot of the general trust money to create a trust for this amount and that is pretty generic. I'm also considering some type of an account in the minors name that maybe I manage (fiduciary?), but it's their money. Suggestions here?

Thank you to all for your input.
Broken Man 1999
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Re: executor of trust: distribution to great-grandchildren

Post by Broken Man 1999 »

Me, I would lean to trusts for the great-grandchildren. Then, depending on their ages I would invest conservatively, or perhaps more aggressively if the time span is longer.

Ages and amount involved would probably point you towards what might be appropriate.

What are their ages, and what is the amount needing to be invested?

A trust could be an overkill if the amount is not that large.

If you provide more info you might get more suggestions.

Broken Man 1999
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NotWhoYouThink
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Re: executor of trust: distribution to great-grandchildren

Post by NotWhoYouThink »

I'm also considering some type of an account in the minors name that maybe I manage (fiduciary?), but it's their money. Suggestions here?
Sounds like a UTMA account. You would have to communicate with the beneficiaries and their parents about the tax reporting responsibilities.
Topic Author
piton
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Re: executor of trust: distribution to great-grandchildren

Post by piton »

Ages and amount involved would probably point you towards what might be appropriate.
about 35k, 13 an 17...
Sounds like a UTMA account.
would an UTMA allow me to control the distributions?
dbr
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Re: executor of trust: distribution to great-grandchildren

Post by dbr »

A UTMA would be a done distribution, it seems to me. If the trust specifies an age for distribution putting the money in a UTMA before then would violate that. Usually the whole reason for the trust is to manage the money until the grandchildren are of age and then a UTMA does not apply.
NoblesvilleIN
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Re: executor of trust: distribution to great-grandchildren

Post by NoblesvilleIN »

I was in a similar situation several years ago. I was executor for my parents. Grandkids were left some money to be used for education or distributed at certain ages if they didn't use the funds for education. Amount was about 50k each. It was going to cost money to keep the estate open for the period specified (estate tax returns, etc.) that I didn't think was necessary to spend. Grandkids were in high school at the time. With the agreement of the other beneficiary (my sibling), I just disbursed the funds to the parent with the understanding on how the funds were to be used. It worked out fine because we trust each other. I realize that left me open to a lawsuit, but I felt it was the best use of my parent's funds and in keeping with their wishes. Note: I was the executor and not a trustee.

Is your family dynamic such that you could do something similar - realizing that it puts you at personal risk? Not all families have to have things blow up.

Both grandkids graduated with zero debt and launched successfully. All family members still get along.
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