Author Topic: Have you established a delayed/ staggered inheritance? How?  (Read 1250 times)

Clambone

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Have you established a delayed/ staggered inheritance? How?
« on: April 04, 2022, 01:12:07 PM »
I read something which said that if you and your spouse both die when your kids are still young, you don't want to just hand the kid(s) a million dollars or more when they turn 18.  This makes a lot of sense, but it isn't something I thought much about when our kids were babies and we wrote our wills.

We have about $1.6 million in assets plus $1.5 million in life insurance between us, and two kids under 9. I don't think a trust is the answer, right? Under expected circumstances, we will need those assets for our own expenses, their education, and our retirement. I don't know if it's reasonable to expect that their aunt and uncle would hang on to my kids' wealth for a long multi-year disbursement; seems like playing with fire. What kind of disbursement schedule would be appropriate, anyway?

I'd be very interested in how people have structured their estates or prepared their wills to account for this possibility. My spouse and I are perfectly healthy, but you never know.

cool7hand

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Re: Have you established a delayed/ staggered inheritance? How?
« Reply #1 on: April 05, 2022, 04:29:51 AM »
Talk to a professional. Inheritance laws change all of the time, including from state to state. The estate documents can create a trust when you die that put your assets into trusts for your kids with trusted a family member or friend to serve as the trustee, who doles out the money according to whatever parameters you set. If you're concerned about needing money for Medicaid and long-term care and the required spend down, then you'll want to look into Miller Trusts, which works quite a bit differently.

davisgang90

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Re: Have you established a delayed/ staggered inheritance? How?
« Reply #2 on: April 05, 2022, 04:43:19 AM »
My MIL who passed away in 2020 set up a trust to give her 5 grandchildren chunks of cash at various ages:
25% at 25
50% at 30
25% at 35

Seems like a smart move, but the lawyer is the executor and is setting up the trusts for each child so there is a cost to all of that.

Turtle

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Re: Have you established a delayed/ staggered inheritance? How?
« Reply #3 on: April 08, 2022, 09:49:04 AM »
My kids are all adults, but one is very much not to be trusted with large sums of money.  As of right now, my living trust is set to be split 5 ways between my kids and stepkids with my dad/brother in control of the my children's portions.  Income will be pass through so as not to be subject to extra tax, but the remainder will stay put.

My brother makes 3 times what I do, and both my dad and my brother are sticklers for doing what's right, so I don't have any worries about that.

I'll probably revisit in about 5 years and depending on how the market does between now and then it may switch to professionally managed in the event of my passing. 

marble_faun

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Re: Have you established a delayed/ staggered inheritance? How?
« Reply #4 on: April 10, 2022, 01:58:16 PM »
Consider a revocable trust. You can specify that it swings into action only if both you and your spouse die, and you can structure it to avoid the "kid turns 18 and suddenly has tons of money" issue. You can also update it as years pass and circumstances change.

iluvzbeach

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Re: Have you established a delayed/ staggered inheritance? How?
« Reply #5 on: April 10, 2022, 02:49:53 PM »
If you go the revocable trust route (which can be setup to create irrevocable trusts for the children upon the passing of both you & DH), you can name the trust as a contingent beneficiary so that if you & DH both pass away the funds will go to the trust and, in turn, the irrevocable trusts for the children.  I am not a lawyer, get professional advice/confirmation as to the best way to proceed.  You are wise to be thinking of this now vs. later.  It might also be a great time to see if you can include provisions that protect your children's best interest in the event either of you re-marry following the death of the other spouse, or a divorce.

Visitation

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Re: Have you established a delayed/ staggered inheritance? How?
« Reply #6 on: April 10, 2022, 03:07:06 PM »
Just create the revolkable trust now. Move all your assets into it and name it was the beneficiaries of your life insurance and retirement accounts should both of you pass.  That way everything remains the same today, you and your spouse manage the trust.

If you both pass, the trust bypasses probate (court).  You name a trustee or two to manage the trust on behalf of your kids, allowing for withdrawls for living, heathcare, and education.  Once their of a certain age, they become the trustees and can split the amount in two or create two separate trusts for themselves.

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Chris Pascale

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Re: Have you established a delayed/ staggered inheritance? How?
« Reply #7 on: April 11, 2022, 12:53:42 PM »
Only if I die when the kids are young, which is fast ending. In that case they get $50k at 25 and 30, and when the last one hits 30, it all gets distributed.

While alive, I may start giving them money if I have it at 80 - the kids will be 50-60. Then again, perhaps their kids coming for extended summer visits will be the inheritance, or daycare, or hand-me-down cars that I give instead of sell, or paying for rehab or legal bills or surgery or who-knows-what.

Can't really say.

Amber-MT

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Re: Have you established a delayed/ staggered inheritance? How?
« Reply #8 on: May 11, 2022, 12:26:45 PM »
We just finalized our revocable trust at the end of March. Our daughter is 4 and we don't plan on dying anytime soon, but have enough assets between retirement and rental properties that it's not something we can trust our financially misguided family to handle. The lawyer said we could be as specific as we wanted and basically if we could write it, it could be done; so we did. There are specific instructions on how, when and for how much to sell real property, how the funds are to be invested (Vanguard index funds) and a staggered distribution to our daughter (at ages 25, 30, 35 and 40) including milestone gifts at graduation, for a house purchase and limited college expenses. Kind of pessimistic to draw out the payments to age 40, but my reasoning was that in the case of a bad marriage she'd at least have something in mid-age. We went with a cooperate trustee (Vanguard if it meets the 2m minimum, otherwise First Trust Company of South Dakota).
Without a trust, in Montana our daughter would have unrestricted access to everything when she turns 18 during her senior year of high school. Also, my parents (husband's are deceased) and siblings have demonstrated multiple times their inability to handle finances. Family has been appointed for guardianship, but even with the cost, it made sense for us to use an institutional trust company for the money end.

marble_faun

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Re: Have you established a delayed/ staggered inheritance? How?
« Reply #9 on: May 12, 2022, 10:22:06 PM »
@Amber-MT , could you say a bit about how you found the "institutional trust company" and how you decided which one to use?

We are in a similar situation, having family members who are not responsible with money. I don't want them to end up being in charge of our child's inheritance, but wasn't sure where to begin in looking for trustworthy alternatives.

mm1970

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Re: Have you established a delayed/ staggered inheritance? How?
« Reply #10 on: May 13, 2022, 11:36:27 AM »
Consider a revocable trust. You can specify that it swings into action only if both you and your spouse die, and you can structure it to avoid the "kid turns 18 and suddenly has tons of money" issue. You can also update it as years pass and circumstances change.
Yup

secondcor521

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Re: Have you established a delayed/ staggered inheritance? How?
« Reply #11 on: May 13, 2022, 12:24:50 PM »
I read something which said that if you and your spouse both die when your kids are still young, you don't want to just hand the kid(s) a million dollars or more when they turn 18.  This makes a lot of sense, but it isn't something I thought much about when our kids were babies and we wrote our wills.

We have about $1.6 million in assets plus $1.5 million in life insurance between us, and two kids under 9. I don't think a trust is the answer, right? Under expected circumstances, we will need those assets for our own expenses, their education, and our retirement. I don't know if it's reasonable to expect that their aunt and uncle would hang on to my kids' wealth for a long multi-year disbursement; seems like playing with fire. What kind of disbursement schedule would be appropriate, anyway?

I'd be very interested in how people have structured their estates or prepared their wills to account for this possibility. My spouse and I are perfectly healthy, but you never know.

IANAL.  Consult tax and estate professionals qualified in your state of residence.

In general, kids under the age of majority (18 in my state) can't inherit directly anyway.  If you die before then, the court will appoint a custodian to manage the money until they become old enough.

If you want to keep it away from your kids longer than that, you'll need a trust of some sort.  When I was in a similar situation, I had a testamentary trust.  A testamentary trust is one that is created by your will.  You decide what assets go into the trust - either through the will itself or through listing the trust as the beneficiary on an asset.  You decide who is/are the trustees (family, or an institutional trustee), and the distribution rules.

I believe you can do a similar thing with a revocable living trust.  I just chose not to go that route because I didn't want to do the titling / transferring stuff.  An RLT would have assets, a trustee and distribution rules also.

A common distribution rule for a trust is the HEMS rule.  You can also do age- or milestone-related distributions.  I think my will had it as 1/3 at age 25, 30, and 35, and I had no HEMS rule.

My youngest is turning 21 in December, and I've decided to rip out the whole trust stuff and just give them the money directly and immediately.

Amber-MT

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Re: Have you established a delayed/ staggered inheritance? How?
« Reply #12 on: May 13, 2022, 02:53:08 PM »
@Amber-MT , could you say a bit about how you found the "institutional trust company" and how you decided which one to use?

We are in a similar situation, having family members who are not responsible with money. I don't want them to end up being in charge of our child's inheritance, but wasn't sure where to begin in looking for trustworthy alternatives.

Basically there weren't tons of choices for companies licensed to administer trust in my state (Montana), but thankfully there were a few. I looked at their track records, fees and requirements and went by that. We actually list four total trustees in preference order ending with my brother-in-law as a last resort (Actually a very trustworthy fellow, but I think subject to undue influence from other family members). Our choices in order based on those criteria were: Vanguard Trust Services (if we have 2 million in the trust, very possible, but potentially not), First Trust of South Dakota and Zia Trust of New Mexico. From my research the trick is to be specific (ex. we're requiring the trust assets to be invested in certain classes of index funds, there are limits to what our daughter can spend on college education, etc.) yet also give the trustee enough freedom to carry out the intent of our wishes. As much effort as we put into it, let me know if you want a copy of what we came up with as it was a feat, but I do feel like our wishes will be fulfilled.