Grandchildren and Inheritances

[PandaBear]

My mom currently has a trust in which her three children split assets. She is changing the trust to include the grandchildren, all of whom are in their 20’s.....20-28. The trust will still be in thirds, with 1/3 to an unmarried child with no children. The other two 1/3’s will be divided in half, with half going to a child and the other half divided by the grandchildren in that family.

I have been asked for input as to the distribution of the funds to the grandchildren. And I’m really at a loss as to what to say. Dollarwise, the amount isn’t gigantic but still substantial, potentially. I really don’t know my moms current money assets, but I’m guessing no more than 500K tops. But because of luck of the draw, she owns a house currently worth about 2 million+. So it could easily be about 100k per kid.

Obviously, the fear is a younger grandchild inheriting this money sooner than later and doing something stupid with it. I’ve wondered about some kind of gradual distribution, with a caveat it could be accelerated for something deemed a “good reason” (paying for college, buying a home, etc). But who oversees that? What would be a good distribution?

I have no reason to believe that anything will happen to my mom in the near future, but my dad was amazingly healthy at 76 (taking no meds, walking a 36 hole golf course 3 times a week) and was diagnosed with a brain tumor. He lived 2 1/2 years beyond diagnosis, but i know anything can happen.

Any advice?

 

[DrRoy]

Keep in mind that it is your Mom's $, so she can do as she likes. You might suggest that the grandchildren's share be smaller, say 1/4 of the 1/3.

 

[Sarah S]

I am a strong believer in putting some restriction on an inheritance going to a young adult. Some would handle it perfectly but some would waste it and at least a few could be destroyed by it.

I once knew a woman in her mid 20s who inherited from her grandmother enough to buy a small condo or to make a large downpayment on a nice house in an expensive town. She had a very responsible job with a solid future. She acquired a drug habit, blew through the money, lost her job and her license to practice her profession

I have had recommended to distribute in 1/3 at 25, 30 and 35 with caveats as you said for need- house purchase, education or medical event I chose 30,35,40 with a small (5k) amount to be given immediately if not yet 30.

The more specific the exceptions the easier it will be on a trustee to administer though you would not want to make the money completely inaccessible in an unforeseen emergency.

I think it does matter too the circumstances of the grandchildren. If they are living in near poverty I might feel differently

 

[PandaBear]

Keep in mind that it is your Mom's $, so she can do as she likes. You might suggest that the grandchildren's share be smaller, say 1/4 of the 1/3.

Thanks, i am aware that it is my moms money. In fact, i have to sign off on the change to the trust, because I do inherit. This is the amount she wants to do. She asked me my opinion on how to distribute it, and I wasn’t sure what to suggest, which is why I’m asking for input.

 

[PandaBear]

I am a strong believer in putting some restriction on an inheritance going to a young adult. Some would handle it perfectly but some would waste it and at least a few could be destroyed by it.

I once knew a woman in her mid 20s who inherited from her grandmother enough to buy a small condo or to make a large downpayment on a nice house in an expensive town. She had a very responsible job with a solid future. She acquired a drug habit, blew through the money, lost her job and her license to practice her profession

I have had recommended to distribute in 1/3 at 25, 30 and 35 with caveats as you said for need- house purchase, education or medical event I chose 30,35,40 with a small (5k) amount to be given immediately if not yet 30.

The more specific the exceptions the easier it will be on a trustee to administer though you would not want to make the money completely inaccessible in an unforeseen emergency.

I was thinking 25, 30 and 35 initially but i feel like both my kids and my nieces/nephews may not be ready at 25.

I like the idea of providing a small amount initially....I hadn’t thought of that. I will suggest that.

Thanks.

 

[Amethyst]

You did not say how old the grandchildren are...I'll bet there are standard procedures and boilerplate language for setting up trusts for minor children.

Also, young people vary greatly in responsibility and common sense. One might be the ER type who starts her own business at 17 and is investing in index funds by 18. Another might be incapable of hanging onto a dollar, as long as there are friends around to party with. I'm sure estate lawyers have ways to deal with every such situation. I'm assuming there's a lawyer involved already.

Example:
trust could be worded such that the money stays in trust until the child has reached a certain age (26?) or passed a certain milestone (college graduation?)

 

[RunningBum]

This kind of thing is pretty commonly and easily (I think) added to a will. It can be parceled out over time by age, or by needs, or whatever. A trustee is named and administers it. Be careful, that might be you. Do you want to deal with that? Or it could probably be each parent.

I have a clause like this in my will, but in just over a year it becomes null as my son turns 30. I don't remember exactly how I set up the distribution, maybe in 1/3s with the full amount by 30.

So just help your mom figure out what she wants to do, and get with the attorney to make it happen.

 

[joeea]

My mom currently has a trust in which her three children split assets. She is changing the trust to include the grandchildren, all of whom are in their 20’s.....20-28.

Why the change? What prompted her action?

The trust will still be in thirds, with 1/3 to an unmarried child with no children. The other two 1/3’s will be divided in half, with half going to a child and the other half divided by the grandchildren in that family.

IMHO, your mom is making a mistake.

I'm guessing the two children don't have the same number of children each. So some grandchildren would inherit less than other grandchildren - based on nothing other than the number of siblings they have.

And her three children are receiving different amounts of money.

Seems completely foolish to me. Still, it's her mistake to make.

If the point is to give money to the grandchildren, all grandchildren should be treated equally. My suggestion would be to give the same amount to each child, then distribute the remainder to each grandchild equally. To me, that's the only thing that makes sense and the only thing that has any chance to avoid hard feelings.

I have been asked for input as to the distribution of the funds to the grandchildren. And I’m really at a loss as to what to say. Dollarwise, the amount isn’t gigantic but still substantial, potentially. I really don’t know my moms current money assets, but I’m guessing no more than 500K tops. But because of luck of the draw, she owns a house currently worth about 2 million+. So it could easily be about 100k per kid.

The distribution she proposed makes sense.

Obviously, the fear is a younger grandchild inheriting this money sooner than later and doing something stupid with it. I’ve wondered about some kind of gradual distribution, with a caveat it could be accelerated for something deemed a “good reason” (paying for college, buying a home, etc). But who oversees that? What would be a good distribution?

Is there something specific prompting your worry? One problematic grandchild?

Any advice?

Depending on your relationship with mom, I'd either advise her to distribute to her children only, or just go with her initial grandchildren-distribution plan. No need to be fancy here.

 

[PandaBear]

This kind of thing is pretty commonly and easily (I think) added to a will. It can be parceled out over time by age, or by needs, or whatever. A trustee is named and administers it. Be careful, that might be you. Do you want to deal with that? Or it could probably be each parent.

So just help your mom figure out what she wants to do, and get with the attorney to make it happen.

My mom originally wanted the childless sibling of mine to be trustee, but i suggested another family member. The reason being, if they have to make a decision that may not be liked, we didn’t want the niece/nephew relationship to be damaged. I definitely did not want to do it.

I want to help my mom but was afraid I’d miss making a good suggestion. Ultimately, all I am doing is giving input. She will decide the details.

 

[PandaBear]

Why the change? What prompted her action?





IMHO, your mom is making a mistake. Still, it's her mistake to make.





The distribution she proposed makes sense.





Is there something specific prompting your worry? One problematic grandchild?





Depending on your relationship with mom, I'd either advise her to distribute to her children only, or just go with her initial grandchildren-distribution plan. No need to be fancy here.

My mom is worried about the spouse of a sibling. That’s what is driving this decision. But she is also aware that it may be a large amount for the grandchildren to manage (especially one from each family)

I worry that my siblings spouse may manipulate whoever has the money (sibling or their kids). But ultimately it’s not my money and my mom will need to do what she thinks is best.

As i said, she asked me for input. I bought some time by saying I’d like to think about it (She told me months ago she planned to make the change, but only recently asked me for input). And i honestly am not sure what the best advice to give is.

 

[joeea]

My mom is worried about the spouse of a sibling.

As i said, she asked me for input. I bought some time by saying I’d like to think about it (She told me months ago she planned to make the change, but only recently asked me for input). And i honestly am not sure what the best advice to give is.

Ah, now I see. There's almost always more to a story than initially appears. I still believe she is making a big mistake here.

IMHO, the absolute best thing you can do for your mom is to help her set up an appointment with a good estate lawyer. Dancing around the real issue and trying to come up with clever arrangements on your own is unlikely to achieve what she actually wants.

The lawyer can talk with her about her actual concerns, and help her devise a plan that alleviates those concerns in an effective manner.

And going with a lawyer takes the blame away from you when the problematic spouse and sibling inevitably blame you for them not getting what is "rightfully theirs".

Have a conversation with mom. Something like "Mom. I've been thinking this over and I'm worried that you and I don't know enough about properly dividing estates. How about if we go talk to an expert?" might help get things started.

One other point I'd strongly suggest. Once mom settles on her plan, have a group meeting with everyone involved and give them each a copy of the will/trust documents. That way there are no surprises and a lessened ability to challenge the documents when the day eventually comes. If you go with the estate lawyer, they can arrange the meeting in their office.

 

[athena53]

I have a Revocable Trust that I set up when DS (now 34, my only child) was younger but done with college, and it specified a trustee (my brother, a CPA) and how the money would be paid out over time. My main concern was not that he'd squander it but that he'd give too much of it to his church. My own pledge is 10% of my church's annual budget so I have no problem with donating to churches, but he and DDIL live modestly and their 3rd baby is due this week. I want them to be able to retire comfortably. That's one way to structure an inheritance so it's not all handed out at once. It's also a way to provide some protection against a spendthrift spouse.

As for the question of allocating equally to children regardless of how many grandchildren are involved- that's your mother's decision. Arguments can be made either way. Sometimes it involves consideration of the circumstances of each family as well. If I had 2 kids and one had 3 children and one had an "only", I might allocate it so each grandchild inherits equally if I felt that the kids in the larger family needed it.

 

[Badger]

My parents set up a trust with the three of us children each receiving equal shares. My brother who has 3 children and who has more money than sand on the beach was constantly telling them his children should receive an equal share too. Their response was that they are his children and if he wanted them to have money they were his responsibility and that he give them from his share. My sister who has 2 children thought that was appropriate. He tried a few times until they finally got angry with his insistence. Since he was designated to handle the trust and once dad died he eventually got mom designated incompetent and started sending large checks to his children for birthdays, holidays, and anniversaries. Once that was found out my sister and I had to hire a lawyer to stop this and he had to pay most of it back to the trust. Since I have no tolerance with liars and thieves we cut all ties with him once mom passed. Not much of a loss since we were not close and he was a constant bully to my sister. Life is better now.


Cheers!

 

[Stormy Kromer]

My mom asked me a similar question last year. She wants to make sure her grandchildren on DB's side receive some type of inheritance. DB has a drug problem and we all know anything he inherits will be gone in no time.


She has a trust in place and rather than rewriting the whole thing, she opened a bank account in her name individually with the grandchildren named as TOD. It will avoid going through her will. I also told her she could just start giving them the money now, then she'll know it reaches them. She's gradually starting to do that, and boy is that making DB mad. Giving money to his children instead of him....


Good luck with your mom's estate plan. It's tricky stuff.

 

[Ducati52]

Ah, now I see. There's almost always more to a story than initially appears. I still believe she is making a big mistake here.

IMHO, the absolute best thing you can do for your mom is to help her set up an appointment with a good estate lawyer. Dancing around the real issue and trying to come up with clever arrangements on your own is unlikely to achieve what she actually wants.

The lawyer can talk with her about her actual concerns, and help her devise a plan that alleviates those concerns in an effective manner.

And going with a lawyer takes the blame away from you when the problematic spouse and sibling inevitably blame you for them not getting what is "rightfully theirs".

Have a conversation with mom. Something like "Mom. I've been thinking this over and I'm worried that you and I don't know enough about properly dividing estates. How about if we go talk to an expert?" might help get things started.

One other point I'd strongly suggest. Once mom settles on her plan, have a group meeting with everyone involved and give them each a copy of the will/trust documents. That way there are no surprises and a lessened ability to challenge the documents when the day eventually comes. If you go with the estate lawyer, they can arrange the meeting in their office.

100% agree.

So many family relationships are harmed or destroyed over inheritances, even small ones. Having a trusted attorney involved early makes a huge difference. It obviously won't solve every issue, nor will it prevent all family fractures, but it certainly will help.

Having gone though this myself, I would recommend talking to the attorney about setting up a trust for each of the grand kids and naming only the parent who is your sibling as the trustee. That keeps the parent in control of the use of the money -- college, start a business, a year to travel, etc. -- and keeps the spouse out of the process (well, legally at least).

Whatever you do, start with a good estate lawyer. It will be money well spent.

 

[gwraigty]

My mom currently has a trust in which her three children split assets. She is changing the trust to include the grandchildren, all of whom are in their 20’s.....20-28.

You did not say how old the grandchildren are...I'll bet there are standard procedures and boilerplate language for setting up trusts for minor children.

Yes, OP did. All the grandchildren are adults. It's in the OP.

IMHO, your mom is making a mistake.

I'm guessing the two children don't have the same number of children each. So some grandchildren would inherit less than other grandchildren - based on nothing other than the number of siblings they have.

And her three children are receiving different amounts of money.

Seems completely foolish to me. Still, it's her mistake to make.

If the point is to give money to the grandchildren, all grandchildren should be treated equally. My suggestion would be to give the same amount to each child, then distribute the remainder to each grandchild equally. To me, that's the only thing that makes sense and the only thing that has any chance to avoid hard feelings.

+1

Otherwise, the child w/o children is getting more than the ones with children, and the grandchild with fewer siblings is getting more than the ones with more siblings. Makes no sense to me.

 

[Aerides]

Whenever there is imbalance in inheritance, there is a high risk of upset within a family. No matter the justification (well you have more kids, you have less XYZ), there is a big chance of resentments and strife in the wake something like the OP is describing.

I get the need and desire to include the GK's in the outcome, but, I think she's better off dealing with flat amounts or even %'s.

Like, all the direct-kids get $100k each, and each GK gets $50k, and then the sibs sell the house and split 3 ways?

And making one of those sibs the trustee is also not a good idea, as they'll take an extra (earned) cut, but still at the risk of arguments.

 

[Amethyst]

Oh, I missed that...my monitor was damaged recently and I was using my smartphone.

Yes, OP did. All the grandchildren are adults. It's in the OP.

 

[brett]

Our grandchildren, current and future, will get their post secondary edu funded.

We do not discriminate between our two children. One is married with two small children. The other not married, no children. We do not feel that there is any inequity. Our son could end up with three children to our daughter's two. Who knows what the future will bring?

Fairness does not enter into it. Even though both are on side with this, it is really all about our wishes, not their opinion of our wishes. We will be long gone so it won't matter.

 

[ivinsfan]

Your original wording is a little muddy to me, it is 3 adult kids of mother, one kid unmarried gets 1/3...the remaining 66% is split as equal parts 1/3 to another adult child and the remaining 1/3 to the grandchildren of the last adult child? Because you use the term "that" family instead of "the family"

This is basically a 3 way split bypassing the adult kid who has the problematic spouse.

So not all the grandchildren are getting money directly?

I'd encourage her not to go down that road. or maybe I'm misunderstanding something in your post.

 

[gwraigty]

Oh, I missed that...my monitor was damaged recently and I was using my smartphone.

Yes, OP did. All the grandchildren are adults. It's in the OP.

You have my condolences on the loss of your monitor. I keep saying my next monitor is going to be at least 27 inches. I can't imagine trying to read/post on forums on a smartphone.

 

[OldShooter]

1) As already mentioned, get professional help with this trust. It needs contingencies for divorce, lawsuits, death of a beneficiary, etc.

2) Plan on using a professional trustee. Ptofessionals are used to the complaints and abuse that controlling the money attracts. Using a family member as trustee is an almost guaranteed recipe for unhappiness and/or family breakups.

3) Fixed disbursements are not a good idea because there is no flexibility. For example, if a beneficiary has a fatal disease a 100% disbursement might make the difference between misery and a little comfort in his/her final days. Trusts can be written with formulas but which also give the trustee discretion within reasonable limits. Again, a good trusts & estates attorney will already have sample language for this type of thing.

 

[gwraigty]

Your original wording is a little muddy to me, it is 3 adult kids of mother, one kid unmarried gets 1/3...the remaining 66% is split as equal parts 1/3 to another adult child and the remaining 1/3 to the grandchildren of the last adult child? Because you use the term "that" family instead of "the family"

This is basically a 3 way split bypassing the adult kid who has the problematic spouse.

So not all the grandchildren are getting money directly?

I'd encourage her not to go down that road. or maybe I'm misunderstanding something in your post.

I read it this way: 3 adult kids were each getting 1/3. The proposal is that the adult kid w/o kids still gets 1/3. The other 2 adult kids w/kids have to split their 1/3 with their kids, with the adult kids getting 1/2 of 1/3 and their kids getting equal shares of the other 1/2 of 1/3.

With the further info given about the one spouse, it seems that this plan will not effectively accomplish what is desired. It also might alienate kids against the Mom and/or each other. Why should the adult child who didn't have kids get more? Why should the adult child w/o the troublesome spouse get less? Why should any grandchild get more than another grandchild?

Disclaimer: I'm an only child, so no sibling issues here.

 

[kaneohe]

Your original wording is a little muddy to me, it is 3 adult kids of mother, one kid unmarried gets 1/3...the remaining 66% is split as equal parts 1/3 to another adult child and the remaining 1/3 to the grandchildren of the last adult child? Because you use the term "that" family instead of "the family"

This is basically a 3 way split bypassing the adult kid who has the problematic spouse.

So not all the grandchildren are getting money directly?

...................................

My interpretation is a bit different:
"The trust will still be in thirds, with 1/3 to an unmarried child with no children. The other two 1/3’s will be divided in half, with half going to a child and the other half divided by the grandchildren in that family."

A)1/3 to unmarried child with no children.

"the other two 1/3's"..........
B)1/3 divided in half to 1/6 to child and 1/6 to grandchildren in that family B

C)the last 1/3 divided like in B) 1/6 to child and 1/6 to grandchildren in that family C.

The total amount is divided per stirpes so 1/3 to each family.
Within each family, the amount is split 50:50.........child gets half and grandchildren in aggregate get the other half.

 

[ivinsfan]

My interpretation is a bit different:
"The trust will still be in thirds, with 1/3 to an unmarried child with no children. The other two 1/3’s will be divided in half, with half going to a child and the other half divided by the grandchildren in that family."

A)1/3 to unmarried child with no children.

"the other two 1/3's"..........
B)1/3 divided in half to 1/6 to child and 1/6 to grandchildren in that family B

C)the last 1/3 divided like in B) 1/6 to child and 1/6 to grandchildren in that family C.

The total amount is divided per stirpes so 1/3 to each family.
Within each family, the amount is split 50:50.........child gets half and grandchildren in aggregate get the other half.

I dunno that's why I asked because there are three kids but the OP says a child....the later comment that his parent doesn't like a particular in law threw me off.