Capital Preservation Trust Language

[oscar1]

Anyone have capital preservation language in their trusts docs they would be willing to share. Was thinking about putting some language in family trust documents along the lines of modest annual distributions of 3.5% or less to maintain the capital base for future generations. How, exactly, to word that is my question.

 

[Bamaman]

I have a daughter that's completely without common sense when it comes to money. I'm going to have to setup a Special Needs Trust where any assets are in the trusts' name that are insulated from creditors. And withdrawals will be limited to things like insurance premiums, utility bills and very basic needs. She has two children that have to be protected, and they'll be provided for.

 

[bingybear]

Anyone have capital preservation language in their trusts docs they would be willing to share. Was thinking about putting some language in family trust documents along the lines of modest annual distributions of 3.5% or less to maintain the capital base for future generations. How, exactly, to word that is my question.

Are you looking for a dynasty trust covering many generations?
Having an irrevocable trust with a long life will also take some tax planning. Earnings that remain in the trust will be taxed at (higher) trust rates. Also, who do you place a trustee and who would administer the trust? You likely don't want this choice to tear apart the family in the process.

I have a daughter that's completely without common sense when it comes to money. I'm going to have to setup a Special Needs Trust where any assets are in the trusts' name that are insulated from creditors. And withdrawals will be limited to things like insurance premiums, utility bills and very basic needs. She has two children that have to be protected, and they'll be provided for.

Special Needs Trust? This is usually for people with disabilities. Your needs sound like a Spend Thrift Trust.

I would use a good estate lawyer to prepare either of these. There are many things that can go wrong with controlling money beyond the grave.

A corporate trustee will need clear instructions to follow. Not just on distributions, but how assets are invested. With too little instructions, they will likely choose overly conservative investments (CMA). Having a trust advisor (someone you trust) that can provide decisions for the trust company. The issue is how long will these people be around to provide this support.

 

[ERD50]

Search the web for for "Spendthrift Trust". It seems common to have language that says the trustee will distribute only the dividend/interest, so that would preserve capital. But a bank trustee will probably charge ~ 1% plus maybe a fixed sum each year. They are sometimes given some discretion to tap principal for medical needs, education, etc.

Check the NOLO publications, and others, if you want to DIY. Probably worth getting a pro since every state can have different requirements. But I'd still read up so you know what you are getting, and the options.

-ERD50

 

[Cat-tirement]

When we set up our trust, our attorney included a "Spendthrift Provision" to protect against creditors, alimony, etc. We also didn't want to have distributions to beneficiaries in a single large lump sum because some have had money management issues. What we ended up doing was stipulating a maximum annual payout to each beneficiary until their share went below a specified threshold, at which point the remainder of their share would be paid. We were not trying to preserve capital, just throttle the inflow of cash to the beneficiaries.