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How to handle money left to heirs...
Old 09-06-2017, 11:52 AM   #1
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How to handle money left to heirs...

My spouse and I are 55, retired for 2 years. We have wills, TOD's on accounts, beneficiaries etc. all set up. We have 2 adult children, one is 27, married, very responsible and is the executor of our will. The other is 23, still struggling to find their way and does not always make the right decisions. My spouse is concerned about leaving a pretty sizeable nest egg to the younger one not knowing if they will continue to grow, become lazy, blow the money, what have you.

We are somewhat interested in creating a trust, but unsure what that would look like, who should be in charge of it etc. I have read that it is not the best idea to put a sibling in charge of doling out money to another sibling for fear of alienating them.

Thoughts, comments, suggestions are appreciated.
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Old 09-06-2017, 12:07 PM   #2
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What if you put %s on it, like 25% immediately, and 25% at 30, 35, and 40 or whatever you think is best. The other sibling wouldn't really be in charge of doling it out but rather just following your orders with no legal choice in the matter. In 10-15 years you'll probably still be alive, and #2 will probably be more responsible, and you can take that clause out. Or it would be moot in 17 years anyway.
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Old 09-06-2017, 12:09 PM   #3
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Originally Posted by Raymond01 View Post
... We are somewhat interested in creating a trust, but unsure what that would look like, who should be in charge of it etc. I have read that it is not the best idea to put a sibling in charge of doling out money to another sibling for fear of alienating them.

Thoughts, comments, suggestions are appreciated.
Our estate plan includes trusts for both our boys. One would blow all the money (probably north of $1M) in a year or two. The other is quite naive and would be shark bait for Series 7 "financial advisors" and/or for glib insurance and annuity salespeople.

The terms of a trust can be whatever you like. In our case, the trust provide for support into retirement for the kids and include language like "It is not our intention that our son will not have to work for a living." Trusts (not ours) can also liquidate on a schedule, like x% at age 30, y% at age 45, and the balance at age 60 if that works better for the grantor. My wife had an assistant die of brain cancer at a very young age. The trust they set up for her kids allowed any of the three to draw for higher education expenses without regard to % shares, then beginning at age 25 the trust begin equal liquidation payments to all three. The idea was to strongly motivate higher education. Trust can also provide support to the beneficiary during his/her lifetime and then the residual goes to charity. Tons of options. Find an experienced trusts & estates attorney and get creative.

Trusts can also be protection against bankruptcy, judgments, divorce, etc. that would put your money at risk if you gave it to kids directly.

Re trustee, use a professional trustee like a bank. Bank trust officers are very used to saying "No" to greedy or creative beneficiaries. I see that Vanguard offers trusts, too, so that might be worth a look but also it may stifle your creativity.

For us, the decision was a no-brainer. Working out the details took some time, though.
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Old 09-06-2017, 12:12 PM   #4
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Just my 2 cents. I also have 2 adult children. One is more responsible than the other and more stable than the other, but the bottom line is they are both my children and I love them equally. Whatever my wife and I leave them they will split 50/50. If they want to be responsible or not responsible that's up to them at that point.

Mike
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Old 09-06-2017, 12:25 PM   #5
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Just my 2 cents. I also have 2 adult children. One is more responsible than the other and more stable than the other, but the bottom line is they are both my children and I love them equally. Whatever my wife and I leave them they will split 50/50. If they want to be responsible or not responsible that's up to them at that point.

Mike
Ditto! Same with the legacy account going to the 7 grandkids .... all equal amounts (20 yo wanting to be a music teacher eventually school admin, 16 yo who wants to be a street musician, 13 yo in medical academy, 10, 4, 3, 1)
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Old 09-06-2017, 12:39 PM   #6
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Originally Posted by wrigley View Post
Just my 2 cents. I also have 2 adult children. One is more responsible than the other and more stable than the other, but the bottom line is they are both my children and I love them equally. Whatever my wife and I leave them they will split 50/50. If they want to be responsible or not responsible that's up to them at that point.

Mike
+1
Anything else will almost certainly create friction.
If one is OK at the thought of having your children fight among themselves, perhaps being estranged for the rest of their lives, then by all means split it unequally.
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Old 09-06-2017, 12:42 PM   #7
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Our estate plan includes trusts for both our boys. One would blow all the money (probably north of $1M) in a year or two. The other is quite naive and would be shark bait for Series 7 "financial advisors" and/or for glib insurance and annuity salespeople.

The terms of a trust can be whatever you like. In our case, the trust provide for support into retirement for the kids and include language like "It is not our intention that our son will not have to work for a living." Trusts (not ours) can also liquidate on a schedule, like x% at age 30, y% at age 45, and the balance at age 60 if that works better for the grantor. My wife had an assistant die of brain cancer at a very young age. The trust they set up for her kids allowed any of the three to draw for higher education expenses without regard to % shares, then beginning at age 25 the trust begin equal liquidation payments to all three. The idea was to strongly motivate higher education. Trust can also provide support to the beneficiary during his/her lifetime and then the residual goes to charity. Tons of options. Find an experienced trusts & estates attorney and get creative.

Trusts can also be protection against bankruptcy, judgments, divorce, etc. that would put your money at risk if you gave it to kids directly.

Re trustee, use a professional trustee like a bank. Bank trust officers are very used to saying "No" to greedy or creative beneficiaries. I see that Vanguard offers trusts, too, so that might be worth a look but also it may stifle your creativity.

For us, the decision was a no-brainer. Working out the details took some time, though.
Trusts can offer protection from divorces, judgements, etc, but trying to control $$ from the grave is another matter. Not recommended.
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Old 09-06-2017, 12:54 PM   #8
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I never understood parenting from the grave once a child reaches 18. If you try to control them it will usually lead to resentment and if the executor is another sibling it could lead to bad feelings. IMO you should just give them the money and let them spend it as they wish. Money can bring out the worst in even good people.
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Old 09-06-2017, 12:56 PM   #9
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Just my 2 cents. I also have 2 adult children. One is more responsible than the other and more stable than the other, but the bottom line is they are both my children and I love them equally. Whatever my wife and I leave them they will split 50/50. If they want to be responsible or not responsible that's up to them at that point.

Mike
+1
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Old 09-06-2017, 01:07 PM   #10
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OK, if you want to treat them equally, give them the same age based increments. Responsible kid probably won't be impacted, and less responsible kid isn't treated differently.

I don't agree that a young adult, especially one you have questions about, needs to get immediate and full access to a fortune. Had we had significant money in the extended family, at least a couple would've blown through a fortune and may not have survived to 25 or 30, but all are very responsible now. None were that hard to see at 18 either. If you want to call that managing from the grave, fine, but I wouldn't sleep well knowing if I don't wake up I am setting them up for disaster.
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Old 09-06-2017, 01:39 PM   #11
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Very good input everyone thanks much!
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Old 09-06-2017, 02:06 PM   #12
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I never understood parenting from the grave once a child reaches 18. If you try to control them it will usually lead to resentment and if the executor is another sibling it could lead to bad feelings. IMO you should just give them the money and let them spend it as they wish. Money can bring out the worst in even good people.
I really don't call it parenting from the grave. Sorry my brother was a crack addict, my other siblings and I totally agreed with the conditions my parents put on the will. No way no how am I leaving my money to some one who is the antithesis of every thing I believed it, even if they are my kid. my kid goes out and joins the KKK that's on him.

You are also right that money brings out the worst. We do have wills but my late husband and I really don't like inheritances. Basically we gift our kids while we are alive.

My sons know that when I die (assuming it's at a nice old age, ) a large portion of my estate will go to charities I support. after free college tuition, free law school tuition and probably help with house purchase, I don't feel the need to leave them a wad of cash.

but they are listed as beneficiaries on stuff. 50/50

Now I don't have grand babies so when that happens I'll do a reevaluate.
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Old 09-06-2017, 02:40 PM   #13
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What if you put %s on it, like 25% immediately, and 25% at 30, 35, and 40 or whatever you think is best. The other sibling wouldn't really be in charge of doling it out but rather just following your orders with no legal choice in the matter.
Something like this may be the way to go. Speaking from experience, I do suggest that you treat each child equally so as not to create a divide between them.
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Old 09-06-2017, 04:00 PM   #14
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Does anyone know if I can set up something like the following:

After we pass, money goes into a Vanguard account. Automatically pay a certain $$ amount out to them 50/50 each month.
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Old 09-06-2017, 04:10 PM   #15
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Does anyone know if I can set up something like the following:

After we pass, money goes into a Vanguard account. Automatically pay a certain $$ amount out to them 50/50 each month.
Not directly. You guys pass, then who owns the money?

you could set it up that you pass, your money buys some annuities and the annuities pay your heirs for specified time (or until EOL)

you could set up a trust that gets the $ on your death and invests it at VG and the trust spits out payments.

But you need something or someone to own your assets.

Using a trust can be expensive if not setup and run correctly.
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Old 09-06-2017, 04:12 PM   #16
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Have fun. Spend it all. Leave them $0.
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Old 09-06-2017, 04:30 PM   #17
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Does anyone know if I can set up something like the following:

After we pass, money goes into a Vanguard account. Automatically pay a certain $$ amount out to them 50/50 each month.
A payout arrangement can be set up through a trust. It costs some money but is necessary to do it. I would suggest that everything pay out within 10 to 20 years. You can't control everything.
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Old 09-06-2017, 04:51 PM   #18
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..... Whatever my wife and I leave them they will split 50/50. If they want to be responsible or not responsible that's up to them at that point.....
+1
OP is going to probably live another 20-30 years (or at least one of them will), and their kids will be close to retirement at that time.

OP should spend it, not try to control it from the grave.
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Old 09-06-2017, 04:52 PM   #19
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... trying to control $$ from the grave is another matter. Not recommended.
Not recommended by whom?

My wife was an SVP in Investments & Trusts for a major bank. She and her staff were trustees on many, many accounts. With very minor exceptions, mostly the bank getting sued by beneficiaries who wanted to do something not allowed by the trust, there were no problems. That's the whole point of a trust; to protect the money from problems.

Re "controlling from the grave" another way to look at it is this: The creator of a trust is called the "grantor." IOW, the person who is granting his/her money to the beneficiaries. It is entirely logical that a grantor would want to have his/her money managed and spent in specific ways just as they did when they were alive. There are cases, too, where a trust is almost mandatory, too. For example a "special needs trust" to benefit a child with physical or mental issues.
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Old 09-06-2017, 04:57 PM   #20
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Does anyone know if I can set up something like the following:

After we pass, money goes into a Vanguard account. Automatically pay a certain $$ amount out to them 50/50 each month.
Sure. No problem. The issue with that is the same as with annuities: It provides no flexibility.

For example, suppose a child is diagnosed with cancer, cannot work, and has no savings. A properly written trust would allow the trustee to provide additional money in circumstances like this where fixed payments are no longer appropriate.

Really, sit down with a trusts & estates attorney and brainstorm. You will learn a lot and will realize the broad range of options that you have.
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