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Trust and children
Old 08-08-2022, 09:31 AM   #1
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Trust and children

My wife and I are retired and in our late 50s. Second marriage for each of us. Now married almost 20 years. She has 3 adult children and I have 1 adult child. When we married, the kids were 6 to 12 years old. She was a stay at home mom/housewife. I brought money into the marriage and was the sole breadwinner during our marriage.



How is it best to split future inheritances with the children so it is fair?



What is the best type of trust to have? We went to an estate attorney two years ago and he put together a joint revocable trust. I questioned this type of trust with him at the time and he was pretty firm that it was the best way to go and I am still questioning that this is best. At the two year anniversary of this trust, I wanted to look at this again. and ask the community their opinions.
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Old 08-08-2022, 09:41 AM   #2
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Do all the kids consider you to be dad? If yes then even split if no and their birth father was around then maybe 55% your child and 15% each of the others. Based on ages it sounds like you helped raise them all.
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Old 08-08-2022, 09:50 AM   #3
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If I were setting up such a trust I'd probably lean towards an even split "assuming" they are all somewhat equally deserving. As in "responsible" kids.

If one of them has been "extraordinarily successful" and really doesn't need it, I may consider/factor that in after talking to him/her and getting their full agreement.
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Old 08-08-2022, 09:55 AM   #4
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If I were setting up such a trust I'd probably lean towards an even split "assuming" they are all somewhat equally deserving. As in "responsible" kids.

If one of them has been "extraordinarily successful" and really doesn't need it, I may consider/factor that in after talking to him/her and getting their full agreement.
That could be seen as "punishing" someone for being successful. Even bringing it up to ask for their agreement could be hurtful. If they really agree, they could just give them the money, or I assume just decline at the time of distribution.

"Fair" is in the eye of the beholder, "equal" is arithmetic. IMO, unless there are specific considerations, I'd go with "equal".

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Old 08-08-2022, 09:59 AM   #5
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^^^^^And I think that's why he's asking for opinions.... Lot's to consider but not a lot of info for us to factor in.
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Old 08-08-2022, 10:10 AM   #6
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The first thing to figure out is what you want to happen after you both die. Then you write your wills and your trust documents to make sure that happens, taking into account that either one of you might die first and the survivor will need funds to live on.

A revocable living trust is probably the best kind for your situation. That's the type of trust that's used by most married couples who want to retain control of their assets during their lifetimes. The important thing to understand is what do your trust documents say about what happens after you or your wife dies? What do they say about the beneficiaries and the distribution of your estate after the last of you dies? Go back and read all the documents you have and make sure they say what you want them to.

If you're afraid that when you die your wife will have the power to cut your child out of her estate, or if you're worried that one of her children will take financial control and hurt your child, you should discuss this with an estate attorney in your state and make a new will. What you can do depends where you live and how much of the estate is marital property vs separate property.
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Old 08-08-2022, 10:33 AM   #7
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This is a good time to sit down and talk with your wife - what we think is "fair" is irrelevant.

From the hints in your post though, I'd steer well clear of "honey you were a housewife, I was the only one bringing in the dough so, my kid..." yah, nope.

Given you've been married 20 years, and will hopefully more than double that number before any inheritance actually comes to pass...I'd start from the expectation of even splits - unless there are other major factors (her ex husband, your ex wife, etc.)
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Old 08-08-2022, 10:39 AM   #8
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This is a good time to sit down and talk with your wife - what we think is "fair" is irrelevant.

From the hints in your post though, I'd steer well clear of "honey you were a housewife, I was the only one bringing in the dough so, my kid..." yah, nope.
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Old 08-08-2022, 11:19 AM   #9
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Do all the kids consider you to be dad? If yes then even split if no and their birth father was around then maybe 55% your child and 15% each of the others. Based on ages it sounds like you helped raise them all.

No. They have a great relationship with their biological father and I am definitely a step dad to them. The two younger children would stay in touch if my wife passed first. The oldest, I'd likely never hear from again. My son would be the same with my wife.
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Old 08-08-2022, 11:27 AM   #10
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...
If you're afraid that when you die your wife will have the power to cut your child out of her estate, or if you're worried that one of her children will take financial control and hurt your child, you should discuss this with an estate attorney in your state and make a new will. What you can do depends on where you live and how much of the estate is marital property vs separate property.
Exactly this. My Mother revoked the living trust my parents had after my Dad died and created a new trust (my sister pulled a couple of stunts that caused her to change beneficiaries). Keep in mind that YOU could survive your wife and change the trust.

Also, assume the reality of incompetency in old age.
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Old 08-08-2022, 11:43 AM   #11
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IMO two separate things are getting mixed up here. (1) The goals, and (2) How to implement them.

First, the revocable trust (aka "rev trust," "living trust") is pretty much a while-alive vehicle and a means to avoid or minimize probate. The rev trust is probably a good idea but not critical.

After death, obviously the ability to revoke goes away and the language of the irrev trust and of the wills determine what happens next. In our case, four irrevocable trusts (aka testamentary trusts). These provide in various ways for our three grands fathered by one son who has died and a fourth trust for our living son. Trusts for two of the grands are basically designed to support their educations. The third grand was born with a genetic defect that makes it very difficult for him to live in society, so we have a "special needs" trust for him. (https://www.investopedia.com/terms/s...eeds-trust.asp) The forth trust for our son is simply to ensure professional management of his money and to protect him from the usual band of crooks that circles. He knows about the plan and is pleased about it.

So ... the point is that trusts can be used as tools to implement a strategy. But first you need a strategy. So I would not bother to fuss with your rev trust until you have done the heavy lift: What is your financial strategy in transferring your money to the kids and what tactics will best implement. Then it may be time to talk trusts. Or maybe not. Straight bequests are a lot easier to design and implement.

Note too that you are buying something here that eats. Your estate plan will need updating every few years as people age, family circumstances and desires change, and as state and national laws change. The simpler you can keep things, the less painful these updates will be.
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Old 08-08-2022, 11:56 AM   #12
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No. They have a great relationship with their biological father and I am definitely a step dad to them. The two younger children would stay in touch if my wife passed first. The oldest, I'd likely never hear from again. My son would be the same with my wife.
Well, that is a little more detail to consider. The involvement of the former spouses in the children's life certainly complicates ones thinking, as I know very well. Attitudes of the heirs also comes well into play.

If it were me, I would make certain that 1/2 of your estate went to your child, the other 1/2 would go to her children if that is what she wants. If your trust is drafted properly, upon the death of one spouse, a sub trust would be created with 1/2 of the estate. This would pass to heirs but not until the other spouse passes. During that interim, under a Clayton provision, the surviving spouse would have access and control for those assets specifically stated to preserve the assets for the heirs. The structure is a QTIP, or qualified terminal interest property. Assets outside of the trust could be deeded POD/TOD or in the case of IRA's, you could establish IRA trusts to extend your beneficiary conditions and the duration of distribution, pending needs. Now pending taxes in state and fed, if you need to preserve specific exemptions from estate taxes, this structure is a must (such as in WA state), but for most states it is only federal estate tax exemptions to consider preserving. Most would not need this.....I think?

Hey, just my opinion and certainly not a lawyer so this is only commentary not advice. For us, we are married now 23 years. I have 2 girls who grew up knowing my wife as a step mom, and still have their natural mother a major part of their life. In fact she is also our friend. DW had no children from prior marriage, only horses AND she brought to our marriage very similar assets and income. We created our trust documents to provide distribution solely to the 2 girls who are both married and all GK's, and we have 3 GK's currently. That said, we are doing our best to make the trust minimized by gifting now.
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Old 08-08-2022, 12:56 PM   #13
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Is it safe to assume that you did not legally adopt DWs minor kids after you married her?
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Old 08-08-2022, 12:59 PM   #14
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I went the trust path with my late wife. We had an AB trust, and when she passed away, hers was converted to a QTIP. I had to deal with that for a number of years until I could dissolve it.
My present wife and I each have 2 children from previous marriages. Her husband passed away.
I used TOD for all the accounts. Things are split 50/50 between DW and the 2 boys, with per stirpes on their accounts.
On DW's, her sons are set up as successor beneficiaries.
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Old 08-08-2022, 01:09 PM   #15
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Is it safe to assume that you did not legally adopt DWs minor kids after you married her?

Correct. No adoption.
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Old 08-08-2022, 01:13 PM   #16
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The first thing to figure out is what you want to happen after you both die. Then you write your wills and your trust documents to make sure that happens, taking into account that either one of you might die first and the survivor will need funds to live on.

A revocable living trust is probably the best kind for your situation. That's the type of trust that's used by most married couples who want to retain control of their assets during their lifetimes. The important thing to understand is what do your trust documents say about what happens after you or your wife dies? What do they say about the beneficiaries and the distribution of your estate after the last of you dies? Go back and read all the documents you have and make sure they say what you want them to.

If you're afraid that when you die your wife will have the power to cut your child out of her estate, or if you're worried that one of her children will take financial control and hurt your child, you should discuss this with an estate attorney in your state and make a new will. What you can do depends where you live and how much of the estate is marital property vs separate property.
This is my concern, yes. She could re-marry and the new spouse could convince her to cut my son out, put him or his kids in, or my wife and my son could argue about something and he stops talking to her and after decades of no communication, she could cut him out.
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Old 08-08-2022, 03:17 PM   #17
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This is my concern, yes. She could re-marry and the new spouse could convince her to cut my son out, put him or his kids in, or my wife and my son could argue about something and he stops talking to her and after decades of no communication, she could cut him out.
But (as I understand it, do your own due diligence), upon your death, your trust becomes irrevocable, so no one can change the distributions that you called out from your trust. After your death, yes, your wife could decide to cut your son out of her will/trust.

But this would also mean your beneficiaries would receive their inheritance from you at your death. Your wife would not receive it all after your death, to be distributed to the rest after her passing. So it depends what you want.

But I agree, your current joint revocable trust doesn't seem to protect against this.

I'm not saying you should do it that way, I don't know, just something to consider in your overall plan.

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Old 08-08-2022, 03:32 PM   #18
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But (as I understand it, do your own due diligence), upon your death, your trust becomes irrevocable, so no one can change the distributions that you called out from your trust. After your death, yes, your wife could decide to cut your son out of her will/trust. ...
But even with some trusts, your son could be cut out. For example, my dad's revocable living trust was designed so that he was the donor, beneficiary and sole trustee while he was alive. Upon his passing, mother became the sole beneficiary and there are 3 co-trustees... mother, sister and me... with the actions of any of the two of us sufficent to make decisions. Upon mother's passing, sister and I become co-trustees and the 5 siblings become the beneficiaries and we are to distribute the assets of the trust equally to the 5 beneficiaries.

However, since Dad passed, technically, mother and sister (or mother and I) could collude to clean out the trust and pay all the assets to mother as the current sole beneficiary and then mother could do whatever she wants with them.

If you want to make sure that your wife dosn't cut your son out you would need to have your own trust and limitations on what your wife can receive from the trust if she survives you and will receive assets from the trust... for example, distributions limited to income of something like that... with principal going to your son upon her death. Or if she'll have sufficient financial resources if you die then you could just bypass her and make your son the sole beneficiary of the trust upon your death.

It get's tricky, but the first thing to decise is what you want to happen when you pass.
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Old 08-08-2022, 03:49 PM   #19
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This is a good time to sit down and talk with your wife - what we think is "fair" is irrelevant.

From the hints in your post though, I'd steer well clear of "honey you were a housewife, I was the only one bringing in the dough so, my kid..." yah, nope.

Given you've been married 20 years, and will hopefully more than double that number before any inheritance actually comes to pass...I'd start from the expectation of even splits - unless there are other major factors (her ex husband, your ex wife, etc.)
This is how I would feel also.
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Old 08-08-2022, 04:11 PM   #20
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..... If you want to make sure that your wife dosn't cut your son out you would need to have your own trust and limitations on what your wife can receive from the trust if she survives you and will receive assets from the trust... for example, distributions limited to income of something like that... with principal going to your son upon her death. Or if she'll have sufficient financial resources if you die then you could just bypass her and make your son the sole beneficiary of the trust upon your death.

It get's tricky, but the first thing to decise is what you want to happen when you pass.
Right, that's what I was suggesting (for consideration) - his own trust.

I'd consider just outright providing X% to son, and X% to wife and other beneficiaries, (but much depends on details, and the actual goals of the OP, as you say). Even leaving the son's in the trust to the wife with restrictions could backfire, unless there were plenty of protections.

This could be complicated to make bullet-proof, if OP really wants it to be tight, I think he's going to need a real pro who walks through everything with them. The current lawyer doesn't seem to be that person, but at least express the concerns and see if he has a better plan to account for them.

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