Living Trust Plus a Subtrust - "Childs Trust"?

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MrWasabi65
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Living Trust Plus a Subtrust - "Childs Trust"?

Post by MrWasabi65 »

I learned this morning that the attorney I have been working with on my living trust has gone on vacation until July 11.

Good for him, lol - I have a question and I am wondering if anyone has any experience with it, or is familiar with the issue.

I am leaving my assets to my 3 grandchildren in a living trust. Is there any particular reason to ALSO have a "childs trust" for each of them within my overall living trust? If it makes a difference, I am divorced, so there is no spouse to consider and their parent, my child, is deceased - and they live with the other parent with whom I have only a cordial but not close relationship.
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Lee_WSP
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Re: Living Trust Plus a Subtrust - "Childs Trust"?

Post by Lee_WSP »

A "child's trust" is defined as
"Child’s trust refers to a trust fund created for kids, usually by family members, in order to have the assets managed until the children mature. These trust funds can be created to operate in a variety of ways. "
If they are minor's, absolutely.

Now that said, my standard approach is to leave all assets in trust with separate trusts for each beneficiary unless there is a reason to have a single trust which then splits into separate trusts. But the single to separate trust kind of complicates things, so it's cleaner and simpler to just bifurcate it from the outset. The separate trusts will go on for the state allowed 500 years, so multiple generations until it's diluted enough to be uneconomic to administer. They'll also split into sub trusts upon each beneficiary's death.

Is that the plan you should go for? It's up to you. I would suggest separate trusts where the grandkids have effective control over the assets at the very least. Effective control gives them the option of terminating the trust if a reasonable third party agrees that termination is in everyone's best interest.
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MrWasabi65
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Re: Living Trust Plus a Subtrust - "Childs Trust"?

Post by MrWasabi65 »

I think I get what you're saying. You're suggesting (and I get the decision is ultimately mine) that another way to do it is instead of one trust with three sub-trusts - just do three separate trusts?

There is also one adult beneficiary named in the will...wasn't planning to do a trust for her because...well, an adult.

I am planning to attach them to a will....

I appreciate the feedback.
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leonidas
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Re: Living Trust Plus a Subtrust - "Childs Trust"?

Post by leonidas »

This is a good question. My wife and I have a RLT and when we both pass it creates 2 sub-trusts, one for each child. I believe that each of those sub-trusts are irrevocable and a trustee that was specially chosen of each child. One question is do these trusts just "exist" after we pass or does one need to go to an attorney and create them. I actually didn't ask that question when the Trust was created.
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Lee_WSP
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Re: Living Trust Plus a Subtrust - "Childs Trust"?

Post by Lee_WSP »

Descendant’s separate trusts are either created via will (testamentary) or they’re created upon death as a fully independent sub trust of a living trust. They can keep going just like descendants.
deikel
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Re: Living Trust Plus a Subtrust - "Childs Trust"?

Post by deikel »

It only makes a technical difference

You can split your estate in three and have a separate trust to operate for each child. In which case they all start with the same value, but they may stipulate very different marching orders for each. This would be useful if their age is very different from each other for example.

If you keep your estate in one trust, then you have to make stipulations for the children from 'the whole', but consider the differences between them at each time point.

Case in point, one goes to college, one does want to travel the world first (they are twins) and one is already 35 and about to divorce...its the year 10 after your departure - what do you want the trust to do ?

Pay out money to the child for college, for the child to travel the world, but not for the 35 year old yet so he does not loose it in the divorce and rather pay them 5 years later (after divorce)....very difficult to do this way. How about one is special needs, the other two are not - equal split or need based ?

Basically, the trust is the future (but deceased) you imagining being the trustee and doing with your money as you see fit......its tricky to look into the future
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Re: Living Trust Plus a Subtrust - "Childs Trust"?

Post by bsteiner »

Most people provide separate trusts for each child (in this case, each grandchild).

However, esepcially where the estate is of modest size and where's a large difference in age among the (grand)children, some people are concerned that the result would be inequitable if they died at a time when they had paid for the older (grand)children's education but not yet for the younger (grand)children's education. They sometimes want a single trust until the youngest one reaches a specified age, so that the youngest one's education won't come entirely out of his/her share.

They could accomplish the same thing by providing that until that point, the trustees are to pay for the (grand)children's education pro rata out of all of the trusts.
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celia
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Re: Living Trust Plus a Subtrust - "Childs Trust"?

Post by celia »

MrWasabi65 wrote: Wed Jun 29, 2022 2:16 pm I think I get what you're saying. You're suggesting (and I get the decision is ultimately mine) that another way to do it is instead of one trust with three sub-trusts - just do three separate trusts?
You can have three separate sub-trusts with different sub-trustees if you want.

I would treat the grandchildren as if they were your children. Most of us with minor children say the children don’t get their individual pots of money until the youngest one is 30 or so, at which time there is an equal split. This allows all of them time to go to college (and the trust can pay for it but be careful about impacting financial aid due to one of their parents being deceased). What you are trying to avoid is having one (or more children) already done with college at the time you die and “forcing“ younger children to use their inheritance for college while the older ones get to buy toys with their inheritance. We looked at equal opportunity first (their college choices cost widely differing amounts), before the remaining assets were split equally.

If you decide to go this way, you would only need one trustee until the youngest reaches the stated age. Then the grandkids can have their individual shares taken out of the trust. Keeping the money in sub-trusts or not partly depends on how much you are talking about. If each grandchild gets $100K, I’d give it to them and avoid future trustee fees and taxes. If each grandchild gets a million, I would continue with the sub-trusts.
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FreddieFIRE
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Re: Living Trust Plus a Subtrust - "Childs Trust"?

Post by FreddieFIRE »

celia wrote: Thu Jun 30, 2022 1:51 pm Most of us with minor children say the children don’t get their individual pots of money until the youngest one is 30 or so, at which time there is an equal split.
Most of us??
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celia
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Re: Living Trust Plus a Subtrust - "Childs Trust"?

Post by celia »

FreddieFIRE wrote: Thu Jun 30, 2022 2:18 pm
celia wrote: Thu Jun 30, 2022 1:51 pm Most of us with minor children say the children don’t get their individual pots of money until the youngest one is 30 or so, at which time there is an equal split.
Most of us??
Ok, let’s hear from those with minor children and who have trusts. What does your trust say about when your kids can get the assets?

On second thought, I don’t want to turn this into a survey thread (which doesn’t answer the OP’s question). Besides, those whose trust already holds out for the youngest to age out might not have any other reason to post. So I might be turning this into a one-sided survey.

FreddieFIRE, you can start a separate thread, if you wish.
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FreddieFIRE
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Re: Living Trust Plus a Subtrust - "Childs Trust"?

Post by FreddieFIRE »

celia wrote: Fri Jul 01, 2022 1:55 am
FreddieFIRE wrote: Thu Jun 30, 2022 2:18 pm
celia wrote: Thu Jun 30, 2022 1:51 pm Most of us with minor children say the children don’t get their individual pots of money until the youngest one is 30 or so, at which time there is an equal split.
Most of us??
Ok, let’s hear from those with minor children and who have trusts. What does your trust say about when your kids can get the assets?

On second thought, I don’t want to turn this into a survey thread (which doesn’t answer the OP’s question). Besides, those whose trust already holds out for the youngest to age out might not have any other reason to post. So I might be turning this into a one-sided survey.
It's not limited to minor children. I believe that our forum "experts" generally agree that it is far superior to never mandate payouts, at any age, but instead to allow a responsible trust beneficiary to serve as their own trustee or co-trustee. That provides asset protection and keeps large balances out of the beneficiary's estate. Sure, for younger beneficiaries, there may be an age threshold for this to become effective. The fact that lawyers still draft trusts that mandate payouts at specific ages doesn't mean that it is a "good" approach. They're likely just running on auto-pilot. :annoyed
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Re: Living Trust Plus a Subtrust - "Childs Trust"?

Post by Lee_WSP »

Only about 1% of the population knows or cares about a dynasty trust. They go to boutique law firms specializing in wealth preservation and/or tax planning.

Given this fact, it’s unsurprising that other lawyers don’t care about or know how to make an inter generational trust.
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FreddieFIRE
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Re: Living Trust Plus a Subtrust - "Childs Trust"?

Post by FreddieFIRE »

Lee_WSP wrote: Fri Jul 01, 2022 12:48 pm Only about 1% of the population knows or cares about a dynasty trust. They go to boutique law firms specializing in wealth preservation and/or tax planning.

Given this fact, it’s unsurprising that other lawyers don’t care about or know how to make an inter generational trust.
I certainly don't disagree. While my personal experience is not broad, I've sampled enough "estate lawyers" to find that the majority either don't know or don't care about long term asset protection and tax planning. I believe that the general business model is to have the client fill in some blanks on a form, have an admin input the data to their document software, and then print out a stack of paper for the client to sign. It is good for folks on the forum to understand this.
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MrWasabi65
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Re: Living Trust Plus a Subtrust - "Childs Trust"?

Post by MrWasabi65 »


I believe that the general business model is to have the client fill in some blanks on a form, have an admin input the data to their document software, and then print out a stack of paper for the client to sign. It is good for folks on the forum to understand this.


I've consulted with three different estate planning attorneys - what you describe is the approach all three proceeded to take. The third one is the only one who has been willing to entertain any questions.....***begrudgingly***
I've paid over $600 in consulting fees to these three....um, professionals and we aren't even at the point yet of the print outs and my signature; I don't feel that I've learned $600 or even $100 worth of anything from any of them.

So, I read and try to learn on the side because I think this is too important of an issue for the future just to leave it to people who could care less.

I know the people here will mostly suggest that I consult with a 4th and a 5th and a 6th - but...how much time and money are you supposed to pour into this just to get started? sorry, I am underwhelmed and it shows.

I mean, we come to Bogleheads for all kinds of education.
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Lee_WSP
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Re: Living Trust Plus a Subtrust - "Childs Trust"?

Post by Lee_WSP »

FreddieFIRE wrote: Fri Jul 01, 2022 1:14 pm
Lee_WSP wrote: Fri Jul 01, 2022 12:48 pm Only about 1% of the population knows or cares about a dynasty trust. They go to boutique law firms specializing in wealth preservation and/or tax planning.

Given this fact, it’s unsurprising that other lawyers don’t care about or know how to make an inter generational trust.
I certainly don't disagree. While my personal experience is not broad, I've sampled enough "estate lawyers" to find that the majority either don't know or don't care about long term asset protection and tax planning. I believe that the general business model is to have the client fill in some blanks on a form, have an admin input the data to their document software, and then print out a stack of paper for the client to sign. It is good for folks on the forum to understand this.
Unfortunately, that's pretty much the industry standard. Doing it any other way requires you to be a real expert or not very successful as a business (broadly speaking, there's always exceptions). That said, I'd say the prices charged are usually not terrible for the product received, especially at the lower end as you're getting mostly the same product.
MrWasabi65 wrote: Fri Jul 01, 2022 1:36 pm I don't feel that I've learned $600 or even $100 worth of anything from any of them.

I know the people here will mostly suggest that I consult with a 4th and a 5th and a 6th - but...how much time and money are you supposed to pour into this just to get started? sorry, I am underwhelmed and it shows.
I'm sorry to hear that. Finding an estate planning attorney really is a herculean task. The advice I agree with is to look for someone who bills hourly, read their bio, reviews pasted to their homepage may be a contra indicator, and try and see if they're published. If they're part of a lot of associations associated with continued learning, that may be a good sign.

I think you should be able to get a good feel for the attorney's expertise in a fifteen minute call by asking questions such as "what's a trust?" "do you craft dynasty/intergenerational trusts?" "What's a SLAT? What's a GRAT? An ILIT?" "Do you offer tax planning services?" or any number of the other issues the lawyers of BH raise. They should be willing to answer at least two or three of the aforementioned questions for free; they're pretty simple to answer. If not, they probably don't know the answer and you can safely skip them.
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Re: Living Trust Plus a Subtrust - "Childs Trust"?

Post by HappyPappy »

Like others here, we have children’s subtrusts that specify the children do not get control of their portions of any inheritance until they are a certain age by which they’ll both be done college.
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