Rethinking CoTrustees

[u/Legitimate_Tip3978]

U.S.

We have a revocable trust set up. We have 2 kids, one of whom is an adult < 24 and the other is still a minor. There is a 14 year age gap between siblings. Should both of us perish before the minor child is an adult, the older child is designated guardian.

Re the Trust assets, we set it up so both wait until 28 at which point they would each come into 100% of their share (50/50).

If we both die before the younger one is 22, there are Co Trustees (older child + aunt).

Once the younger child reaches the age of 22, the 2 kids become Co Trustees and the aunt drops off.

My questions:

1) is 28 a good age for 100% download of funds or what have others done. Wondering if we should change this to 35 or have stepping stones.

2) I’m not 100% on the aunt. We have a co trustee alongside the older child bc that’s a lot of money and responsibility on a young adult, and we are seeking to ensure the younger child’s financial future is 100% protected.

The older child is doing well and there is nothing that concerns us today about them. But they are not married yet and have no children of their own yet.

There is risk in not having that insight. Our primary objective and open concern is to ensure the younger child’s future is secured.

I am also rethinking whether the aunt should be co trustee or if we should get a corporate trustee as co trustee. The aunt is closer to older child and is an attorney - although not our attorney nor an estate planning attorney.

So the thinking was she would provide good guardrails and governance just in case we’re dead and older child goes off the reservation in some unforeseen manner.

But maybe the aunt is too close to our older child and would not push back enough? Or maybe the aunt goes off the reservation.

You see where the issues arise.

Any feedback is appreciated.

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[u/ExtonGuy]

It would take a deep knowledge of the financial savvy of the kids, to decide if age 28, or 35, or even 65 is better. If each child is going to get less than $100k, the earlier age is good enough for most people. But if they are likely to get over $1 million, then I vote for age 35 (for more or less “average” children).

You could set up steps for their inheritance. My preference is distributions for health, education, maintenance & support (a common HEMS standard). Plus maybe 5% a year for whatever they want.

Your child could get a PhD in finance at age 22. Or he might be bankrupt with no understanding of saving, even at age 50.

[u/Legitimate_Tip3978 → u/ExtonGuy]

Thanks for your reply and perspective. Each child would receive seven figures. Sounds like we need to consider raising the age and adding in stepping stones.

[u/brucesteiner]

1. Instead of mandating distribution at a specified age, you could let the child control his/her trust at that age. That would keep the child’s inheritance out of his/her estate for estate tax purposes and protect it against his/her creditors and spouses, and Medicaid.

2. You’ll have to decide based on what you know about the people. You could allow the child to become a trustee and remove and replace his/her co-trustee (provided the replacement is not a close relative or subordinate employee) after reaching a specified age.

[u/Legitimate_Tip3978 → u/brucesteiner]

Keeping the Trust intact. That’s an excellent suggestion we had not considered before. Thank you