At what age do you want your children to receive outright distributions from your trust? There is no right or wrong answer. It will vary from family to family and from child to child. Some children are responsible and sensible at age 25, others could take a little longer, and some children may never be in a place where their parents are comfortable. Luckily, a revocable trust is flexible enough to address any and all of the above circumstances. The real question is, what is best for your children, and your family?
First and foremost, what is an outright distribution? An outright distribution is where the trustee is writing a check or signing over the right to property that will thereafter be completely under the control of the beneficiary. There will be no oversight or further input from the trustee. The alternative to an outright distribution is keeping the property or money in trust for the beneficiary. This means the trustee is in control of the property and is responsible for making payments to the beneficiary for their needs. Discretion for making these distributions is often left with the trustee, and this approach prevents the beneficiary from buying a Lamborghini (for example) with their inheritance versus putting the money down on a home.
Oversight is helpful, but there is a tradeoff. While the trustee is acting on behalf of the trust and serving that intermediary role, he/she is going to have administrative responsibilities. Tax filing, accounting, attorney fees, trustee fees are all expenses that need to be paid. The trust itself is responsible for these fees, so the longer the trust administration continues to be needed, the more money is going to be used from the inheritance to pay for it. There will always be situations that necessitate keeping the trust open for extended periods, such as underage children or children with special needs who are not capable of handling their own finances, but for the vast majority of children, there will be a point where the oversight is no longer needed.
Remember, there is no right answer here, what you chose is what is the best solution for your family. You know your children the best. You know who is responsible now and who is not quite there yet. The default age for a majority in the United States is 18, so if that seems too young, bump the default in your trust up to 21 or 25. If you think a stagged distribution may be a good solution, have 1/3 distributed at 21, 1/3 at 25, and 1/3 at 30. If 50 seems like a better age for your children, do it. The important thing is that you are informed about the tradeoffs, and feel comfortable that when you are gone, your children will be able to handle their inheritance responsibly.
If you would like to talk about distribution options in your current trust or if you need to create a new trust, we at Tresp Law, APC are here to help. Call for an appointment today and one of our Estate Planning Attorneys can explain these options and more in greater detail.
