As I mentioned last month, the majority of my cases begin with a mother making a phone call. However, once we begin working together, I find many of the fathers focus on the practical aspects of protecting the money for the children. So as the thank you I promised in May, I thought I would thank all of those fathers by offering advice on one of the main concerns I see.
Often times, fathers focus on how long the money should remain in trust for the children. Most fathers (and mothers) do not expect their children to be ready for their inheritance immediately at 18. Instead what I normally suggest is to give the money out in stages. This can be life events or ages. For example, upon college graduation the children might receive 10%, then 50% at 30, then the remainder at 35.
When determining the times for distribution consider the following:
What life events do you want to encourage? School, careers, holy orders?
When do you think your children will be responsible enough to handle $10,000.00? $50,000.00? $100,000.00? $500,000.00?
How much of a burden do you want to place on the Trustee?
At what point is it the children’s issue if they want to make poor decisions?
At what point do the costs of administration outweigh the benefit of protecting the money?
There’s obviously no right answer when determining at what points to distribute money to the children. Holding the money in trust can be extremely beneficial if the children are not responsible. While the money is still in the trust’s name, the money is protected from spouses, creditors, and bad decisions. However, as I’m sure all fathers know, children cannot be protected forever. The costs and burdens of the trust as well as limiting the child’s access generally mean the money should be distributed at some point. And when? Well, thanks to the fathers who make that hard decision.