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My wife and I just had our wills and POAs redone. We changed our domicile form PA to NJ a few years ago, and it was recommended we have them updated. I was surprised how different some of the documents were from state to state. For example, NJ has an 11 day period before a will can be probated, starting form the date of death. PA does not have that. The Medical POA and Advanced Directive was very narrative driven; our PA versions used tables of conditions and check marks for selecting treatment or not.
The estate attorney said our PA documents were valid, but the biggest issue was the language that defined the conditions under which our grandsons would inherit, in the unlikely, and sad, event that one of our sons predeceased us. The PA will set up a PA trust . The attorney felt this would add a lot of complication and force the will to be also probated in PA.
One consideration in a generation-skipping inheritance is at what age does the heir get control of the money in trust. I was a bit surprised that there are numerous opinions on this. Our original wills specified the age of 25. Lot of folks thought that was too young. Some recommended 35, others 30. Maybe we are optimist, but I think the world of our grandsons (currently 11, 9, 4, and 20 months), and was quite confident they will be outstanding adults at 25, like their parents. We finally settled on 28. Hopefully this part of the will never is exercised.
I fully understand this decision is very much dependent of the heirs. I have friends who are trustees for adult siblings that struggle with life. But I wonder what do other HD readers think is an appropriate age for an heir to assume control?
Thanks to everyone for reading and commenting. I didn’t mention it, but as others have said, our wills allow for broad powers for the trustee to spend the money for the benefit of minor grandchildren if necessary. I hope I can hang around long enough to see our grandchildren grow and mature. I would be thrilled to feel comfortable removing any restrictions on their inheritance.
Don’t rush it Rick. Our oldest grandchild just entered college and the second oldest has narrowed her next years college choice to three schools. They get old faster than we seem to 😎. My long-term goal since retiring was to see a at least one gradnchild graduate college. I’m still hopliing.
Dick, that is a fine goal that I share. Our oldest grandson is entering 6th grade, and talking about high school. I even think I might be able to make a wedding if the oldest gets married in his twenties!
As soon as our youngest graduated from college and started adult employment, we switched our estate to a give it now from a dole it out by age 35 model. Due to cost and long-term fee erosion experiences with trusts, I am generally anti-trust except for minor children or to protect significantly challenged adult inheritors.
I have come to fear lawyers’ costs, management fees, and tax-law changes far more than either probate or my kids spending non-ideally. More here:
https://humbledollar.com/2022/08/where-theres-a-will-2/
John, I agree completely. My question was really about minor grandchildren. Our sons are competent adults and we have total faith in their judgment. To me trusts, seem to be necessary in the situations you mention. Thankfully, we don’t have those challenging situations.
As others have said, it depends a lot on the child; some kids are more naturally mature and driven than others.
My husband and I are much older parents (63 and 61 with a 12 year old daughter), so this is definitely a concern for us. We have quite a bit of money saved, so barring unexpected disasters, she could inherit a life-ruining amount of money at a young age if we don’t carefully consider when to give her access to the money. We definitely want her to establish a career since this is essential for self-esteem and financial self sufficiency (in the unlikely case the money is gone when she inherits). I say life-ruining amount of money, because we have several friends and acquaintances who we feel have pretty unhappy lives because they were never forced to develop themselves.
My daughter is bright and strong academically, but slightly immature. Maybe not coincidently, my husband and I are both bright, and were slightly immature. I had a great career because I was forced to persist in school in a challenging major because I had no money and was tired of being poor. Also, I could see I had no future if I didn’t succeed so failure was not an option. My husband was also forced succeed to obtain the future he wanted for himself. I think if we had been enabled, we would have had much less satisfying lives – both career-wise and romantically. This is why ideally we would like my daughter to inherit 1/3 at age 35, 1/3 at age 45 and 1/3 age 55. I know this seems ridiculously drawn out, and our lawyer is against it, but we know too many people who would have been better off without the money.
We will adjust the trust as my daughter matures and we have a better idea of how she is doing.
We have a similar plan for similar reasons (immaturity of our adult daughter). In our trust, the last distribution would be at age 60. That way she’ll have funds for her old(er) age even if she doesn’t manage money well when she’s younger, which at this point seems the likely outcome.
In many of the answers below, folks talk about using trusts to distribute money over time (as opposed to a trust simply for probate avoidance). That’s necessary if money is left to a child who hasn’t yet reached the age of majority. But in other instances, I get a little queasy thinking about the ongoing legal and money management fees. Have folks figured out a good way to minimize those fees?
We took a different approach with our trust. All the funds go to our children equally, 1/3 each. Then we directed our children outside the trust on how to give a certain amount to our Grand Children. This works as each child has two children. We were never worried about age, as expected our children will make good judgments. This of course minimized fees. Some good news at this time 3 grads from college, 2 in college, and one a Senior in High School. As many have said they grow up really FAST! Best to all.
We have contracted with a local financial firm to act as trustee. Yes, there will be some ongoing expenses, but they’re not that exorbitant, and the estate won’t be that complicated to administer. They’re paid by the hour, but they shouldn’t have to do all that much on a regular basis. For us the peace of mind to know that the money will be managed for our daughter, distributions from retirement accounts will be handled, etc., is worth it. We also didn’t want to burden a family member either with the workload or the potential relational awkwardness.
If you are referring to parceling out money to an adult relative over time, we did it by appointing a trusted person with our wills alone. Our attorney advised against a trust, for the reasons you cite. We later found out first hand that trusts can be a headache to administer.
We appointed our son— who agreed to take on the responsibility — as trustee. Our daughter is a lawyer so can help with filing the yearly taxes etc. I agree an institutional trustee would be very pricey, but I do have concerns about a young person managing a considerable inheritance.
But the question assumed that grandchildren were inheriting because of the death of their parents. Therefore your son and daughter would no longer be available.
No, the son and daughter are the uncle and aunt— not the parents.
My stepbrother, who is older, needs protection from himself due to him not being very smart and having a history of making both poor financial decisions and poor romantic choices. I suggested to my stepmother that she leave his inheritance in a trust, but to make it simple by having the trust buy an annuity for him. He has no heirs, so does not need any money left at the end, so the annuity would provide a nice income for his retirement. Because there won’t be a need to manage the manage the money, it will take the pressure of whatever family member gets stuck with being trustee, plus it should minimize ongoing costs – there is really nothing to manage.
Unfortunately, since I haven’t managed to convince my step mother yet, I can’t say how this works out in real life.
I went into the meeting with our attorney with a complicated formula in mind, but he anticipated all my concerns and advocated for simplicity. If both my wife and I die while our daughter is still young, she will receive half our estate at age 25, and the remainder at age 30. The trustee, however, has discretion to distribute money for a reasonable purpose prior to those ages.
So… the revenge of the trust!
My grandfather (a lawyer who worked for a bank) became annoyed with my dad near the end of his life (Maybe for a long time before, I don’t know, I was a kid and not paying much attention to whatever their disputes might have been.) First everything went to my grandmother and then when she died, the trust kicked in and it was divided equal shares between my father and his three children (the grandchildren). It didn’t come to us right away. There was a drizzle of cash, and then the trust dissolved and the remainder was distributed. On my dad’s * 60th * birthday.
I guess my granddad thought my dad would be acting like a “grown up” by then.
The youngest of the grandkids was 28 at the time, so right in the ballpark of the numbers being suggested in this forum.
It wasn’t a lot of money, but it was a guilty pleasure watching my dad squirm a bit as his own dad showcased an opinion on his son’s character long after he himself had gone to his reward.
In my planning, I’m leaning the other way, also as suggested here. Looking for early interventions in career building and education, maybe some help with a small first home, given the young uns seem sensible and seem to avoid shysters and con artists and get rich quick schemes. Plus I’m hoping to support local charities where a small bequest means more… No major foundation money here, just Humble Dollars.
We opted for 40- but there is language that permits the trust to be tapped for living expenses, education, medical, first house. The trustee also has wide discretion, so could fund travel, business startup, etc.
The wills drafted by attorneys in both our prior and current state use 25. I believe this is a fair age; if you were going to develop financial common sense (or in modern parlance, “you got good at adulting”), you probably have it at that point and another 5-10 years isn’t going to help.
I thought the usual age was 21. I suppose that with the recent research on brain development and a later age at first marriage pushing it out a bit makes sense, but 35?
Seems to me that the question to ask is why you are leaving money to your grandkids rather than to charity, like Buffet. If it’s to help with their education over and above a specific education fund – a gap year, unpaid internships, medical school etc – the earlier the better. If it’s to help with a first house, maybe 28 does make sense. If it’s for a secure retirement maybe 55! I know that I would not be happy if I needed money, perhaps for medical expenses, or to start a business, and knew there was some sitting around I couldn’t access. Who knows what the economic situation will be in 20 or 25 years?
I think 28-30 sounds good. Maybe a clause in the trust about use for college/trade school. Chris
My estate attorney was able to add some standard legalese about being a solid citizen, not a wastrel, of sound mind etc. that she said would be adequate for the trustee to use their judgment. As we all know age is not a surrogate for wisdom.
My 2 cents worth – is that the generation-skipping trust should be administered by an outside party. I would also specify an age greater than 28, but that’s just me. To me, they all need to learn how to work for a living before receiving a potentially life-changing amount of money. I’m assuming a lot, but the grandparents and parents would both be gone, and I wouldn’t want to place a family member in the role of deciding who gets how much from the trust, and when. There are trust companies that provide clear-eyed and neutral administration of trusts (for a fee, of course).
When I was in college, I met a classmate who had lost both his parents at a very young age. He was accepted into the civil engineering program, and as far as I can tell, he succeeded. I do not know if he graduated. The thing that stuck out to me was that he was driving a brand-new Porsche 914 as a sophomore. It was not an extremely high-end Porsche by any means, but it had the accompanying expenses associated with service a mid-engine automobile. Critical decision-making skills need to be demonstrated, honed, and explored.
Haha yep the BMW mechanics used to smile at me when I arrived for yet more expensive maintenance.