Best trust distribution for high net worth and children?
In Tennessee but the questions are pretty generic. Currently 45, assets around $5m, two children, 9 and 11. A trust is being drafted but I'm having a hard time deciding what the verbiage should be, in the unfortunate case that my wife and I died before the children were adults. This initial trust has to be bank managed and make sure our children don't end up doing nothing with their lives or spending every penny at age 21.
My thoughts are
- Maintenance until 25
- At 25 some percentage each year distributed
- At 35 some greater percentage each year distributed
- At 45 some greater percentage each year distributed
The problem I have with this is I don't know what size the trust will end up being. 1% of 1 million dollars is too little, imo.
My estate attorney has recommended two approaches
- Divided up by 10, paid out that 10% from 25 to 35. Or 5% over 20 years.
- or
- Pay out at 25, 35, and all of the rest at 45.
I feel like both of these could give access to too much money, too early in life. What are other people in this situation doing? Keep in mind that we don't know how our children will turn out. If we are alive and they are 30, this trust may look totally different!
Would these values need to adjust with inflation? Putting a fixed value like $50k is a totally different amount in 10 years.
Other things in the trust, in case people have comments
- Single pool of money until the first child reaches 25. Health and maintenance can come out of this pool.
- Split pool once the first child hits 25, this is when payouts would start.
- 529s are already split
- Pre-tax accounts will split on death, one pool for each child.
- In Tennessee these can be held until the child is 21
- At 21 they will be paid out over 10 years, has to be paid directly to the beneficiary
- Trust payouts will be reduced by this amount each year
Thanks for any tips!