Last week, we started a two-week series about common trusts. Click here to read part one. This week, we tie up that two-part post, by focusing on the advantages and drawbacks of a common trust.
Instructions for a Common Trust
The trust created often leaves instructions to the trustee. In these, they note that older children earn an advancement from the common trust. They use this to pay for expenses such as buying a home or starting a business. The trustee then subtracts those funds from the share they ultimately inherit when the common trust terminates. This choice allows older children access to their share if need be. Therefore, they need not wait for their younger siblings to come of age before earning the right to withdraw funds.
Events Which May Impact a Common Trust
Keep in mind that such events might not come to pass or may take longer than anticipated to complete (e.g., the youngest child could fail to graduate, decide to take a five-year break between graduating from high school and starting college, or stay enrolled in college for seven years taking a variety of courses without completing a degree), so including an age with the milestone can be a more-reliable marker, such as when the youngest child graduates from an accredited college or university or reaches the age of twenty-three.
Advantages and Drawbacks of a Common Trust
The key benefit of a common trust is flexibility. You are giving the trustee the same spending discretion that you currently exercise. They have the authority to manage money for the family in the same way you would. This is not only a heavy burden for the trustee but a big decision for you because the trustee will be forced to manage family dynamics, objectives, and interests. Choose wisely.
From your point of view, a common trust might be the fairest way to handle leaving accounts and property to your minor children, even though it is not 100 percent equal. Of course, your children may have a different outlook. Older children could resent waiting until the youngest child reaches adulthood to receive their share of the funds. And by then, depending on the size of your estate, the funds might have been depleted by the younger children.
Age Gaps & Trustee Discretion
If there is a large age gap between your oldest and youngest children, a common trust might not be the best option. But if you have minor children who are close in age and you want to give a trustee discretion to care for their needs in a parental manner, a common trust is a wise option. However, it is not the only option. For children with diverse ages or needs, you could choose to divide funds equally into an individual trust for each minor child or explore additional options.
To learn more about common trusts and how they can protect your children, as well as other important estate planning tools, please schedule an appointment with our law office.
About Skvarna Law in Glendora & Upland, California
Skvarna Law Firm operates offices in Glendora and Upland, California. Also, we provide legal services. We cover San Bernardino, Los Angeles, Orange, and Riverside Counties. This includes several cities. Upland, Ontario, Rancho Cucamonga, Fontana, Colton, Rialto, Chino, Chino Hills, Glendora, Claremont, Pomona, La Verne, Montclair, San Dimas, Azusa, Covina, West Covina, Diamond Bar, Walnut, La Puente, Corona, Norco & Mira Loma.
