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What Happens to the Kids if the Slow Cooker Explodes?

By February 20, 2018 February 25th, 2020 No Comments

While becoming an orphan seems to be a fate far more common to befall children in literature than in an American family (I’m looking at you, Harry Potter and Anne of Green Gables), it is not inconceivable. When we become parents, we discover that we are not immortal. It is our responsibility to plan for this distinct – if remote – possibility of our demise. For example, a typical estate plan for parents of children who have not yet reached 18 years of age both nominates a guardian to care for their children if the children do not have a living parent and includes a testamentary trust for children.

A testamentary trust typically nominates a trustee to make distributions from the trust’s assets for the beneficiaries’ (i.e., the children’s) health, education, maintenance and support.  A typical children’s trust will also direct that the trustee must distribute the assets remaining in the trust to the beneficiaries when the youngest beneficiary reaches a certain age and the trust will then terminate.

How does this work? Imagine Terry and Sam have five teenage daughters, Elizabeth, Jane, Mary, Kitty and Lydia. While their daughters are away at summer camp, Terry and Sam die in a slow cooker fire.  Terry and Sam each had wills that directed a total of $2 million be distributed to the trustee of a testamentary trust for their five children. The funds are to be managed as a single trust and any remaining assets will be distributed to the five beneficiaries in equal shares when Lydia, the youngest, reaches age 30.

In addition to paying relatively comparable amounts for each beneficiary’s food, housing and health care, which amounted to approximately $200,000 in distributions for each beneficiary over the term of the trust, the trustee makes a number of distributions unique to each beneficiary: Elizabeth receives $500,000 in distributions to cover tuition for a B.A. at Stanford, a Harvard PhD and a second PhD at Oxford; Jane receives a $45,000 distribution toward yoga teacher training; Mary receives $5,000 in distributions toward piano lessons; Kitty receives $100,000 to open an ice cream parlor; and Lydia receives $250,000 in distributions to study fashion design at the Pratt Institute. When Lydia turns 30 and Jane is 35, $100,000 remains in the trust and each daughter receives a final distribution of $20,000.

What’s an alternative if you feel like you need to make equal distributions to your kids? A sub-trust! Stay tune for the sequel to this blog post, where I explain what a sub-trust is and how that might work for Terry and Sam and the kids.

Photo credit: Tammra M on Flickr

This post is for informational purposes and does not contain or convey legal advice. The information herein should not be used or relied upon in regard to any particular facts or circumstances without first consulting with an attorney.

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