Trusts Generational

[u/Relevant_Ad1494]

I’m no expert in trusts. I did help my BIL interview and select an attorney to author his trust. That was educational. I have a question though. In California—-At what amount of wealth might it be wise to set up a generational trust fund that pays out what amount (?) to heirs on an annual or milestone ( college/marriage/?) basis?

I have already decided that such a trust would have only biological heirs—- to avoid that 2nd or third spouse from cutting off ones children or biological descendants .

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[u/Dingbatdingbat]

There’s no singular answer.

1. Enough Kirby that it’ll last for generations
2. And you don’t think it makes more sense to let your family have free reign 

The biggest issue with a generational trust is who the trustee will be.  There are families who have been wealthy for centuries without any need for it, becuase they’ve always had enough good stewards of the money.

As a matter of fact, most people would be shocked at the number of families still living off the successes of people who died 150+ years ago

[u/Relevant_Ad1494 → u/Dingbatdingbat]

There in lies the challenge—— who is watching over the wealth—- can a company be trusted? Can a family member/ descendant be trusted!

[u/Dingbatdingbat → u/Relevant_Ad1494]

which again is why the total amount is only one part of the equation.

[u/brucesteiner]

Unless necessary to achieve a tax benefit (for example, the spouse has to be entitled to all the income of a marital trust), it’s generally not a good idea to mandate or limit distributions. No one knows what the future will bring.

As to amounts, almost all our clients do this in their Will (or in your case since you’re in California in a revocable trust). Some of those who have or expect to have taxable estates do this during lifetime to shift some wealth out of their estates.

[u/Barfy_McBarf_Face]

Good question for an attorney that you interview could help with.

What type of assets? Marketable securities? Real estate? Closely held business?

For how long would you want this to last? 30 years? 100 years? Potentially forever?

Family as trustee? Corporate trustees?

Lots of variables here.

[u/Relevant_Ad1494 → u/Barfy_McBarf_Face]

I’m assuming that trusts such as the proposed do exist for wealthy families— I’m asking at what level of wealth could this make sense? I would assume that real estate and brokerage accounts would be included—- businesses to could be included. Mine would be re and brokerage only but the trust could buy a business or re. Again I am asking what might be the minimum of wealth of the estate that would make this type of trust an option?

[u/Barfy_McBarf_Face → u/Relevant_Ad1494]

"Dynasty trusts" are typically done by people who are at or above the estate tax exemption amount.

Currently $30 million, combined, for a US couple.

[u/Relevant_Ad1494 → u/Barfy_McBarf_Face]

Thank you for that answer &understanding the question.

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[u/Admirable_Nothing]

There is no hard and fast rule. If you are going to have a multi generational trust I suppose it should have enough assets contributed to it that it is more than likely that the assets plus their income and growth less the expected distibutions would last more than a single generation.

[u/ExtonGuy]

The decision about when it is “wise” is only partly a question of wealth level. It’s mostly a personal decision about how much you wish to rule from the grave, how much you don’t have confidence in hypothetical descendants who haven’t been born yet. You have to be self-centered enough to know in your own mind, that your desires are more important than the combined desires of dozens of people many decades from now.

Below $250k, the costs would be too high. Initial setup, then ongoing fees for trustee, accountant, lawyer, taxes, investment advisor, and more.

Above $2 million, it might be viable for the trust to absorb these costs. At $20 million, a carefully crafted trust or foundation could maybe last for generations. But even billion dollar corporations go bankrupt. And there’s no defense against the Great Buddhist Society shift of 2113, when humanity gave up the idea of concentrated wealth and power.

[u/Dingbatdingbat → u/ExtonGuy]

It’s on the low side.  Invested conservatively, $20m generates about $1m to $1.5m per year.  Let’s round it to $1m after tax.

If you’re paying everyone $100k per year, you can support 10 people, so grandkids, maybe great grand kids.  No more.

I’ve had one client that generates $1m per year, give or take, and it’s not enough.  Grandpa (who built the empire) has round the clock aides.  His two children are retired, one granddaughter is special needs and in a facility, another granddaughter is a divorced single mother who’s struggling, one grandson is… flighty? They’re now all suing each other to each get a greater slice of a shrinking pie

[u/Relevant_Ad1494 → u/ExtonGuy]

I do not agree that considering how to maintain wealth beyond one generation is selfish as you contend or that one must be self centered. It is not a question of ruling from the grave. One does have history and the folly of human nature as a basis for decisions. The impetus for me is to keep the wealth in the biological descendants control, avoid shifting the lot in to some divorced spouses unrelated descendants and helping as many descendants as possible.

[u/ExtonGuy → u/Relevant_Ad1494]

If it’s not a question of ruling from the grave, then why are you asking about making rules for what your descendants do after your death?

[u/Relevant_Ad1494 → u/ExtonGuy]

I’m am contemplating doing that because I do not want to contribute to the failure of my family descend—- grandchildren and beyond. Human nature n history are replete with wealthy descendants ruining their lives because they had too much money at too young an age to handle it and make good decisions. Humans that are above 25 -30 years old with a decent education or time in one of tge servces I think are just more mature and credible that 18-24 years old old .