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Now that we’ve had a chance to put our estate plan together (finally!), I though that I’d share some details on how we set things up. Hopefully this will help others who are trying to figure out the same sorts of things. Or maybe it will inspire those who have been putting it off (like we did for too long) to finally get things taken care of. Anyway, I digress…
As far as our wills go, everything is pretty straightforward. My wife is my primary beneficiary, and vice versa. In the event that something happens to one of us, the other one gets it all. But the real driving force behind all of this was our desire to make sure that our kids will be taken care of if anything were to happen to the two of us. Thus, we named guardians to take care of our kids in our absence, and we also set up a testamentary trust to hold our assets on their behalf until their old enough to handle things on their own.
Before I go any further, I should probably set the stage… We have four young kids ranging in age from two to nine years old. While we’re doing everything we can to raise them right and make sure they have good heads on their shoulders, we don’t really want them inheriting a substantial (at least to them) sum of money with no strings attached the moment they hit 18.
While this sounds simple enough, there are actually a lot of things to consider when trying to make things as fair as possible between our kids. Fortunately, our attorney has been through this numerous times before, and was thus able to provide a good bit of advice on the ins and outs of setting things up.
So here’s what we did… (The legalese spans several pages – this is just a synopsis.)
If both my wife and I ‘pre-decease’ our children, then our ‘Residual Estate’ will go into a testamentary trust. The Trustee (whom we selected) is allowed to disburse funds as necessary for the benefit of our kids (e.g., healthcare, education, or general support). Once our youngest child hits the age of 21 (at which point he’ll be done with college, or very nearly so) the trust will be divided into four equal subtrusts. As soon as they turn 25, they receive 20% of their subtrust free and clear. At age 30, they’ll be able to collect 30% of the funds remaining in their subtrust. And at age 35, the balance of their subtrusts will be distributed. Because our oldest will be 28 and our second oldest will be 26 when our youngest hits 21, they will both get their first 20% free and clear when the subtrusts are created.
The point of all this isn’t to control out kids from beyond the grave. Rather, we just want to be sure that there are checks and balances in place in case one or more of our kids turns out to be less responsible as a young adult than we’re hoping. The Trustee will, of course, retain the flexibility to disburse funds from their subtrusts as he sees fit (over and above the set payouts). Thus, they’ll be able to (for example) tap into their subtrust to get married, buy a home, start a business, etc. But they won’t be able to take it to Vegas and put it all on red. Hopefully they wouldn’t want to, but you never know.
If these any of these sorts of ‘encroachments’ occur on behalf of our older kids before our youngest hits 21 (and thus before the trust is split), that amount will be deducted (with simple interest) from their ultimate share. In other words, our oldest can’t snooker the trustee into bankrolling his latest (and greatest!) business venture at the expense of his younger brothers.
So there you have it… The ins and outs of our estate plan. We also had the attorney draw up durable general powers of attorney, healthcare powers of attorney, and living wills. But since those are fairly standard fare, I won’t go into details about them here.