We are belatedly redoing our wills, now that we have 2 kids. We are having trouble deciding what to do with the $$, if something happens to both of us.
We have a trustee chosen, so that part is taken care of.
The difficulties are:
There is a 6 year age gap between our kids. If we both died while one or both was still a minor, then the younger child would ultimately need more support - she has 6 more years to go than her sister before she becomes an independent adult. So if we simply split the funds in half, and hold both in trusts until a given age, then the younger child reaches adulthood with less. Splitting it unevenly, however, I have a hard time doing - no matter how much you explain it, it totally looks like “you love my sister more”.
Alternatively we could do one trust, where money is doled out as needed for both of them, until the youngest reaches a given age, and then it gets split between them. But then the older child is much further into adulthood when she gets her share.
Lastly, we have trouble deciding when they should get access to the funds without a trustee. 18 seems awfully young to get a significant injection of cash. How do you pick that age?
Only one kid here, so we’re not going to face those issues. But what I’d suggest:
One trust, which gets used for the support of each kid through the summer they should graduate from college if they finish HS at the expected time, and go through college in 4 years if the trustee determines that funds will be available.
That means that as the older child approaches college age, the trustee will have to make a determination of whether there are enough funds in the trust to support the younger child through high school graduation, plus an excess amount to be divided between the two for support and expenses during the college years, because you don’t want the older child being the only one to get any support during her college years, and you absolutely don’t want to provide her with college support at the expense of being able to properly support the younger child during her minority.
For the simple reason of the age gap and that the trustee wouldn’t know for sure how much of the corpus will remain after the youngest child’s prospective graduation date until it arrives, the trustee waits until that date, then divides the corpus into two equal shares. And I’d say have them each get their share at a certain age, e.g. 30 years old, so they both have to wait until the same point in life to get their share.
We have two daughters, both now adults. Our wills have always said that in the event both of us died our assests would be divided 50/50, with my sister and brother-in-law as their guardians. I trusted my sister and BIL enough that they would somehow deal with it.
We decided it was too much trouble to figure out and readjust the proportionate amount to each as circumstances might change. I’ve had this discussion with each of them – when Dad and I are both gone, the will just says divide it in half. You can sell everything and split the cash, or one of you can buy the other out, or whatever you decide you want to do.
We have two trusts, one for my husband and one for me, plus two wills. Again, his and hers. Our kids each have a 529, too.
The trusts split our assets 50/50, with my sister appointed as guardian to use the funds for education and upkeep and to visit my husband’s family in India every X amount of years (I can’t remember how frequently). We also stipulated that they get any remaining funds earlier if they complete a four-year college than they would if they don’t.
I don’t recall exactly when that is, just that the distribution starts at a certain age if they complete college; a different one if they don’t, and the distribution age on both is later than is typical. We also don’t give all the cash out at once, but in 3 installments.
Like almost everyone in California, we have a family trust. it has fairly complicated directions about how much each of our kids gets when, designed so that they won’t get it all at 21. They are both older than the max age so it is kind of moot.
However we set up our financial institution as manager of the funds until they get it, to avoid arguments about investment directions.
This certainly makes sense once your children are adults and on their own. It wouldn’t make sense with a 23 year old whose college you’ve already partially funded, and a 17 year old still in high school. I’m not the OP, but I’m pretty sure he’s asking how to deal with the possibilities of him and his wife dying while one or both of them are still dependents, either fully or partially.