How Should I Distribute Trust Assets To The Kids? | Estate Planning TV 037

5 Ways To Distribute Your Trust Assets To Your Kids

A question I often get from clients is “how should I distribute my assets to my kids via my trust when I die?”

I thought everyone might want to know about the different options so here we go with this week’s episode of Estate Planning TV.

To begin, there are essentially 5 ways you can distribute your trust assets to your kids. Let’s just run down them.

1. Distribute Outright.

The easiest option is to just cut your kids a check when you die. You have avoided probate with the trust and you have easy distribution (after paying off your debts).

The obvious downside to this is the ease with which your kids can blow their newfound wealth (and I don’t care how good your kids are, they WILL blow it).

Another often overlooked downside is the loss of protection these assets have from divorce, bankruptcy, lawsuits, and bad habits (addictions).

2. Distribute at a Specific Age or Ages.

With this option the funds are held in trust until a certain age is reached (and your kids can use the trust assets if they need them during this time as determined by the trustee) and the assets are distributed to the kids.

With this trust distribution model there are two sub-models you can choose.

The first is an outright distribution at a certain age. They turn 25 and they get a check.

The second is distribution if they ask for it. They turn 25 and they ask for their third and the get it.

The advantage of the second distribution is the money stays protected by the trust until they ask for it (if you and your kids are smart you will take this option).

3. Unitrust distribution

This trust distribution structure allocates a certain percentage of the trust to the beneficiary every year no matter what.

For example, every year little Johnny gets 5% of the value of the trust. If he needs more for specific, real needs, it’s available.

Again, the downside here is you are just blowing money, essentially.

4. Discretionary distribution only

This is the most restrictive distribution model and is usually reserved for those that are highly interested in legacy and generational wealth.

The way this works is trust funds are only released if they are necessary for health, support, education, or maintenance.

There are NO outright distributions at any time and the goal of the trust is to create as much opportunity for as many generations as possible.

There you have it, the usual trust distribution options for your assets to your kids.

Oh, and the fifth would be some sort of combination of these methods.


Christopher Small

If you have any more questions or think you might want some help, click the link below to schedule a phone or in person strategy session. Looking forward to it!