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UTMA, good or not so good

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  •  Kamban 
    Participant
    Status: Physician
    Posts: 1718
    Joined: 08/01/2016
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    We don’t know how this will turn out yet. I know people that have blown through their inheritance received in their 60’s, so I’m not sure age is the determinant of fiscal responsibility

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    real trust with defined ages (Like 25/30/35)

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    I have no problems with trusts but using that as a way to teach fiscal responsibility is a futile effort. If you decide to control the purse strings at ages 25-40 with regular amounts being doled out, the person will behave like a sailor eagerly waiting for the paycheck so that he can blow it on booze and women. All you are doing is hoping that things will be better at that age but there is no evidence it will be.

    It is better to give smaller amounts earlier and on and teach them about sensible savings,  spending, growth of money and the magic of compounding and see where it goes. So when you distribute the trust money at 35 they don’t behave like a PowerBall billion dollar lottery winner blowing through the huge sum and getting bankrupt within a few years.

    We preach to 30- year old physicians here on saving 20-25% and then they can spend the rest free of guilt. How about teaching that to the 12 year old so that the mantra is imprinted in his mind earlier in life.

    #171986 Reply
    Liked by MnSaver
     MnSaver 
    Participant
    Status: Other Professional
    Posts: 47
    Joined: 01/04/2018
    We don’t know how this will turn out yet. I know people that have blown through their inheritance received in their 60’s, so I’m not sure age is the determinant of fiscal responsibility 

    Click to expand…
    real trust with defined ages (Like 25/30/35) 

    Click to expand…

    I have no problems with trusts but using that as a way to teach fiscal responsibility is a futile effort. If you decide to control the purse strings at ages 25-40 with regular amounts being doled out, the person will behave like a sailor eagerly waiting for the paycheck so that he can blow it on booze and women. All you are doing is hoping that things will be better at that age but there is no evidence it will be.

    It is better to give smaller amounts earlier and on and teach them about sensible savings,  spending, growth of money and the magic of compounding and see where it goes. So when you distribute the trust money at 35 they don’t behave like a PowerBall billion dollar lottery winner blowing through the huge sum and getting bankrupt within a few years.

    We preach to 30- year old physicians here on saving 20-25% and then they can spend the rest free of guilt. How about teaching that to the 12 year old so that the mantra is imprinted in his mind earlier in life.

    Click to expand…

    Yes! We dont use age-based trusts, and agree with your points in-terms of the unintended side effects of age-based distributions. As you note, early education and modeling of good behaviors may be the best defense against spendthrift heirs.

    #172101 Reply
    Liked by Kamban
     bean1970 
    Participant
    Status: Physician
    Posts: 297
    Joined: 07/12/2017

    Yes! We dont use age-based trusts, and agree with your points in-terms of the unintended side effects of age-based distributions. As you note, early education and modeling of good behaviors may be the best defense against spendthrift heirs.

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    i don’t worry about the UTMA…i don’t even worry about our entire estate with my kid I we both die tomorrow…however, as thing are starting to morph and because of my kid’s profession…i do have some fears for protecting the estate primarily against a divorce for him.  I trust him…I just don’t trust anyone else. It would be kind of tragic (well first tragic that i’m dead along with my husband), but if my kid had the entire pot, gets married, marriage lasts 10 months and she walks away with half our our estate….so i’m starting to entertain more about periodic distributions under a trustee (right now they stop in his late 20s in our trust)….to maybe he is 60. It would be more solid than a prenup for him should he ever get married. The estate is hefty.  If we die when he is 60 it may be really hefty. The UTMA isn’t.   I just like the trust protection more than the prenup protection because i had a family member prenup invalidated in a court battle.

    #172162 Reply
     FIREshrink 
    Participant
    Status: Physician
    Posts: 681
    Joined: 01/11/2017

    UTMA is the least good option and we use only for money kids have been directly gifted or they have earned themselves. No way we’re forcing our own hand by putting our own hard earned money into an account which by law must be given to our children when they turn 18. What nonsense.

    Money they need or want from us as young adults will come in three forms all with strings attached. One, 529 money for approved expenses. Two, cash flow from our income. Three, transfers from our own taxable accounts. No benefit to a UTMA for our own money.

    #172191 Reply
    Liked by jz

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