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Why You Shouldn't Trust Your Kids

Kids don’t have to be taught to be sneaky. Before he was two, my grandson would look to see if we were watching before he’d touch the Christmas tree ornaments. He knew better.




But we learn in time to set limits and grow trust in our kids. My favorite teen strategy was “trust, but verify.” You occasionally and unpredictably verify they are where and with whom they said.


But there are some things with which you should never trust your kids.

The big one is actually your trust.


A common estate planning mistake, in my opinion, is to have your child be the trustee of your trust. Sure, they are the ones who are likely to organize the estate sale. They are the ones who will have to run errands and request paperwork. But if you are planning to have ongoing gifts to your children (which to me is the biggest reason to have a trust), your son or daughter should not be the one in control.


Here’s why. Let’s say you have a very reliable daughter. And she gets into a fender bender. Then you end up with a money grubber who decides to fund her own retirement on the bad back she’s always had but now blames your daughter for aggravating. If your daughter is the trustee, any funds that would disperse to her are now attachable in the lawsuit.


But if you have an independent trustee who has some discretion over the gifts, the trustee can pay your daughter’s bills directly and ensure she has what she needs. And only what is actually deposited to an account would be attachable. If done right, nothing is attachable. So money grubbing fender lady has to find another victim.


Here’s another reason why you shouldn’t trust your child as trustee. Imagine your son is going through a nasty divorce. Any funds that have been comingled into accounts are going to be split with his ex. And any ongoing scheduled payments or money over which he has discretion are possible considerations for alimony. But an independent trustee with discretion can similarly withhold these payments and keep this money out of reach.


So who should you trust as your trustee? There are two primary qualifying questions. 1) Who is someone who is so good with money that they rub two nickels together and get a dollar? And 2) Who can be unbiased toward the beneficiaries you listed in your trust?


If you have someone in mind, fantastic! If not, it may be worth the 1-2% of your estate each year to protect your kids with an independent trustee.

Yet, there are those who can’t be trusted. So be careful of those who charge by the hour or by the task. Some have been known to wipe out estates with their excessive involvement and costs. They’re a little like my grandson, trying to get their hands on shiny objects.


You’ve worked hard to build your estate plan: make sure you leave it in capable and trusted hands. And just don’t trust your kids: protect them from their own lives by keeping them out of control of your trust.

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