Should your child who is under the age of 25 be the trustee of your living trust?

David: Hey, I just have a question. If I have a living trust and I have my daughter on it, she was under 17, and I put my sister in charge, in case I ever passed away. Now that she's an adult over 20 years old, would I need to keep my sister on that living trust still, or what would happen?

Attorney Tom Olsen: You're talking about who would be your successor trustee who would manage your trust if you passed away. David, when you initially set it up, you appointed your sister because your daughter was younger. Now your daughter's older. I assume that she's mature enough to do this job for you. What you would do would be to amend your living trust and make your daughter as the first choice to be your successor trustee, if that's what you want to do, David.

David: Got you.

Tom: Hey, David, how old is your daughter, by the way?

David: She is going to be 21 in May.

Tom: David, let me ask you, and by the way, does she inherit your wealth when you pass away?

David: Yes. I have her down as beneficiary and also on the trust.

Tom: The trust, David, does it say something like that if your daughter happens to be under the age of 25, her wealth, your wealth would stay in trust to be used to help her go to college, help her buy a home, and she doesn't get it until she reaches age 25? You might find that language in your trust as a standard procedure. Do you think that's in there, David?

David: I'm not too sure, Tom. I'm going to have to look it over real good for that living trust. I know I left everything for her in case I pass away with my wife. I know I put my sister in charge because she was under 18 at that time.

Tom: David, if your trust states that your daughter doesn't get the money until she reaches age 25, all in all, David, I'd recommend that you leave it the way it is. Your sister would continue to be trustee. Once your daughter turns age 25, then consider adding her as the trustee. David, what we're talking about is that if you and your wife both passed away and you guys got a million bucks, it might be unwise to hand a million dollars over a 21-year-old. It may not be used for the purposes you want to be used for.

David: Right. I understand that. [laughs]

Tom: Okay. Thank you, David. Holley, when we do trust for people, we are using them for a couple of purposes. Purpose number one is to help people to avoid probate. Probate's expensive and takes a long time, but we're also using it for people who have younger children so that their children, in the trust, the client gets to dictate at what age their children would get this money.

Attorney Holley Knapik: Absolutely, yes. They can do that with a living revocable trust.

Tom: Our standard trust, the pre-printed form itself states 25, age 25.

Holley: That's our default, age 25. The reasoning behind that, Tom, is a 21-year-old is just that 21 and probably still in school, focused on school, and other things. It's nice to know that there's this default of age 25 where if something did happen to mom and dad, whoever they appointed a successor would be managing it for that 21-year-old, that 18-year-old. I find it's a good provision.

Tom: David said it was his 21-year-old daughter, which means she's probably got the maturity level of a 28-year-old. If David had a 21-year-old son, he's probably got a maturity level of about a 13-year-old.

Holley: 13-year-old. Yes.

Tom: When I hear daughter, eh, maybe. If I heard 21-year-old son, no, no way.

Holley: No. [laughs]

Tom: When we talk about age 25, keep in mind that if you pass away and your child is under age 25, your successor trustee can use that money for certain purposes.

Holley: Absolutely. For the care and maintenance and help on behalf of the child, medical, school, trade school, they need a car. They need an apartment to live in while in school, whatever it is that would assist and help the child before they turn age 25.

Tom: There is access to that money, but it is at the discretion of your successor trustee. In this situation, it was David's sister. If they follow this plan that we're suggesting and they both pass away and the daughter goes to the sister and says, "By the way, I can drive. I'd like a new car now. I'd like it to be a Corvette," sister could say-

Holley: No, you're going to get a Honda Civic-

Tom: There you go.

Holley: -Hybrid.

Tom: That's the important part. Now, this age 25 is our default, but when we're doing trust for people, we certainly make them aware that here's some other choices.

Holley: Absolutely.

Tom: Sometimes people will say, "Okay, for my kids, they get half at 25, half at 30," knowing that they're going to blow the first half. Hopefully, they'll be older and wiser at 30 to hold onto the second half.

Holley: We do see that quite often. I've seen that just recently where a client has asked that we do just that, where they get a certain percentage at age 25, age 30, and the rest at 35.

Tom: At 35. Exactly. Sometimes we got people going up to age 40. Sometimes we have clients that did not inherit their wealth. They worked hard for every dime they've ever owned. They want to make sure that their kids work for their money before their handed this pot of gold, you might say.

Holley: Absolutely. Yes, indeed.

Tom: Because we know, and I'll bet most of the listeners know what happens to a lot of trust fund babies.

Holley: Ooh, they go off the rails.

Tom: It doesn't come out well.

Holley: It doesn't end well. There is a period of time where they're really struggling only to come out losing in the end.

Tom: That's just something to consider that making your kids earn it before it's given to them.

Holley: Before it's given.

Tom: Now what it is odd, every once in a while, Holley, we'll have a client and their children are 45, 50 years old and they're saying, "Tom, when we pass away, we want their share to stay in trust until they reach age 65." These clients are telling us that "Man, they got a 45, a 50-year-old child that hasn't managed to save a dime their entire life.

Holley: Their entire lives.

Tom: Yes. What they're saying is that they want this money stays in trust until basically age of retirement. Hopefully, by then they would understand that, boy, they better hold onto this because they're not working forever. They got nothing in savings. This is what they're going to live on.

Holley: This is it.

Tom: Hey, folks. My name is Tom Olsen. The name of the show is Olsen on Law. We're going to take a break.

[00:06:42] [END OF AUDIO]