Should I set up a trust fund for my kid?

[Baby Gorilla]

Don't worry....

Should I set up a trust fund for my kid, or will I be doing him/her a disadvantage by making things too easy, so that he/she is not self-motivated?

I don't knw NZ law, but if it's like American law, you can set rules for the trustee of the trust fund to follow so that it requires some productivity from your kid's part.

For example, have an "allowance" from the fund ONLY if the kid is in school full-time towards a degree or working full-time, not when the kid can work but chooses not to because of the fund.

 

[Testosterone boy]

Pyrenees?

Then you must have gone up el Monte Perdido. A good 2500m climb.

Fonz

That would be a small hill and a short hike in Colorado.

 

[Fonz]

That would be a small hill and a short hike in Colorado.

Yeah...so I've been told. Plus amazing skiing.

I'm very close to Colorado right now.

About a 3hr drive from Vegas at the moment.

Planning on going to the Grand Canyon soon.(I had originally wanted to go a couple of months ago but something came up)

Fonz

 

[HansNZ]

This is all really good advice everyone, i'm glad I posted this thread. As a result of what people are saying I am thinking along these lines:

1. The kid won't know the fund exists while he/she is growing up.

2. 21 is too young for the whole sum to be available.

3. At age 21, only an income from the fund should be available,
the principal should be locked down until the kid is at least 25.

4. There are to be definite guidelines as to how the money is to
be used, i.e. for capital expenditure such as a house, not for
dead-end consumption.

Anything else you think I should add to the list?

 

[musclebrains]

Yeah...so I've been told. Plus amazing skiing.

I'm very close to Colorado right now.

About a 3hr drive from Vegas at the moment.

Planning on going to the Grand Canyon soon.(I had originally wanted to go a couple of months ago but something came up)

Fonz

I spent half my childhood in Aspen and I'll take Ordesa and Monte Perdido any day, at least for the scenery.

Consider a rafting trip down the Colorado River. I did that about 10 years ago for a week. An amazing experience.

 

[bigguns7]

She's a part of my family, she likes me (obviously) and considers me to have a good set of genetics.

LOL. "Hey baby, you look like you got some really nice genetics. Want to help me out by fathering a child?"



My only experience with trust funds has been negative. My roommate is a trust fund baby. Only he cannot access the money until he becomes "a contributing member of society," which means he has to have a "real" job before he gets the dough.

He is now 30 years old, tells everyone he is 26. He has been dating a 22 year old girl for a year and a half, and she thinks he is 4 years younger than he is. He has been a lifeguard instructor every summer for the past 6 years. So he works 4 months out of the year, and literally sits on his ass the other 8 months. When he runs out of money during that time, he just sells stocks that his parents have given him over the years.

He has no motivation to ever get a job, not even the $500k he has waiting for him in the bank. His father owns a company that he will inherit when his father retires, so he is basically waiting until that point before he does anything with his life. I would say his dad will retire in 10 years, so he'll be teaching 16 year old lifeguards until then.


My advice would be to set up a revocable trust, and not tell him that it exists. That way, if the kid turns out to be a total shit like my roommate, you can keep the money for yourself. If not, you can give it to him when he graduates and it will all be gravy.

 

[Baby Gorilla]

Well....

This is all really good advice everyone, i'm glad I posted this thread. As a result of what people are saying I am thinking along these lines:

1. The kid won't know the fund exists while he/she is growing up.

2. 21 is too young for the whole sum to be available.

3. At age 21, only an income from the fund should be available,
the principal should be locked down until the kid is at least 25.

4. There are to be definite guidelines as to how the money is to
be used, i.e. for capital expenditure such as a house, not for
dead-end consumption.

Anything else you think I should add to the list?

What is the goal of the whole trust? In America, a irrevokable trust fund is UNTOUCHABLE by creditors for both the funder (you) and the beneficiary (your kid). However, a creditor can try and attach disbursements from the fund to the beneficiary.

I'm not sure how the rule agains perpetuities works in NZ. However, if you are going to just let the kid have the money at age 25 (too young IMHO), why not just give it to him at 18...or tell him about it when he's a kid?

If this was in America and the RAP doesn't have a problem with it, I'd make an irrevokable living trust with the kid as the beneficiary. If it must pay out....it pays out to him at age 35 or to his estate at his death. Until then, it would pay a monthly or quarterly "allowance" so long as he's productive (either working full-tim or in school full-time or diligently seeking full-time employment). I'd also make provisions to allow it to pay uncovered health care expenses (at the trustee's sole discretion so health care providers can't use it to breach the trust for debts owed). Remember, there is a legal difference between saying "MUST" or "SHALL" and saying "MAY" or "SHOULD." I'd maybe also allow the possibility of paying school expenses or downpayment for a first home kind of thing. Again, at the trustee's sole discretion.