My trust says that, upon my death, assets go to my three kids. Two are great with money. My middle child spends every penny on things I think are frivolous. At my death, each child will inherit about $500k. I have heard of professional trustees. Can you tell me about how that works? I am concerned that the money will go up on smoke.
-Frugal on Flores
Dear Frugal on Flores:
You are not alone. You likely worked hard for everything you have. While you love your son, it’s difficult to think about 1/3 of your savings depleted frivolously, perhaps within months after your death. I have seen this first hand. Once the money is spent, it’s likely gone forever.
Many folks do not want to give money outright to a spendthrift child. They also do not want to put the other, responsible sibling in charge of the funds. This might jeopardize the siblings’ relationship.
Professional trustees are licensed and bonded individuals or institutions named to serve as the administrator of a trust and will manage and distribute funds according to the terms. I have one client who has directed the trustee to distribute $10,000.00 per month, nothing more.
Professional trustees (also called “fiduciaries”) typically charge about 1% of the value of the trust per year. This might be money well spent if you want the money to last! There are many options available, and this might be a good one.