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Old 09-27-2012, 09:11 AM
  # 29 (permalink)  
AndreaB
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Join Date: May 2012
Posts: 41
Hi NoGround, since your AS is in his late 20s and still an active addict and because this is causing you concern, I would move the distribution date to his 65th birthday. Now, 65 is old. That's about ten years older than I am now and my thoughts are that if at that age he isn't sufficiently responsible to manage his money, its his problem and not yours.

Now at 65, there are a couple of options, you could instruct your trustee to purchase a lifetime annuity for him and title the annuity in your son's name and dissolve the trust. The problem with this scenario, is that the commercial trustee will undoubtedly purchase an annuity that pays the trustee a commission and since your son will own the annuity he can just turn around and sell it to an investor (this happens a lot). The next choice is to instruct the trustee to purchase an annuity and keep it in the trust. This protects the annuity because your son can not sell it if its in the trust, but the trust must remain open and continue to pay the trustee a management fee which effectively reduces the annuity payment. The third strategy, is mentioned above, distribute the trust corpus to him at 65 and terminate the trust.

Regarding the magic of compounding, let me warn you, that 8% is the return that all investment advisers use, and it is now debunked. My experience is that 4%-6% gross return is more common. Most commercial trustees invest in financial products (mutual funds) that are managed by their financial institution. On average, the trust will pay a 1-3% fee to the manager of the mutual fund and a 1-2% fee to the trustee to manage the trust. So after paying all fees, I find it rare for a trust to net more than 2-3%. Those are the good results! I have seen some bank trustees wipe out trusts within 10 to 15 years. That is why I always recommend including a provision for a "Trust Proctector". A trust protector is a friend who is given the power to change trustees. You can make that their only duty. I find having that provision in a trust document can do a lot to keep a commercial trustee honest.
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