What's the deal with trust fund kids? They're like unicorns where I come from, and I'm curious.
Do they get access to the trust until they get a professional job or a position in the family business, until the father dies, or until a certain age?
What's their typical income from the trust, and how often are payments made?
I get the impression the funds are partly to teach rich kids the value of money, and partly to rein their spending in, so is there a big discrepancy between their trust fund lifestyle and what they grew up with?
Lastly, what kind of family net worth is implied, at minimum, by the average trust fund?
I had a trust fund. It contained about 80K at its peak and I paid for my engineering degree with it. I'd assume my family was at the lower end of wealth for setting up a trust fund. I think it's mostly so kids who get given money by their parents don't do anything too silly with it.
I know a couple of them - one works for the family business, parent passed away. he gets dividends like the other owners of the business/group and obviously his salary/bonus/whatever from working there...
basically his stake in the business is owned by a trust
on the other hand the other guy I know has a much smaller trust fund - the trust owns a small portfolio and a property that is rented out... he and his sister get an income from that though at best the whole thing is worth only a high six figure or low seven figure sum
>Lastly, what kind of family net worth is implied, at minimum, by the average trust fund?
you can't tell really... with the two I know one is worth a six figure sum from his share of the trust... the other is worth several million
Trusts are a complex legal device, and there is little uniformity among them. They vary according to the wishes and needs of the people who create and fund the trusts.
The kind of trust you are generally referring to when speaking about "trust fund kids" are known as spendthrift trusts. They are designed to give the beneficiary limited access to the trust income and assets, and thereby protect the balance of the trust from both (a) poor spending decisions by the beneficiary, and (b) creditors of the beneficiary.
Typically, the beneficiary of a spendthrift trust is permitted to draw some combination of (a) the income of the trust, (b) a fixed percentage of the trust, and (c) a fixed amount for a given time period. These can be combined to form a nearly infinite variety of rules (e.g., "the annual income of the trust, not to exceed 8%, but not less than $5000 per month").
All decisions about withdrawals from the trust are made by the trustee, but are subject to the rules of the trust. The trustee is usually given some degree of discretion to make decisions in accordance with the intent of the grantor (who may also be the trustee).
The beneficiary is not permitted to exercise control over the trust, the trust's assets, or compel distributions except in accordance with the trust rules. If the beneficiary ever exercised such powers, it would invalidate the trust.
Disbursements can be periodic (monthly, annually, etc.), sporadic (when needed), or both, depending on the rules of the trust and the trustee's discretion.
The trust can terminate upon the occurrence of any specified condition(s). Often, but not always, this may be related to the age of the beneficiary. However, there is no requirement that the trust have a termination event.
There is no implied family net worth required for a family trust. However, there are no insignificant legal costs associated with the formation and administration of a trust, so it's not for everyone.