Case study #1: the outright gift. Single Mom dies relatively young and leaves $500,000 to daughter Judy, a junior in college. Judy quits school and marries older Tom, who has always wanted his own restaurant. Restaurant fails and so does marriage. Judy leaves her twenties as she entered them, single, poor and without a career.

Case study #2: in trust to a specified age. Single Mom's Will puts Judy's inheritance in trust instead, until she reaches the age of thirty. Distributions from the trust are at the discretion of Uncle Paul. Judy tells Paul of her plans to quit school and marry the budding restaurateur. Paul says he'll pay for Judy to finish school but not for a restaurant. Tom finds Judy suddenly less attractive, and they don't get married. Judy finishes college.

Case study #3: a lifetime trust. Wealthy Parents have four children in their late twenties and early thirties. Two of the children are lousy at handling money and a third, while herself responsible, is married to a big spender. An approach like that in case study #2 would have the effect of giving all four children their inheritance outright. Wealthy Parents fret over how to do their Wills. Is it right for them to try to control from the grave? They decide their motivation is proper - it would be in their children's best interests to have their inheritance held in trust for life.

Having decided on a lifetime trust for the children, Wealthy Parents face a few more tough but interesting questions. Who should be trustee? They decide on the one Responsible Child, who will have the power to select his own successors as trustee.

But won't it put Responsible Child in an impossible position, to make him trustee for the others? There are ways to lessen the pressure. The trust agreement may suggest an investment approach, and may take much of the discretion out of making distributions to the children. One example of a non-discretionary approach to distributions is the "private unitrust," paying each beneficiary five percent (or some other percentage) of his or her balance each year. The trust agreement may also prescribe a "good faith" standard for the trustee, to make it more difficult for the other children to upset his efforts.

Case study #4: a family partnership or LLC. This is a popular way to make gifts to children during your lifetime. Wealthy Parents can put their investments into Family LLC, a limited liability company, then give small percentages of ownership of the LLC to their children each year. The parents retain management authority, and may also predetermine succession of control. The LLC agreement may be drafted to discourage creditors and divorcing spouses from seizing a child's interest. The gifts reduce the parents' taxable estate. The value of the gifts may be "discounted" due to the children's lack of control over the LLC, thus allowing the parents to compress more value into the use of their gift exemptions. And the LLC may be used as a device for the financial education of children through periodic family meetings.

Which of the four reflects your style? We suggest you circle the one that appeals to you most, then do one of the following things:

• Call us for a meeting to discuss your wishes and get them expressed in proper legal fashion; or
• Reserve the evening of September 26th on your calendar. On that night we will hold a workshop on "Your Children's Inheritance" at the Tacoma Club.

You'll get an invitation to the workshop. If you'd like to talk about your estate planning in the meantime, please call the attorney with whom you work, or Julie Dickens, Al Falk, Alan Macpherson, Eileen Peterson, or Sandy Rovai, all members of our Trusts & Estates Group. Thanks.