Question about trust fund
UPDATED: Oct 1, 2022
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Question about trust fund
My 6 siblings and I were left $330,000 in Trust 21 years ago by my grandfather. The Trust states that it pays out for education or is to be released as each child reached the age of 25. I was the first to use my portion. We have 2 siblings left to collect in a couple years. The value of the Trust is now at about 200k. After the last 2 collect, about 100k will be divided by 7. Is this a typical appreciation in the value of the fund? It gained only about 120k in interest over 20 years. Also, the Trust list 22k last month and has been on a downward trend. I am worried that in 2 years, it may be exhausted. Do we have the right to close the Trust?
Asked on January 16, 2019 under Estate Planning, Pennsylvania
SJZ, Member, New York Bar / FreeAdvice Contributing Attorney
Answered 4 years ago | Contributor
1) You can only close the trust when the terms of the trust--the instructions in the document creating it--say you can. The trust is controlled by the documents creating it.
2) The savings (e.g. short term CD) rate was around 5% about 20 years ago and is around one-fifth of one percent now. If we take the simple average, or 2.6%, and run it through a compound interest calculator, a $200k trust would gain aound $144,000 in interest over that time. While the trust started with more, the principal would have been drawn down to under $200k, since if it has $200k now, including the accrued interest, it would be worth much less than that without interest (i.e. principal only). Therefore, if as an approximation, we use $200k in principal for our calculations, as per the above, we find that the trust may have slightly underperformed, but not much all that much; the performance is probably without around 15% or so of what you'd expect, which is within a reasonable margin of error for such rough calculations as we are doing. The appreciation is probably more or less what you'd expect.
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