[Music] With that being said, we're moving on to Michael's question. He said, I'm about to be a grandparent. Congratulations, exciting, and considering putting $10,000 into a dividend trust for my grandchild to access at 35. What are your thoughts or recommendations on this type of investment for a grandchild or this type of situation to you in the future? But I'll FR because I'll get you to get into the technical stuff, but something I always think about is we have clients that whenever we're doing estate planning or anything that is way out in the future. You always tell people to get in the shoes of the making sure you're not creating unintended consequences. Because I think about we have a very successful client who had a father who was in the medical field who set up all these trusts, and then the son turns out to be extremely successful in his own right, and there's a little bit of a cloud over the fact that he has to deal with the annual

Administration matter of fact, we had to help unwind some of that. Um, so when I hear somebody say, Hey, I'm a grandparent, I'm thinking about putting $10,000 in this dividend trust with the goal of 35. What do you think? And this, this is kind of leading you into the question. What do you think the grandchild's going to think when they turn 18 or 19 and they need to go to college? What do you think they're going to think when they're 26 or even 32 and want to buy that first house somewhere in between that? Do you think they're going to be like, Man, I'm so glad that my grandfather set this thing up that comes available at 35. Well, I think it's going to be one. I do like that it's at least something that has a finite because like in the instance you're talking about, this client is now well in their 60s and they're still dealing with this trust because it was set up the way that it

was at least this one does have that terminal event. I think what's interesting, Michael, you're thinking about doing this. It is for a very specific goal. If it's 35, which means it's probably not going to be to pay for college. It's probably not going to be to help with the first-time purchase of, I don't know, maybe in today's day and age, it will be for first-time home purchase. Probably not going to be to buy the first car. So, you just have to go into that knowing that. One thing that I do love is if you've not done this, go to moneyguy.com/resources and check out our wealth multiplier. What's great is you can see that if I put in $10,000 today for my grandchild and it grows all the way out until age 35, what kind of gift am I actually giving them? That should get you pretty excited. Now, he used the term here, Brian. I want to make sure I understand. He said a dividend trust for my grandchild, and I'm trying

to figure out is he talking about the type of trust that will pay out an income. I don't think so. I think it's supposed to sit there. So then he's talking about I'm going to go buy like dividend-type holdings inside of the trust structure. Because I have thoughts both ways. Because if that is what you're saying, hey, I'm going to go buy dividend Blue Chip, whatever, that's fine if that was the strategy you wanted to deploy inside this vehicle. But what would encourage you to remember is that when it comes to rates of return, there are two different ways that returns are generated. There is income, which is like dividends, interest, coupon payments, that sort of thing. But there's also capital appreciation. And if you have a 35-year window that you're going to allow for these dollars to grow for the benefit of your grandchild, I don't know if I would just exclusively and solely focus on only one component of that return equation. I may look at something more

broadly diversified with a bigger mandate and larger capital capital appreciation potential because if you really want to get the most bank for your buck and you're going to put in a trust and you know the dollars aren't going to be touched that gives you an opportunity for a lot of growth and a lot of future potential for this asset for only thing I'll throw on there is pay attention to complexity too because um there's already some pretty simple structures and this is what I was alluding to in my setup is that like 529s great for Education funding from not only the simplicity of setting it up but also from the the fact of the tax-free growth and and and funding the goal of Education um custodial accounts now yes your child when they become or grandchild when they become age of majority in your state would get control but hopefully with good training good behavioral of understanding you know how money works and being good with money when you reach adulthood um that

shouldn't be that big of an issue. Those things don't require you to set up a separate trust because it's written into the legislation that funded and made these things available. Whereas when you set up this trust, you have to figure out, is this going to be a simple trust? Is this going to be a complex trust? Because if it's simple, the child's going to be paying the taxes on it. If it's complex, the trust will be paying its own taxes, and then that's got its own, you know, issues with it. Just be careful, think about all these, begin with the end in mind, um, as you're thinking about these complex things. Because that's the part when I get into estate planning and other things, I'm always like, don't get caught up in the sizzle of how cool it would be to destruct. Think about what you're actually trying to accomplish, and then let's build this thing as simple and effective as possible so that people, it doesn't have all these unintended consequences. I love

that because I think so often people start with the good intention of doing something, not realizing what they're signing people up for. That's a I I think people are amazed that it can you could you could open up just an excess brokerage account that you house in your name, and you could accomplish this exact same thing with those dollars. Now yeah, you'll have to pay the taxes, it'll be taxed at your, you know, your tax rate, and then you could just, you know, have a payable on death designation on that account, or you could list it inside of your estate documents. There are perhaps simpler ways to grant this money to your child. Now if 35 is something you sticking on, then the trust may be it, but I like the idea of keeping it as simple as possible, but no simpler.

What Is the Best Way to Invest Money for Your Grandkids?

Bring confidence to your wealth building with simplified strategies from The Money Guy. Learn how to apply financial tactics that go beyond common sense and help you reach your money goals faster. Make your assets do the heavy lifting so you can quit worrying and start living a more fulfilled life.

Subscribe today to stay up to date with our latest episodes, livestreams, and highlight videos: https://www.youtube.com/c/MoneyGuyShow?sub_confirmation=1

Are you ready to go beyond common sense when it comes to your money? Check out all the free resources The Money Guy Show provides: https://moneyguy.com/resources/

