Kids account question

[waverly]

My Grandmother passed on, and my mom gave me money for the kids (not a lot, but some).  She didn't specifically state it was for college, but it is for their future, so I told her I would put it in the kid's trust. 

The other option is the 529 (which is also owned by the trust).  I thought I could put it in their trust, and then withdraw OUR money to pay for our nanny since now we need to do that due to e-learning.  However, we don't have the matching amount because most of it is in the 529, and we can't withdraw that. And the other amount is invested and we would pay fees on it. 

The financial advisor said we could put it in the trust in a cash account and withdraw to pay for our nanny for e-learning.  We had decided to use that money for e-learning.  But, since it is supposed to be for their future, IDK how I can use it now.  We do put in $900 a month to their 529 and trust, so if we withdraw for the nanny, but then put in $900 a month we would pay that back in a year.

What does MM think?  I want to make the money look clean, not like oh I took the money when it was supposed to go for the kids.  But we do have a pandemic emergency crises that caused our childcare to unexpectedly go from 0 to $$$$.  The money is going to the kids and also will be paid back in a year, guaranteed because the payments are automatically taken from our bank account.

The money was always supposed to be going to offset our college costs, so we were always going to put the amount in and take our amount out, but that plan doesn't work due to the 529 and fees on the other account.  Thoughts? 

The other option is just leave it in our regular or high yield savings account and offset it by our $900 a month, but I think that looks less clean, and then the money could easily end up in household bills.  

Or we deposit the money in the trust, but stop putting $900 a month in and use that to pay the nanny (but it doesn't cover the full monthly cost of the nanny)?  

[pierogigirl]

Is your mother going to be checking up on the money (like getting statements, demanding to see proof of the deposit)? I would just use it for the nanny and continue to put the $900 a month in their 529/trust and not think twice about it. You are using it for the kids. I don't see the need to make it a complicated deposit and withdraw game to make it look better (for who?).

[waverly]

No I don't think she will be demanding to see statements and proof of deposit. I wanted to provide her proof of deposit.

It's my personal preference to keep the money looking more clean. My husband tends to mix funds, and it drives me crazy. I like to see everything laid out and earmarked.

However, according to our financial planner, my original plan wouldn't work, so I needed to re-evaluate. I just feel guilty using future money now, even if I will be technically replacing it.  

I also don't know how we can afford a nanny all school year (even with this money), and Covid looks like it is not going away anytime soon.  

[pierogigirl]

Aug 31, 2020 15:12:18 GMT -5 waverly said:

No I don't think she will be demanding to see statements and proof of deposit. I wanted to provide her proof of deposit.

It's my personal preference to keep the money looking more clean. My husband tends to mix funds, and it drives me crazy. I like to see everything laid out and earmarked.

However, according to our financial planner, my original plan wouldn't work, so I needed to re-evaluate. I just feel guilty using future money now, even if I will be technically replacing it.  

I also don't know how we can afford a nanny all school year (even with this money), and Covid looks like it is not going away anytime soon.  

Does your savings account let you break the money into separate sub accounts?  I have several sub accounts all in the same numbered account.  They just have a different suffix at the end of the account number. I can see what I have set aside for different purposes. If you can't do this, I would keep my own accounting of how much of the kids' money I withdrew each month to pay the nanny.

[waverly]

pierogigirl, Yes, the financial planner recommended a separate account (under the trust) specifically for that money and to pay the nanny. Then once we transfer the money back monthly it would mostly go into the 529.

I could do a spreadsheet also just to make myself feel better to account for what goes in and what comes out. This way I could show the management of the money to myself mostly. It would be easy to do, since it would be the same amounts every month.

[ellipses84]

Is the trust money going to earn the same or more than the 529? If not, I’d put the inheritance money in the 529 to earn the biggest return and stop or lessen the amount you are putting in for the 529 while you have nanny costs. Even after that is over, start saving some more liquid money in the trust that you can pull out for a future kid expense that isn’t college. Also, there might be other budget areas you can use for nanny costs, like less gas money or less travel.

[sandandsea]

I don’t like people giving gifts with strings attached. The intent of the money was to help your children. Covid is causing an additional need for the child and I think it’d be totally fine to use the money to pay for the nanny. As long as it’s not restricted in a trust/529/etc then I think using it for a nanny because of Covid is within the intent and I wouldn’t worry about all the hassle of moving money around and playing with funds. Keep putting money aside for their future and be sure they know great grandma helped fund xy&z because she loved you.


ETA - to clarify - it’s about staying within the intent of the gift. If you are using this money for a nanny because you can’t afford the nanny but are planning a $$$$ trip to Fiji, then I’d put it in the 529. But it doesn’t seem like that’s the case.

Also, just curious for my own planning/knowledge. Why do the kids have a trust (beyond a 529)? Is this a living trust where if you die all your assets go into the trust or is there an ongoing trust fund for them? Because it seems odd that paying for a nanny is difficult but the kids have trust funds. I don’t understand trusts that well and would like to understand how normal people use them and if there is something we should be doing.

[waverly]

Sept 3, 2020 11:28:20 GMT -5 sandandsea said:

I don’t like people giving gifts with strings attached. The intent of the money was to help your children. Covid is causing an additional need for the child and I think it’d be totally fine to use the money to pay for the nanny. As long as it’s not restricted in a trust/529/etc then I think using it for a nanny because of Covid is within the intent and I wouldn’t worry about all the hassle of moving money around and playing with funds. Keep putting money aside for their future and be sure they know great grandma helped fund xy&z because she loved you.


ETA - to clarify - it’s about staying within the intent of the gift. If you are using this money for a nanny because you can’t afford the nanny but are planning a $$$$ trip to Fiji, then I’d put it in the 529. But it doesn’t seem like that’s the case.

Also, just curious for my own planning/knowledge. Why do the kids have a trust (beyond a 529)? Is this a living trust where if you die all your assets go into the trust or is there an ongoing trust fund for them? Because it seems odd that paying for a nanny is difficult but the kids have trust funds. I don’t understand trusts that well and would like to understand how normal people use them and if there is something we should be doing.

In our case the trust is a legal entity that owns the 529 and additional funds. We don’t have much in additional funds at the moment.

I know when you think trust fund you think wealth but in our case it’s a vehicle that will bypass probate if we both die. Then the money will go to my mom to care for the kids.

[sandandsea]

I see. That makes sense with a vehicle. Per google it doesn’t seem worth it if it’s only a 529. We have our home and accounts in a living trust for estate planning purposes but not the 529s. I think we were going to but it was nearly impossible to do after the fact so we left them.

And thank you for answering!! I learn so much here.

[waverly]

sandandsea, When we originally set it up we had more funds in the non 529 than in the 529 and over the years, the 529's have grown and we withdrew some of the other funds, so it is lower now.

We still plan to add more to the other fund, but I am thinking of maybe using it more for known medical bills. For example, 2K every 5 years for new hearing aids (Audiology is free through the school district), 1K every 1-2 years annually for heart testing.