Gifts With Strings Attached
Paul Merriman wanted to leave money to his grandson. But while the 55-year-old Seattle investment adviser liked the idea of one day freeing 5-year-old Aaron from financial insecurity, he was also afraid of spoiling the boy. So Merriman set up a trust with a tax-free gift of $10,000 that his grandson can't touch until the ripe age of 65. Each year after that, Aaron will be able to withdraw 7% of his inheritance, with the remainder going to a charity of his choice when he dies. "It's not going to make him rich," Merriman says of the trust, which will nonetheless reach $4.9 million in 60 years if it compounds at 10% a year. "If he wants to be rich, he can do that on his own."
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