Inherited IRA

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What is a Sprinkle Trust?

A sprinkle trust is a trust that allows the trustee to allocate or ’sprinkle’ trust income or principal among the members of a specified class such as children. Since the trustee can sprinkle trust income whenever needed to whomever need it, the sprinkle trust resembles what parents would have done for their children. 

Example of use of a sprinkle trust

A common use of a sprinkle trust is when there are young children and modest trust assets. A sprinkle trust would allow the trustee of the sprinkle trust to distribute income or principal needed by any of the children. For example, a child with medical needs may be given more of the income from the sprinkle trust because of his or her condition. 

Will the children be treated equally in a sprinkle trust set up?

There is no requirement that the children must be treated equally in a sprinkle trust set up. 

What happen to assets in the sprinkle trust when the children are grown up?

When children whose the sprinkle trust is for have grown up, the sprinkle trust ’s assets are usually divided into shares at the time the youngest child reaches a certain age such as in their twenties. 

What is the make-up provision of a sprinkle trust?

A make up provision is often included in a sprinkle trust. A make up provision in a sprinkle trust governs the distributions to the children prior to the time when the sprinkle trust assets are divided among them. It is possible to take distributions before the appropriate time but those distributions are ‘advancements’. Advancements are deducted from the child’s share are the time of the real distribution when all sprinkle trust assets are divided into shares for each child.