Trust Distribution Calculator

The “Shirtless to Shirtless” Curse: Why Most Trusts Fail (And How to Fix Yours)

There is a proverb that exists in nearly every language. In Scottish, it is “The father buys, the son builds, the grandchild begs.” In Japanese, “Rice paddies to rice paddies in three generations.” In America, we call it “Shirtless to shirtless.”

The statistics are brutal: 70% of wealthy families lose their wealth by the second generation. By the third? That number hits 90%.

Why? Because most families plan for the money, but they fail to plan for the flow.

They set up a Trust, throw their assets into it, and assume the lawyers handled the rest. But without visualizing the math of distributions, taxes, and inflation, a Trust is just a leaky bucket.

We built the Trust Distribution Calculator (above) to help you visualize your family’s financial future. But before you use it, you need to understand the three forces trying to destroy your legacy.

1. The “Incentive” Trap

The most common Trust structure is the classic “Age-Based Milestone.” You know the type: Johnny gets 1/3 at 25, 1/3 at 30, and the rest at 35.

The Problem: At age 25, Johnny is likely just starting his career. Suddenly, he receives a check for $2 million. Does he continue working the 60-hour weeks required to build resilience and character? Or does he buy a McLaren?

Money distributed too early acts as “economic outpatient care,” stifling ambition.

The Fix: Use the calculator to compare “Milestones” vs. the “Endowment Model.” The Endowment Model (used by universities like Harvard and Yale) distributes a fixed percentage (e.g., 4%) annually. This ensures the principal is never touched, allowing it to grow indefinitely while providing a steady “salary” for heirs.

2. The Tax Dragon (It’s worse than you think)

This is the secret most estate attorneys gloss over: Trusts have terrible tax brackets.

As an individual (in 2025), you don’t hit the top federal tax bracket (37%) until you earn over $600,000+ a year. You have room to breathe.

A Non-Grantor Trust? It hits the top 37% tax bracket at roughly $15,200 of income.

That is not a typo. If your Trust earns $50,000 in dividends this year and doesn’t distribute it to the beneficiary, the IRS takes nearly half.

The Fix: In the calculator, toggle the “Trust Tax Bracket” to “High.” Watch how fast the red bar (Taxes Paid) eats into the green line (Trust Balance). This visual proof is why many families opt for Grantor Trusts (where the parent pays the tax) to let the trust grow tax-free for the next generation.

3. The “HEMS” Safety Valve

Most trusts include a clause called HEMS: Health, Education, Maintenance, and Support.

While the calculator simulates mathematical distributions, HEMS is the human element. It allows a Trustee to break the rules if a beneficiary gets sick or gets into Harvard.

However, “Maintenance” is a slippery slope. Does maintenance mean “keep them out of poverty” or “maintain the lifestyle they grew up with”? If it’s the latter, a $10M trust can be drained in a decade.

How to Use the Calculator Above

Step 1: The “What If” Scenario (Tab 1) Enter your current Trust Principal (or expected inheritance). Set the beneficiary’s age.

Step 2: Choose Your Strategy (Tab 2)

• Milestones: This is the default. Look at the chart. Do you see the steep drops? Those are the moments wealth is transferred out of the trust’s protection and into the beneficiary’s personal name (where it can be lost to divorce or lawsuits).
• Endowment: Switch to “Endowment.” Notice the smooth line? That is generational wealth preservation.

Step 3: The Tax Stress Test (Tab 3) Set the “Trust Tax Bracket” to “High.” This simulates what happens if you leave income inside the trust to accumulate. The results are often shocking—the taxes paid over 30 years can sometimes exceed the original principal.

Summary: The Math of Legacy

A Trust is not a bank vault; it is a living, breathing financial engine. If you run it too hot (high distributions), it blows up. If you ignore the friction (taxes), it grinds to a halt.

Use the calculator. Run the numbers. And then, call your estate attorney and ask them if your current plan passes the “Shirtless to Shirtless” test.