Author Topic: Last Will / Testament / Trust  (Read 1612 times)

brightblade81

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Last Will / Testament / Trust
« on: August 29, 2017, 11:29:10 PM »
Hi,
We have 2 young boys (3 year old, 5 year old) and we are well on our way to becoming FI but we have not created a last will or anything yet!!  The main reason is the only guardian(my sister and her husband) are major major spendy pants.  Since our boys(and potentially future children) would inherit above $1M in assets, that is very scary for my sister to be managing all or a significant amount of it and what they might be tempted to do with it...my sister has said she would be willing to be their guardian.

In terms of potential other guardians, I have no other siblings, my wife is a only child (from China) although she has a cousin she trusts to raise them but she lives in China(we live in the Bay Area, CA)...Both our parents are fairly elderly so they wouldn't be good options.

So any advice on how to prepare in the event we pass away?
Is a trust where they would inherit some amount in their adult years be the best way to protect some of the money from being spent by their guardians?
Would you recommend talking to a lawyer?
What type of lawyer would you recommend seeing?

Our assets at this point in time:
Retirement accounts/pre-tax accounts(401K, IRA, HSA): $300K
Cash/Taxable stock accounts: $100K
3 properties, 2 SFR(rented out) and 1 Duplex(we live in one), total equity(if liquidated): $700K
My company's life insurance policy on me: $300K

My income: $140K
Wife's income: $50K
Rental income: $70K
Umbrella Insurance: $1M

My wife is 33 and I'm 36, we both are very healthy.

Properties value:
Duplex(Alameda) - $1M (once I finish remodeling the primary house we occupy, this will be worth $1.2M+)
SFR(Concord) - $540K
SFR(Martinez) - $350K

Properties current remaining balance on mortgages:
Duplex(A) - $650K(4.25%) (PITI is $4350) (purchased for ~$775K, originally renovation loan for additional $75K, although didn't use full budget, only used $50K)
SFR(C) - $300K (3.5%) (PITI $1800) (purchased for $280k...HELOC is $100K, mortgage is $200K)
SFR(M) - $98K (4.25%) (PITI + HOA $1200) (purchased for $150K, this is the one my wife really really wants to sell because she sees all that money locked up...her plan?  Let it sit in a bank account.)

All the units are rented out, rent per month(we do not pay any utilities for tenants):
Duplex(A) - $1900 (1bed/1bath) (primary residence portion is 3bed/2bath)
SFR(C) - $2500 (4bed/2bath)
SFR(M) - $1540 (2bed/2bath) (haven't increased rent consistently, long term tenant 5.5 years, probably could rent out for $1900/2000, never had any issues)


Thank you!
« Last Edit: September 06, 2017, 05:27:37 PM by brightblade81 »

PNW

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Re: Last Will / Testament / Trust
« Reply #1 on: August 29, 2017, 11:32:57 PM »
Definitely questions for a lawyer and not for laypeople on a forum. Ask around in your area to see if someone has a recommendation for a good wills & estates / tax practitioner, or do some google searching.

Finances_With_Purpose

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Re: Last Will / Testament / Trust
« Reply #2 on: August 29, 2017, 11:40:41 PM »
Definitely questions for a lawyer and not for laypeople on a forum. Ask around in your area to see if someone has a recommendation for a good wills & estates / tax practitioner, or do some google searching.

Yes.  I was posting to say exactly that.

Ask your attorney, because you may want to consider a trust.  It could pay out annual benefits to kids/guardians until 18 or so, then pass the bulk on as they get older.  Can give more for edu, so on.  I see you already mentioned that - you're on the right track.  You'd need to figure out who would administrate it (sounds like you have the beginnings of some options).  Definitely consult an attorney about it all. 

You need legal advice, which none of us here can really give. 

See a wills/trusts/estates lawyer in your state. 

Another tip, in general: only use an attorney who's recommended by an attorney you already know and trust. 

koshtra

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Re: Last Will / Testament / Trust
« Reply #3 on: August 29, 2017, 11:44:26 PM »
Definitely questions for a lawyer and not for laypeople on a forum. Ask around in your area to see if someone has a recommendation for a good wills & estates / tax practitioner, or do some google searching.

+1

Yes, I agree, this is not a do-it-yourself job. I suspect what you'd want would be some kind of living trust, with the capital (at least) tied up until the kids are (at least) of age. I think "estate planning lawyer" is what the people who do this are called?
« Last Edit: August 29, 2017, 11:48:04 PM by koshtra »

sobezen

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Re: Last Will / Testament / Trust
« Reply #4 on: August 30, 2017, 02:09:42 AM »
You need an estate planning attorney licensed in CA.

The following are some suggested estate planning attorneys I already interviewed. 
-  Ingrid Berger  http://www.bergernicholson.com/
-  Connie Yi  http://www.connieyilaw.com/
-  Faye Lee  http://members.calbar.ca.gov/fal/Member/Detail/164631
-  Jamay Lee http://www.bdlawinc.com/attorney-profiles/jamay-lee

Feel free to PM me for more details.  Good luck!

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GizmoTX

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Re: Last Will / Testament / Trust
« Reply #5 on: August 30, 2017, 03:24:22 AM »
You do want a trust for your children, since they can't inherit while minors, but it could be created by your wills (testamentary trust) rather than a trust you fund now. You absolutely don't need to make your guardian your heir or the manager of your children's money, although you should consider some compensation to give them added incentive to take good care of your children. You should name a second or third guardian in sequence in case your first choice can't serve, and do the same for your trustee. Your final trustee could be a bank that specializes in this; they'll charge, but not unless they get called to administer your trust. While not ideal, grandparents could still be better than other choices. You can also update your guardian & trustee designations as your children get older. You want an estate attorney to set up your wills & define the trust. One key provision in the trust language is to use the phrase "may distribute" rather than "shall distribute" for purposes of health, welfare, support, or education because it will not force your trustee to spend down the trust. I'm not a lawyer but we opted to set up an irrevocable trust for our child(ren) which continues until he turns 35.

brightblade81

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Re: Last Will / Testament / Trust
« Reply #6 on: August 30, 2017, 10:48:21 AM »
Thank you for all the replies and advice, I figured this wasn't a DIY thing but wanted to check.  I've reached out to a lawyer I trust plus I'll check out the referenced ones.

sobezen

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Re: Last Will / Testament / Trust
« Reply #7 on: August 30, 2017, 10:55:31 AM »
OP you probably will not want minors to inherit outright until a specified age too.  To help protect your loved ones a trust either revocable or irrevocable can be customized by the attorney to cover this.  The trust can be drafted to specify how much you want to cover education essentials, housing, living expenses, charity, as well as include specific instructions on how and when you want assets to be distributed.

Since you raised the concern involving your wife and the legal guardians handling the finances, a solution to this might be using what is known as a 'private fiduciary'.  This individual will help manage the distribution of the financial assets to your beneficiaries in accordance to your instructions.  A private fiduciary compensation varies but typically is on a percentage of assets under management, (approx 1%). 

Separately you should consider purchasing additional term life (TL) insurance outside of the insurance offered by your employer.  Owning a separate TL policy will follow you in the event you leave the employer.  The exact amount typically ranges between ten to 15 times your base pay.  You do not list your age, health, or income but all of these are important factors when considering obtaining TL insurance; generally the healthier you are the more affordable the premiums.  Your health is determined by undergoing a health check and blood draw during the underwriting process by the insurance carriers.  Additionally, since you sound like the primary income earner, strongly consider buying disability insurance (DI).  DI is a living benefit to you and is a partial replacement of income lost due to illness or injury.  TL is a death benefit to your beneficiaries only.  TL usually is the cheapest type of life insurance staying in effect for a specified period or until a certain age of the insured. TL pays the face amount of the policy when the insured dies within the coverage period (term) but pays nothing if they outlives it.  I would even suggest you consider adding umbrella insurance (UI) if you do not already have it bundled with your home and auto policies.  UI is an added layer of protection purchased on top of other policies; it provides broad coverage for protecting assets and income of individuals from claims originating from risk situations not covered in their primary insurance policies (e.g. rental properties, auto accidents).  UI is typically inexpensive and sold in increments of $1 million.

Lastly, after you complete researching local CA estate planning attorneys you will want to meet them.  Confirm the initial meeting is complimentary.  Also ask how many trusts have they created, and ask about their experience involving litigation, probate, and family law.  The attorneys should also help educate you generally on estate planning and the trust drafting  process.  Make sure to ask upfront how the attorneys bills (flat rate, hourly, etc) and determine if their services meet your unique needs before retaining.  Feel free to ask them for references too.  Hope this helps.  If you have questions PM.
« Last Edit: August 30, 2017, 12:54:22 PM by sobezen »
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Bicycle_B

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Re: Last Will / Testament / Trust
« Reply #8 on: August 30, 2017, 11:08:12 AM »
Love the replies on this thread!

I suggest that during or after the process of setting up the trust or whatever vehicle you use to keep the "guardian" hands off the money management, discuss with the "guardian" relative how these arrangements are going to go.  My observation of spendy people is that you need both a verbal discussion and written commitment/instruction that the money is provided for the kids' care, not for spending by Spendy Relative as compensation for care. 

brightblade81

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Re: Last Will / Testament / Trust
« Reply #9 on: August 31, 2017, 04:58:59 PM »
Sobezen,
Thank you for the advice.  In general I've avoided any type of life insurance simply because we have a high savings rate and if I were to pass away, my wife's income and the rental income covers all their expenses with a small savings with the cash to smooth any bumps.  Although she has no interest in having rentals so she would probably sell them all off or at a minimum find a property manager (I currently manage them).

I got a recommendation for a lawyer, I will contact him and check out a few you recommended near us, thank you.  I will also follow up with this based on what we end up doing.


I did update the top post with some information you said was missing, here it is too:
My income: $140K
Wife's income: $50K
Rental income: $70K
Umbrella Insurance: $1M

My wife is 33 and I'm 36, we both are very healthy.
« Last Edit: September 01, 2017, 10:06:05 AM by brightblade81 »

sobezen

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Re: Last Will / Testament / Trust
« Reply #10 on: September 05, 2017, 03:08:48 PM »
OP more questions:

What is the market value for each of your properties?  What are the balances on the three remaining mortgages?  Also in the event you prematurely leave are you 100% sure your wife does not want to keep all three properties so she has passive income for retirement, instead of selling one or both?  One thing that really helped me visual the unknown, involved imagining situations 10, 20, and 30 years into the future and how I wanted to protect and help my loved ones.

One of the reasons to have insurance is to cover your mortgage liabilities so your loved ones do not have to liquidate and sell assets during an already traumatic time.  The cost to cover the mortgages so all three properties are paid off is relatively affordable.  In addition to helping pay the mortgages on your home, insurance will cover the two investment properties (which you may or may wish to leave to your two children).  Also, the insurance face amount can help pay your children's college education (if you wish to cover), plus leave your wife with what amounts to your final paycheck.  It is important to remember, while your current savings rate might be high, what happens when your income evaporates? 

Now regarding your umbrella insurance, in my opinion, you have far too little.  Considering you have three properties in CA, plus your retirement accounts, and your income level, you should conservatively have at least 2.5 million or more in umbrella insurance.  Hope this helps.

« Last Edit: September 06, 2017, 03:15:13 PM by sobezen »
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brightblade81

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Re: Last Will / Testament / Trust
« Reply #11 on: September 06, 2017, 05:26:51 PM »
This is turning into a full case study :)  At the bottom are the property information you asked.  At this point in time, my wife brings up selling one property about 1-2 weeks, the only reason we haven't is because I remind her every time how much we'll have to pay in taxes...the duplex is our latest purchase earlier this year, she was adamant about buying a SFR and not a duplex but showing her the math convinced her it was a good idea.  The only exception is our Concord house, that is her dream retirement house so she'll never sell that one.  She is the type of person who prefers to have EVERYTHING as cash in the bank, doesn't want to do 401K, IRA, HSA, etc (I ensure she contributes to her 401K, although if I were to die, she'll change this right to 0%)  She prefers to have it very very simple and no work, so that is why I'm confident she'd sell them, unfortunately I suspect her cousin may try and take advantage of her to sell the properties to him...he owns 15+ properties in the bay area and is always looking for a deal.

As long as the units are not vacant, they all cover the mortgage and plus some, one unit hasn't been vacant in 5.5 years, the other ones its too early to tell, but its the Bay Area, things rent out fast from my experience, so far...  Our goal is to be FI in ~5 years so our savings rate is over 50% although my wife intends to continue working.

So how did you come up with the $2.5M umbrella policy?  My lawyer(for real estate law) is the one who recommended the $1M umbrella policy, although I don't recall if I went over all the properties with him or only the Duplex(the duplex was my main reason for seeing him).

Properties value:
Duplex(Alameda) - $1M (once I finish remodeling the primary house we occupy, this will be worth $1.2M+)
SFR(Concord) - $540K
SFR(Martinez) - $350K

Properties current remaining balance on mortgages:
Duplex(A) - $650K(4.25%) (PITI is $4350) (purchased for ~$775K, originally renovation loan for additional $75K, although didn't use full budget, only used $50K)
SFR(C) - $300K (3.5%) (PITI $1800) (purchased for $280k...HELOC is $100K, mortgage is $200K)
SFR(M) - $98K (4.25%) (PITI + HOA $1200) (purchased for $150K, this is the one my wife really really wants to sell because she sees all that money locked up...her plan?  Let it sit in a bank account.)

All the units are rented out, rent per month(we do not pay any utilities for tenants):
Duplex(A) - $1900 (1bed/1bath) (primary residence portion is 3bed/2bath)
SFR(C) - $2500 (4bed/2bath)
SFR(M) - $1540 (2bed/2bath) (haven't increased rent consistently, long term tenant 5.5 years, probably could rent out for $1900/2000, never had any issues)

martyconlonontherun

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Re: Last Will / Testament / Trust
« Reply #12 on: September 06, 2017, 08:02:13 PM »
You aren't very clear on if you even want you sister as the guardian. Unless you love your money that much, the fact that you are considering other options is a red flag. Just make your your kids up with a good family, worry about the money later.

brightblade81

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Re: Last Will / Testament / Trust
« Reply #13 on: September 06, 2017, 11:00:52 PM »
Out of all our options for guardians, I prefer my sister the most, her parenting style is similar to mine (except for the spendy pants part) but I wouldn't want her or her husband(who is even more "spendy") to manage their entire inheritance, I suspect there are some grey areas they could take advantage of. For example, now we went from 3 family members to 5, we need a new bigger car with 4 wheel drive (I'm not exaggerating, they own 2 Ford Explorers with 4 wheel drive...the bay area has the horrendous roads I guess(sarcasm))...we need to buy a new big house to fit everyone.  They have negative net-worth and are our same age(mid-30s).  I've tried to turn them onto MMM, my sister has partially taken it in and made some progress but her husband(not employed) has not and spends a significant amount.  So that is my huge concern.

The next best option are my parent-in-laws, although they are in their mid-60s although in fairly decent health though they only spend 6-8 months per year in the USA and speak no english.  They follow our savings habit, they probably would move the kids to China and refuse to use any of the inheritance and insist on only using their own money...although their parenting style is completely the opposite, oh, your crying, here, take what ever you want, please stop crying.  The kids are trained, if grandma(laolao) says no, start crying.  I've tried to explain to them not to give-in to the kids and set some ground rules but it hasn't worked over the last 5 years.

My parents are not an option, my mother is in very poor health and my father doesn't want to take care of them (plus my sister learned her spendy habits from them...).

Last but not least, I think my wife's sisters in China would be good options but I'm not sure how that could work.

Anyways I just want to make sure the kids reach adulthood with fair amount of the inheritance remaining so they can choose to make the mistake of blowing it all or not...Once I interview the lawyers, I'll have a better picture.

Imma

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Re: Last Will / Testament / Trust
« Reply #14 on: September 07, 2017, 01:46:31 AM »
I think in a situation like this, it's almost always better to split the responsibility for raising the children and the responsibility of looking after their inheritance. In the best case scenario, both your families would be involved somehow. First of all, it minimizes the real risk that someone would spend a lot of money on themselves rather than on the children, secondly, it would also prevent the hard feelings some relatives might have towards others, whether that's based on reality or not. If your sister is spending a lot of money, for example, your wife's family might think they're dipping into your chilldren's inheritance and start hating them for that, even if your sister is only spending her own money. I think it's better to keep everyone involved, if possible.

I think you can leave fairly detailed instructions for the people looking after your children's inheritance and I would do that. I would decide about a certain yearly lump sum to compensate the carers of your children for things like utilities and grocery bills. I think that's entirely reasonable if you're leaving the amount of money you are leaving your children and it wouldn't touch the principal.

On top of that, you could designate a certain amount of money for special costs for your kids, that need to be approved by the people handling the inheritance. Think sports, music, education. Then I'd reserve a certain sum for college when they turn 18 and maybe release parts of the inheritance gradually when your kids are 25-30. You could even include a clausule allowing your children to use the principal for the purchase of their first home. Please also look into how this works tax-wise, because I used to know someone who'd received a large inheritance that he couldn't touch yet, but had to pay taxes over every year. It left him with huge debts. You need to make sure you get a good attorney who knows how to handle these things.

We don't have children yet, but we are in roughly the same situation. My SIL and her husband are the only realistic option to be the legal guardians, but we don't agree with their spending habits. To avoid them spending it, and to avoid our relatives or kids thinking they spent it, we will ask my mustachian uncle, who FIRED young, to be responsible for the money side.

sobezen

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Re: Last Will / Testament / Trust
« Reply #15 on: September 08, 2017, 12:36:57 PM »
OP in your situation it is logical to divide the responsibilities for your family in advance.  As previously mentioned working with a estate planning attorney will help you craft a trust reflecting your wishes detailed with clear instructions.  Do not underestimate how powerful a tool and resource this legal document is for you.  The majority of your final financial and health concerns can be addressed with a trust.  For example, whom do you want to make medical decisions on your behalf if you are incapacitated?  And to what extent do you want to receive medical treatment if doctors deem your condition fatal?  An advanced medical directive in a trust will address this.  Do you to prevent fiscally irresponsible individuals from managing or stealing assets that you want to go to your beneficiaries?  A trust will handle it.  Do you want to shield the public from knowing your assets?  A trust will do this.  Also a trust can do so much more.  A trust enables you to control the timing and conditions whereby money to your beneficiaries is distributed.  For example, if paying for your children's full education is important to you, you do not need to specify the amount reserved for education costs; however, you can stress the primary purpose for distribution to children is to first cover all expenses related to education.  Distributing funds to cover living expenses is standard and typically includes shelter, food and clothing.  Also you can specify how much money for your children's non-education is distributed to each and the timing.  As an example, you may wish to establish milestones or markers for specific distributions; so when a beneficiary gets married, makes their first home purchase, or has a child.  You can even correlate the distributions to specific ages, such as at age 30 $250k goes to a beneficiary for their first home purchase, etc.  Keep in mind, how, when and under what conditions (if desired) is something you can specify in the trust.  You can customize your trust to be as restricting or minimal as you see fit; discuss the pros and cons for different ideas with your estate planning attorney.

Furthermore as previously mentioned, you can further protect your beneficiaries and others from directly handling or mismanaging your assets by using a 'private fiduciary (PR)'.  A PR will not be able to use the funds that is not in accordance with your wishes.  The PR is responsible to paying specific taxes required.  As such, you do not need to worry about greedy spendypants relatives accessing the monies because a PR is only allowed to distribute to your designated beneficiaries.  For greater details about PRs and the benefits for retaining one, ask your estate planning attorney.  PM if you need referrals in CA.  Also to clarify, in my opinion regarding creating the trust, you do not need to consult with your beneficiaries prior to the creation or finalized version.  The trust is ultimately your final wishes.  Also considering your wife is extremely conservative with finances (likes cash portfolios) and prefers a less active role, retaining a PR will greatly help her and your children.  If you consider a PR, ask them what their services cover, how they are compensated, their tax background, and to explain their role limitations.  For a PR it is prudent to retain someone who is younger than you and your wife.  Ultimately, you want the PR to outlive you and your wife, so the PR can manage the trust under worst case scenarios for your children until you designate they receive the remaining assets.

Your high savings rate is important, however, it is completely moot if you prematurely expire.  That is why it is essential to establish strategies addressing how your final medical and legal wishes can be fulfilled.  As previously mentioned, sure you wife can sell one or both of the rental properties.  But in doing so, the trade offs include the passive income generated (might help fund your children's education) and associated tax benefits are eliminated.  Beyond these concerns, wouldn't you want to keep the two rental properties you worked so hard to obtain in the family, so that one day the properties can be given to your children?  Imagine the big picture and what you want to happen 20, 30 and 40 years from now.  Sometimes simplifying things for your beneficiaries is good, but sometimes is also prudent to consider dynasty planning when your beneficiaries are unwilling or incapable of doing so themselves.

Establishing suitable legal guardian(s) is something you and your wife need to agree upon.  I feel selecting a legal guardian is far more difficult than selecting an estate planning attorney.  Selecting legal guardians is an emotionally charged decision and is particularly challenging because you need to select people you feel are responsible to protect and teach your children good values that are most aligned with your own.  If you both feel your sister might be suitable, consider asking her about it privately to see if she is willing to help.  But, this does not mean you need to allow her or any guardian to control the financial side.  You can also select other guardians in the future, if you feel differently or if you find someone whom you trust more.  It is essential to keep your trust updated and properly fund it.  So if circumstances change, remember to update the trust accordingly.

I feel your real estate attorney is grossly overlooking protecting you from risk exposures, specifically litigation.  You are the owner of three properties in CA and two of your properties are rentals.  You do not indicate if these are rent controlled but suffice to say, all it takes is one accident on or around your properties and you are exposing your entire assets to litigation.  I have worked with families owning rental property who were dragged by tenants into litigation and the owners lost millions and some, even lost the property itself.  The main reason is during litigation it involves jurors, and many are extremely biased and award asinine damage amounts that typically favor renters and punish owners.  So, as a property owner possessing higher umbrella coverage is prudent to help protect you and your beneficiaries.  A 1 million umbrella is far too low for you.  Lets do a simple breakdown of your net worth.  Your three property values currently total over 2 million.  Add your cash reserves plus your various retirement accounts, and you are at 2.4 million.  Note your active income is not even included and it can be factored against you by jurors.  Bear in mind, when jurors award damages it often is not logical or reasonable.  Are you willing to expose your net worth during litigation to the standards of others?  Do you still feel you are sufficiently covered?  Mitigating your risk exposure takes a comprehensive financial outlook.  In my experience liability protection and risk reduction are very different perspectives that many real estate attorneys do not consider primarily because they do not possess Certified Financial Planning (CFP) and more importantly litigation backgrounds.
« Last Edit: September 09, 2017, 12:22:23 PM by sobezen »
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Chrissy

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Re: Last Will / Testament / Trust
« Reply #16 on: September 10, 2017, 03:36:12 PM »
My husband felt my sister and her husband should raise our children using their own money, out of the goodness of their hearts, despite the fact that they have their own children.  Logic need not apply.  He was adamant that they have NO ACCESS to the trust.  I decided I was okay with this, and just didn't mention to him that they would be able to claim social security.  Be sure to take that into account.

I think they can only claim one parent's benefit.  For us, that would be $4,600/mo for two kids.

sobezen

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Re: Last Will / Testament / Trust
« Reply #17 on: September 11, 2017, 11:56:02 AM »
@ Chrissy:  Your husband is rather short-sighted and may not understand the importance of proper estate planning.  In the worse case scenario when both parents pass prematurely, all of the accumulated assets end up somewhere; either you select the distribution in advance or the government will do so for you during the Probate process.  Do you both want the assets to go the the government?  We all know how efficiently the government spends our hard earned monies don't we?  *sarcasm intended*  Wouldn't you want all of your assets dedicated to benefiting your children and their actual upbringing, instead of establishing individual trusts for the children that they access in the distant future?  If your husband is uneasy with your children and/or your sister accessing all of the assets, have you examined using a private fiduciary?

Personally I'd happily give my child's guardian claim to SS; this is an extremely small price to pay to express gratitude and to acknowledge the guardian's help.  For example for the OP brightblade81, giving his sister $5,000/mo versus access to nearly 2.5 million is in my opinion, a no contest.

Also, has your husband actually considered the impact of forcing your sister to fully pay for raising your children?  Could resentment develop?  Might your sister or her own children treat yours differently?  You never know until the situation is actually unfolding when you sister assumes the role of guardian, and by then, there is literally nothing either you or your spouse can do.  As you stated your sister has her own parental responsibilities which need to be taken into consideration.  If your husband remains unreasonable, do you have separate accounts?  You might want to consider designating her the beneficiary of your assets to help ease the financial burden just in case.  Good luck.
« Last Edit: September 11, 2017, 11:05:03 PM by sobezen »
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ReadySetMillionaire

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Re: Last Will / Testament / Trust
« Reply #18 on: September 11, 2017, 01:59:51 PM »
There should be a sticky at the top of this forum that simply says, "Yes, You Should Retain an Attorney for Estate Planning."
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Re: Last Will / Testament / Trust
« Reply #19 on: September 11, 2017, 02:36:25 PM »
There should be a sticky at the top of this forum that simply says, "Yes, You Should Retain an Attorney for Estate Planning."

+10!

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Re: Last Will / Testament / Trust
« Reply #20 on: September 11, 2017, 02:42:18 PM »
It's important to know what the rules are for dying intestate where you happen to live before you bother to consult a lawyer.  Generally this is easy to find, and well spelled out.  You might find that there's no need to do anything at all . . .

sobezen

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Re: Last Will / Testament / Trust
« Reply #21 on: September 11, 2017, 03:57:05 PM »
It's important to know what the rules are for dying intestate where you happen to live before you bother to consult a lawyer.  Generally this is easy to find, and well spelled out.  You might find that there's no need to do anything at all . . .

For the OP, they are in CA so off to Probate.

Ref:  https://www.thebalance.com/dying-without-a-will-in-california-3505046
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Chrissy

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Re: Last Will / Testament / Trust
« Reply #22 on: September 11, 2017, 04:47:55 PM »
@ Chrissy:  You husband is rather short-sighted and may not understand the importance of proper estate planning.  In the worse case scenario when both parents pass prematurely, all of the accumulated assets end up somewhere; either you select the distribution in advance or the government will do so for you during the Probate process.  Do you both want the assets to go the the government?  We all know how efficiently the government spends our hard earned monies don't we?  *sarcasm intended*  Wouldn't you want all of your assets dedicated to benefiting your children and their actual upbringing, instead of establishing individual trusts for the children that they access in the distant future?  If your husband is uneasy with your children and/or your sister accessing all of the assets, have you examined using a private fiduciary?

Personally I'd happily give my child's guardian claim to SS; this is an extremely small price to pay to express gratitude and to acknowledge the guardian's help.  For example for the OP brightblade81, giving his sister $5,000/mo versus access to nearly 2.5 million is in my opinion no contest.

Also, has your husband actually considered the impact of forcing your sister to fully pay for raising your children?  Could resentment develop?  As you stated your sister has her own parental responsibilities which need to be taken into consideration.  If he remains unreasonable, if you have separate accounts you might want to consider designating her the beneficiary of your assets to help ease the financial burden.  Good luck.

To clarify, we have wills, trusts, and POAs.  We laid out a distribution plan based on ages of the adult children in consultation with the lawyer and my mother, who was the trustee for my cousins' trust when they were underage.  My sister and her husband are guardians.  We have back-up guardians listed, too.  No one has access to the trust, but all parties are upper-class and very wise with money.  My husband forbade it access to the trust for living expenses.  I couldn't budge him on it.  BUT, the guardians would have access to $4,600/mo from social security, which is not a paltry sum.

sobezen

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Re: Last Will / Testament / Trust
« Reply #23 on: September 11, 2017, 05:00:10 PM »
@ Chrissy: Not to get too off topic but are you actually ok with leaving the full financial and emotional responsibility for raising your children to your sister without helping her?  You do not detail if your children are minors but if they are, selecting someone as a guardian but not providing any assistance whatsoever is not prudent.  Even if your household dynamics involve your husband being the sole decision maker for all of the finances, wouldn't you want to leave something versus nothing, to your sister to help care for your children?  In my opinion helping your sister financially if she does end up acting as the legal guardian is not strictly about money, it demonstrates consideration, respect, and appreciation from both of you towards her and her own immediate family.  If you both feel otherwise, more power to you, I hope it works out for your family.
« Last Edit: September 11, 2017, 11:06:13 PM by sobezen »
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brightblade81

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Re: Last Will / Testament / Trust
« Reply #24 on: September 11, 2017, 06:03:55 PM »
FWIW, I agree with Sobezen, I don't want to give $0 to the guardians, raising children is a lot of work and there are a lot of expenses, health care, clothes, food, etc, etc. I just don't want them to "win" the lottery and what that entails....too many people suddenly get a large sum of money and then next thing they know, they are broke again.  Although I think there was a misunderstanding, Chrissy said her husband WOULD give her sister access to claim the SS for the kids.  Although if thats the sole source, does SS track with inflation typically?  At least in my case, my kids are very young still, with well over a decade before they reached 18 if we were to pass away in the near term.

sobezen

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Re: Last Will / Testament / Trust
« Reply #25 on: September 11, 2017, 07:02:44 PM »
@ brightblade81:  Chrissy said she did not mention to her husband "... that [her sister] would be able to claim social security."  It sounds more like an omission of information and as such her husband is not aware how the SS funds might be distributed and to whom.  Yes SS can adjust for inflation and cost of living aka COLA; but the adjustments are not consistent because some years COLA is minor, and during other years there are no increases.  From a retirement planning perspective do not count on COLA to bridge inflation gaps especially if you are still working and growing your net worth.

For your own situation, your children are minors which is why I suggest the option of retaining a private fiduciary to eliminate any family or legal guardians from mishandling and mismanaging the assets.  A trustee can still mishandle the distribution of assets for their own personal gain.  Whereas retaining a private fiduciary eliminates the risk of anyone accessing or obtaining a windfall and then squandering it, instead of properly distributing the assets per your wishes. 

Also I feel a larger risk exists for many people who establish trust funds for their children and that is without proper guidance when the child legally reaches adulthood, they may still squander the assets.  Parents can be affluent and financially savvy, but the knowledge and values do not transfer automatically to children.  There is no full proof way to ensure your dependents will possess or demonstrate fiscal responsibility.  In the end, I feel all you can is do is teach and demonstrate all the values you want your children to possess while you still have time.  Then hope for the best and let the chips fall where they may.  YMMV.

« Last Edit: September 12, 2017, 12:33:20 PM by sobezen »
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NeonPegasus

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Re: Last Will / Testament / Trust
« Reply #26 on: September 11, 2017, 07:13:11 PM »
As others said, hire an estate attorney.

When we prepared our wills, we designated DH's brother as guardian, with my brother as a backup. The attorney suggested that we appoint someone else as a trustee. The trustee ultimately controls the money. The attorney explained that this will not only protect the money but protect the guardian from allegations of mishandling the money from the children down the line. We appointed DH's sister, who is not local but has kids so we figured she'd have a good handle on what was worth spending money on. 7 years later, we changed our wills to switch the guardian to my brother as DH's brother hasn't been very involved with our kids. My brother and his wife love to travel and have a small RV that they take everywhere. I let him know that upgrading to a larger RV so they could take our 3 girls traveling was a good use of the money. They are reasonable with their money and lifestyle and thrusting 3 kids into it would require them to sell their place and get something bigger as well as a bigger vehicle. I don't want my kids to be a burden and I have ensured there will be enough money so they won't be.

The estate attorney walked us through the decision process for deciding when our girls would inherit the remainder of the estate. The attorney said most people do it in two stages - one at 25 and one at 30. DH and I decided to delay that by 5 years so they'd receive at 30 and then 35. We did that to ensure they'd have to make something of their lives rather than be trust fund kids.

The attorney also helped us with other decisions to set up Advance Directives for Health Care and Financial Powers of Attorney. It wasn't cheap but it was worth the money to have that guidance and to know it was done right.

GuitarStv

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Re: Last Will / Testament / Trust
« Reply #27 on: September 12, 2017, 07:42:43 AM »
It's important to know what the rules are for dying intestate where you happen to live before you bother to consult a lawyer.  Generally this is easy to find, and well spelled out.  You might find that there's no need to do anything at all . . .

For the OP, they are in CA so off to Probate.

Ref:  https://www.thebalance.com/dying-without-a-will-in-california-3505046

Yeah  . . . see, that's actually close enough to what I want done with my money that there would be no reason to draw up a will.

Chrissy

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Re: Last Will / Testament / Trust
« Reply #28 on: September 12, 2017, 11:19:35 AM »
@ Chrissy: Not to get too off topic but are you actually ok with leaving the full financial and emotional responsibility for raising your children to your sister without helping her? 

Wow.  So... much... assuming.  I was really just trying to point out that the potential social security benefit should be taken into account, and had no intention of going into our own details.  But, since sobezen is so invested...  She will not be left without assistance, she and her husband will get $4,600/mo which will be quite helpful.  Not quite as helpful as ~$7,000/mo, which is what I would've preferred, but I viewed the amount as a compromise (though not one my husband knew he was making).

My sister knows that they will only get the social security.  She's fine with it.  Because, of course I discussed the pertinent details with her as part of asking her to be guardian.  If all parties involved agree with the arrangement, I fail to see why anyone else should have their panties in a TWIST.

You do not detail if your children are minors but if they are, selecting someone as a guardian but not providing any assistance whatsoever is not prudent. 

As mentioned, $4,600/mo.

Even if your household dynamics involve your husband being the sole decision maker for all of the finances, wouldn't you want to leave something versus nothing, to your sister to help care for your children?

Yet again not nothing:  $4,600/mo.

If your husband remains unreasonable, do you have separate accounts?  You might want to consider designating her the beneficiary of your assets to help ease the financial burden just in case.  Good luck.

I admit to omitting mention of social security benefits to my husband so he wouldn't try to lock them away in the trust.  I did all the research and work regarding estate planning, but, at the last minute, he wanted final judgement.  Let's say we silently disagreed on this division of labor.  I don't feel guilty about having knowledge he could've readily gained had he lifted a finger during the process.  However, now that the agreement is finished, I certainly wouldn't go behind his back and designate other beneficiaries to my accounts to keep them from being part of the trust.  That would be a huge betrayal.

sobezen

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Re: Last Will / Testament / Trust
« Reply #29 on: September 12, 2017, 12:32:21 PM »
@ chrissy:  Thank you for raising the SS benefits as it relates to a trust and guardianship.  I apologize if I come across as too concerned.  My comments and questions to you were in response to the tone used and information you provided.  I find it is only natural for people to raise questions if there is limited information presented.  Thank you for elaborating more about your situation it helps provide context. 
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lexde

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Re: Last Will / Testament / Trust
« Reply #30 on: September 12, 2017, 12:45:11 PM »
You need what is called a spendthrift trust. You can pay out $x per month/year to the kids and same for guardians if you want. They can't touch the trust res (all the funds) until some condition is met, either a number of years, or kids' age, or whatever.

This is definitely something you want to do sooner rather than later to be sure your wishes are taken into account. I'm an attorney but you need to talk to someone who can look at your full situation. If you tell me your state I can see if I have a referral for you.