Author Topic: Estate, Will and Trust planning  (Read 1690 times)

BTDretire

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Estate, Will and Trust planning
« on: September 13, 2018, 09:18:45 AM »
I'm getting serious about setting up a meeting with a trust planner and want to put down some ideas
as to how to divide our nest egg. We are in our early 60's.
 We have two kids one is single a son and the other a daughter is married for the second time.
Marriage is less than a year old, but we like the guy and he is a worker, so far it looks good.
He has a 10 year old son, who they now have custody of thanks to my daughters fastidious* record keeping.
 Between my wife and I, who ever dies first the other gets everything, when that person dies, then come the tough decisions.
 I expect to subtract about $300k from my daughters part because we will have paid her Dental school tuition.
 I expect tat $300k could easily double if it was invested, but I don't think I care to insert that calculation.
The rest of the nest egg would go to my son.
 Revocable, non-revocable, anything else I need some understanding of so I can at least ask the right questions.
Any feedback is appreciated.

*regarding the fastidious records, my daughter kept a file of everything they spent, every dental and doctor appointment she made, kept and paid for, the mother would not give up the medicaid card to them to cover bills.  She had a record of all the school he missed, who did all the travel to pick up and drop off the son.
 And much more.
 When they went to a lawyer to try to get custody, the lawyer started asking questions and my daughter pulled out her file, he started looking through it, he looked at her and said Wow, then looked at him and said she's a keeper!
 OK, just a proud papa brag. :-)

mxt0133

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Re: Estate, Will and Trust planning
« Reply #1 on: September 13, 2018, 09:47:33 AM »
Estate planning is more than just allocating who gets what, which in itself is not straight forward as you have to plan for various scenarios.  Such as what if there are no living heirs or you and your wife survive them all.  It also includes structuring assets to avoid probate and minimizing tax liabilities.  Then there's the health care directives, power of attorney in case one or either of you become incapacitated.  Also look up letter of intent that is a supplement to a Will.

There are lots of sites that will help you review the various items and scenarios you need to have through through to minimize the time you spend with a estate lawyer, they do charge by the hour.


mbl

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Re: Estate, Will and Trust planning
« Reply #2 on: September 13, 2018, 09:57:02 AM »
1.Can you assign percentages for the beneficiaries for your IRAs?   
Let's say that as of today you have $1,000,000.

Split evenly would be 500k to each.
Take out her 300k, leaves her 200k and son 800k.

 200k to daughter  20%
 800k to son           80%

2.Anything else, like brokerage, bank accounts, et al,   if available, can have a transfer on death if possible and would be split evenly if the IRAs cover it as in the example above.  TOD seem to be one of the easiest ways to pass non-retirement accounts.

3. Having a trust does require some review of the language of the trust when the time comes.

4.  Sometimes having accounts held jointly between you and DS and DD can be a good strategy.  The drawback can be that they lose the step up basis when you pass as they were already owners.    While you're alive you pay the taxes so they don't incur that but later it operates as they were part owners.
This strategy works well for instance if the holding are muni bonds.   They are FEd tax free and depending on your state of residence and the origin of the bond, can be state tax free as well.   
A joint account just requires submission of a death certificate.

Obviously, check with your FA, attorney, accountant, banker and brokerage people to see if any of this makes sense.

My goal is to avoid probate.   So any assets have to be able to pass by TOD,  beneficiary designation,  trust,  joint tenancy and any other way, some of which I haven't listed.

profnot

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Re: Estate, Will and Trust planning
« Reply #3 on: September 13, 2018, 12:40:52 PM »
I've found reading these books have been helpful in preparing me before meeting with an attorney:

Plan Your Estate
by Denis Clifford for Nolo Press
Great overview of all aspects of retirement and estate planning except how to anticipate and pay for medical expenses. Includes Wills, Powers of Attorney, Trusts, ways to avoid probate, and more.  Terrific book to read before speaking to an estate planning attorney and insurance brokers.

8 Ways to Avoid Probate
by Mary Randolph for Nolo Press
Tools like Transfer on Death for real estate and vehicles, Payment on Death for bank accounts, and Trusts can be used to move parts of your estate into the possession of your heirs without the delay of probating your will.  Avoiding probate is not a scheme to avoid taxes.  This book expands on the information in the Plan Your Estate book.

Make your Own Living Trust
by Denis Clifford for Nolo Press
This book talks about Revocable Living Trusts and how to easily create one yourself.  I initially read this book to learn about Trusts: what they can and cannot do so I would be informed about the issues when I met with a lawyer.  But setting up a simple one turned out to be surprising easy so I did it and put my investments into it.  (I had to make some changes to the book’s forms to comply with WA law.)  This created a simple safe harbor for the investments.  I’m still studying about other kinds of Trusts so I’ll be informed when my inheritance arrives and I can get an expert attorney to create a more comprehensive Trust.

Living Trusts for Everyone:
Why a Will is Not the Way to Avoid Probate, Protect Heirs, and Settle Estates
by Ron Sharp


Catbert

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Re: Estate, Will and Trust planning
« Reply #4 on: September 13, 2018, 01:15:21 PM »
I probably would go 50/50 on each retirement account since different types have different taxation.  Take the 300K out of assets which would be sold anyway because they don't have a beneficiary option (e.g., real estate). 

A more interesting question is what to do if one of your children predeceases both of you.  As I understand your situation now, I would have the remaining sibling inherit all.  I would not have either a relatively new son-in-law or step-grandchild as a backup beneficiary.  If you get biological/adoptive grandchildren or if the step-grandchild stays in your life long term then I would have children as back-up to their respective parents.

The whole bio vs step children is a minefield.  Personally, I'm not hung up on "blood relations" and believe if both types of children are in the same family they should be treated the same.  OTOH I am mindful that step relatives are more likely to come and go from your life that bio ones. 


robartsd

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Re: Estate, Will and Trust planning
« Reply #5 on: September 13, 2018, 02:51:34 PM »
Most common instrument for avoiding probate is to put assents into a revocable trust. This avoids the time and expense of having the courts oversee the probate process, but does not change the tax treatment of the inheritance. A trustor can modify a revocable trust at any time, so tax treatment is that you still own the assets. I believe you and your wife could both be named as trustees and be able to act in the name of the trust independent of each other if you wish. You'd name one ore more successor trustees who could manage the distribution of the trust after your passing (could be a beneficiary or a third party - third parties generally expect to be paid). Most financial accounts can be set up with designated beneficiaries that have assets transferred on death which also avoids probate without the need to be placed in a trust. Real estate and valuable personal property are where revocable trusts are most useful.

Irrevocable trusts do not allow you to modify them after you fund them. They can be useful for controlling the use of assets towards a specified purpose after they are transferred. They can be useful in tax planning because once assets are transferred to the trust you no longer own them. Even if as trustee you have the access to manage the assets, doing anything with them that is not in keeping with the specified purpose of the trust would be a violation of your fiduciary duty.