Author Topic: Trusts and Wills  (Read 5446 times)

Kairos

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Trusts and Wills
« on: April 29, 2016, 04:18:56 PM »
Wondering about trusts and wills.
I'm a single mom with 9 year old son. Net worth just over 1.1M. If I were to die while my son is minor, his dad would be awarded custody but I have major concerns/red flags that his father would blow throw my son's inheritance. But I would want to my son to have a comfortable life and get a good education.
I've been taking some financial education classes and there is a big push for getting a trust drawn up for my son. I've looked into pricing - about $2500 for all my end of life documents but the trust is what the majority of the cost is. Question: What is your take on Wills, trust and avoiding probate? I don't have anyone in my life I would really trust to be the trustee anyways (I have no siblings or living parents). Any creative ideas about planning for the worst?


lthenderson

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Re: Trusts and Wills
« Reply #1 on: April 29, 2016, 04:24:47 PM »
I've looked into pricing - about $2500 for all my end of life documents but the trust is what the majority of the cost is. Question: What is your take on Wills, trust and avoiding probate? I don't have anyone in my life I would really trust to be the trustee anyways (I have no siblings or living parents). Any creative ideas about planning for the worst?

I think you need to relook into costs. I literally just signed my will, trust, end of life documents two weeks ago and it cost me $250 and two hours of time at the lawyer's office spread over two times a month apart. The big factor for me to get all this done was simply because of my children. If my wife and I were to die at the same time with minor children, the children automatically become wards of the state until permanent housing is determined. As for trustees, they don't have to be family. Ask friends or even a lawyer.

GizmoTX

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Re: Trusts and Wills
« Reply #2 on: April 29, 2016, 05:31:58 PM »
You can specify a financial guardian in your will who is not the same person as the person who is awarded custody of your minor son. Yes, this should be managed in a trust, but you can inexpensively provide in your will for a testamentary trust that only gets created if you die. You may need to specify if/how the custodian gets funding to care for your son; the trustee managing this can be a trust bank, not just another relative or friend. We revised our wills to provide for this when DS was born.

We also set up a separate irrevocable trust for DS when he was a year old. 529s didn't exist then. Because we had substantial income, we didn't want income earmarked for his education subject to the kiddie tax or AMT -- an irrevocable trust is a legal way to have the trust pay its own taxes on the income it generates, at substantially lower rates in our case. We funded it every year with our maximum annual gift tax exemption & invested it. The trust is not limited to just education, but can & should also provide for health or living emergencies at the trustee's discretion, which happens to be us. The trust allows DS the option to withdraw up to 50% of any residual when he graduates from a 4 year college, & any remainder when he reaches age 30. Or, he can choose to let the trust keep accumulating for the rest of his life -- it is finally disposed of according to his will. The trust allows him to keep this fund solely in his name, which largely eliminates the need for a prenuptial agreement if he marries -- he is free to make his spouse a beneficiary in his will or can direct it elsewhere. DS was awarded 2 nice merit scholarships to his university for all 4 years, & we paid the remaining cost with cash flow, so his trust is untapped at this time, about $500K.

ltt

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Re: Trusts and Wills
« Reply #3 on: April 29, 2016, 06:35:53 PM »
When we set ours up, we set up a personal rep, a guardian, and a trustee, as our children are minors.  One will settle the estate, one will take care of the kids, and the other will take care of seeing that the money is given to the kids for things like education, a wedding dress, etc., if something unexpectedly happened to us. 

Your child's father could be the guardian of your son without touching any of the money.  There are banks that can handle the trust part, however, they probably don't know your son that well.  Do you have any close friends that might know your son well enough, or someone at church, who you would trust to manage the money? if something were to happen.

I would call around to see what attorneys charge for setting up a trust in a will, or maybe get a recommendation from someone.  It really should not be that much.   

Jim2001

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Re: Trusts and Wills
« Reply #4 on: May 01, 2016, 04:46:14 PM »
Things to consider:
  • A will dictates how things are distributed as of the day you die. It will have absolutely no control of what is done with anything after the fact.
  • A trust is a legal entity which continues on after you pass and will be run according to your written instructions (assuming you assign a good trustee, i.e. not your ex.)
  • You often get what you pay for.


My uncle passed away leaving a will which had been reviewed by an attorney who didn't specialize in family law.  I was named executor.  He wanted to leave property to his grand kids, his house to me and other assets to individuals according to specific instructions.  When I hired an attorney to assist with probate, we found that it was poorly written and without any provisions for the estate to maintain the properties while in probate. The properties were lost to foreclosure and his grand kids got nothing.

My advice is to find the best family law attorney you can.  $2500 is actually less than I've seen for a standard trust from a good attorney, with $3500 being closer to the going rate here in LA five to eight years ago.  I assume you want the best for your son and the one time cost to get it done correctly will be worth the piece of mind.   It's like insurance, you can't go back and change it after the incident happens and your son will be stuck with what ever you set up. Good or bad.  A good attorney will walk you through the process considering who should be the guardian (your ex may pass as well) and who should make the financial decisions.  They don't have to be the same person.  Also, how the money should be invested, how and when it should be given out, etc.  For example, do you want some of it allocated and saved for college and some for a down payment for a house, should it all be allocated to support daily living expenses from day one, should disbursements only be assigned from dividends creating a lifetime of income, or should it be assigned from principal with a specific number of years.  There are many things to consider and a professional can help you make the right decisions for you.