Trusts

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills.
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tmp123
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Trusts

Post by tmp123 »

I do not know whether my wife and I need a trust. My situation is our retirement income will allow for us to do what we want or need to do. We have $285000 that we have in IRA’s. We plan on taking four percent of this for extra travel money each year or most years. Forty percent of this is in a Roth IRA. We have land valued at $50,000 and our house is valued at $400000. The only debt we have is on our car. We owe $14000 on it. In the future there will probably be around $350,000 additional money from an inheritance. Our daughter is married with 2 children. Our son is married and he is not going to have kids. When my wife and I die there will be an additional $650000 from insurance proceeds. Our wishes are for my son and daughter share equally in the inheritance. We love our son-in-law and daughter-in-law. How is the best way to take care of our estate and potentially see that our grandkids have something left over. I do not know if the value of what we have is great enough for a trust. Any advice or help would be appreciated.
Bogle64Pilot
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Re: Trusts

Post by Bogle64Pilot »

You need to talk to an estate planning attorney. Everyone’s situation is unique. The value in a trust to me atleast is it simplifies the process and your heirs, if done correctly, can avoid the probate process. There’s a million variables so speaking with an attorney is your best course of action.
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David Jay
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Re: Trusts

Post by David Jay »

You could set up UTMA accounts for the grandkids outside of the inheritance and fund them separately. Then your 2 children split the inheritance 50/50.

As soon as you start making uneven distributions in the inheritance you are creating the conditions for potential estrangement of your two children.
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Lee_WSP
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Re: Trusts

Post by Lee_WSP »

I'd suggest talking to your children and an estate planning professional.
Last edited by Lee_WSP on Thu Apr 22, 2021 6:15 pm, edited 1 time in total.
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Sandtrap
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Re: Trusts

Post by Sandtrap »

1. Seek legal counsel for estate planning.
2. Read "Beyond the Grave" by Condon, to get additional insight into family dynamics and various inheritance scenarios. (while the legalities may not apply, which is why you talk to legal counsel, the scenarios of inheritance and so forth are interesting).

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restingonmylaurels
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Re: Trusts

Post by restingonmylaurels »

tmp123 wrote: Thu Apr 22, 2021 7:42 am I do not know whether my wife and I need a trust. My situation is our retirement income will allow for us to do what we want or need to do. We have $285000 that we have in IRA’s. We plan on taking four percent of this for extra travel money each year or most years. Forty percent of this is in a Roth IRA. We have land valued at $50,000 and our house is valued at $400000. The only debt we have is on our car. We owe $14000 on it. In the future there will probably be around $350,000 additional money from an inheritance. Our daughter is married with 2 children. Our son is married and he is not going to have kids. When my wife and I die there will be an additional $650000 from insurance proceeds. Our wishes are for my son and daughter share equally in the inheritance. We love our son-in-law and daughter-in-law. How is the best way to take care of our estate and potentially see that our grandkids have something left over. I do not know if the value of what we have is great enough for a trust. Any advice or help would be appreciated.
As another poster said, every situation is so unique you really need to talk it out with a lawyer in your state.

A few general thoughts:

1. If you have a reason to control the assets after your death beyond their initial distribution or the timing of that distribution then a trust is an answer.
2. You can set up a trust in your will (a testamentary trust) or in your lifetime (a living trust); they are not that expensive to create.
3. Some trustees will only accept trusts of certain sizes. VNTC I believe has a $1m minimum but I am sure your local bank may do it.
4. Because you are talking about the proceeds from life insurance, you could be talking about a second trust, as described here: https://www.legalandgeneral.com/life-co ... ce-trusts/

Good luck.
mnsportsgeek
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Re: Trusts

Post by mnsportsgeek »

I don’t think a trust is necessarily required in your situation. The value of a trust for me is avoiding probate if my wife and I die with minor children, and allowing our successor trustee to give money to our kids guardian immediately after our death to start caring for our kids. If your kids are all adults, then a simple will should suffice to accomplish what you want.

If you wanted to keep them from inheriting anything until they were older then you could do a trust, but if they are responsible enough to inherit money now then you probably just need a will and to make sure your beneficiaries are set up correctly on your accounts.

That said, talk to a lawyer to confirm but make sure to ask pointed questions about what benefits a trust would give you in your situation. Depending on the lawyer, some will just push you towards a trust because it costs more than a will.
fittan
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Re: Trusts

Post by fittan »

mnsportsgeek wrote: Thu Apr 22, 2021 2:24 pm I don’t think a trust is necessarily required in your situation. The value of a trust for me is avoiding probate if my wife and I die with minor children, and allowing our successor trustee to give money to our kids guardian immediately after our death to start caring for our kids. If your kids are all adults, then a simple will should suffice to accomplish what you want.

If you wanted to keep them from inheriting anything until they were older then you could do a trust, but if they are responsible enough to inherit money now then you probably just need a will and to make sure your beneficiaries are set up correctly on your accounts.

That said, talk to a lawyer to confirm but make sure to ask pointed questions about what benefits a trust would give you in your situation. Depending on the lawyer, some will just push you towards a trust because it costs more than a will.
Another purpose of trust is to reduce estate tax. Each state has its own limits. For example, in MA it is $1 million. If you include life insurance pay out, most people can hit this $1 million easily. With proper estate planning, you can save $$$ when both you and spouse die. One such "method" is to use AB trust. Below is an article that describes this process. It costs about $3K to $4K to create an estate plan (i.e. wills, trusts, healthcare proxy) but can potentially shield uncle sam from your hard earn money and leave ten if not hundreds of thousands more to your family.

https://www.maheritagelawcenter.com/wha ... b-trust-2/
bsteiner
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Re: Trusts

Post by bsteiner »

fittan wrote: Thu Apr 22, 2021 3:56 pm ...
Another purpose of trust is to reduce estate tax. Each state has its own limits. For example, in MA it is $1 million. If you include life insurance pay out, most people can hit this $1 million easily. With proper estate planning, you can save $$$ when both you and spouse die. One such "method" is to use AB trust. ... It costs about $3K to $4K to create an estate plan (i.e. wills, trusts, healthcare proxy) but can potentially shield uncle sam from your hard earn money and leave ten if not hundreds of thousands more to your family.
...
A good point. You may want to provide for each other in trust to save state estate taxes, especially if you're in a state like Massachusetts or Oregon with a low state estate tax exclusion amount. You may also want to provide for each other in trust to protect the spouse's inheritance from future spouses and Medicaid.

Since each child's share will be about $800,000 or so, you may want to provide for your children in separate trusts for their benefit rather than outright, for similar reasons.

In most states, you would most likely do this in your Wills.

This should be a routine matter for any law firm with a good trusts and estates group. However, depending on where you're located, the cost may be more than the figures mentioned.
restingonmylaurels
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Re: Trusts

Post by restingonmylaurels »

mnsportsgeek wrote: Thu Apr 22, 2021 2:24 pm I don’t think a trust is necessarily required in your situation. The value of a trust for me is avoiding probate if my wife and I on die with minor children, and allowing our successor trustee to give money to our kids guardian immediately after our death to start caring for our kids. If your kids are all adults, then a simple will should suffice to accomplish what you want.

If you wanted to keep them from inheriting anything until they were older then you could do a trust, but if they are responsible enough to inherit money now then you probably just need a will and to make sure your beneficiaries are set up correctly on your accounts.

That said, talk to a lawyer to confirm but make sure to ask pointed questions about what benefits a trust would give you in your situation. Depending on the lawyer, some will just push you towards a trust because it costs more than a will.
A couple of points on what you said:

"The value of a trust for me is avoiding probate if my wife and I on die with minor children" to which I would add the word "AND" in the middle, to "The value of a trust for me is avoiding probate AND if my wife and I on die with minor children." Avoiding probate by itself is a goal.

"Depending on the lawyer, some will just push you towards a trust because it costs more than a will." If you tote up the total costs of drafting a trust on one side versus drafting a will and going through probate with all your assets, which do you think will cost you more money?

Not a probate lawyer, so do not have an agenda, but as an individual I have pretty much everything possible avoiding probate through trusts, designated beneficiaries, payable on death designations, etc. Keeping things out of probate is the better strategy.
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tmp123
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Re: Trusts

Post by tmp123 »

I appreciate all the input. This gives me considerations that will help me plan for the future.
bsteiner
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Re: Trusts

Post by bsteiner »

restingonmylaurels wrote: Thu Apr 22, 2021 4:58 pm
mnsportsgeek wrote: Thu Apr 22, 2021 2:24 pm I don’t think a trust is necessarily required in your situation. The value of a trust for me is avoiding probate if my wife and I on die with minor children, ....
A couple of points on what you said:

"The value of a trust for me is avoiding probate if my wife and I on die with minor children" to which I would add the word "AND" in the middle, to "The value of a trust for me is avoiding probate AND if my wife and I on die with minor children." Avoiding probate by itself is a goal.
...

Not a probate lawyer, so do not have an agenda, but as an individual I have pretty much everything possible avoiding probate through trusts, designated beneficiaries, payable on death designations, etc. Keeping things out of probate is the better strategy.
In most cases in most states, probating a Will isn't difficult, expensive or burdensome. It's usually a small part of the work involved in an estate administration.

To probate a Will we file the Will with the court together with some forms, a death certificate, and the filing fee.

Why are you concerned about it?

There are more important issues to consider.

There are exceptions. In some states such as California probating a Will and dealing with the court is more difficult. In some states the court fee is significant, such as Delaware where it's 1.75% of the probate estate (not counting the real estate).
Dinosaur Dad
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Re: Trusts

Post by Dinosaur Dad »

Sandtrap wrote: Thu Apr 22, 2021 11:40 am 1. Seek legal counsel for estate planning.
2. Read "Beyond the Grave" by Condon, to get additional insight into family dynamics and various inheritance scenarios. (while the legalities may not apply, which is why you talk to legal counsel, the scenarios of inheritance and so forth are interesting).

j :D
+1 for "Beyond the Grave" - very helpful book.
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Dregob
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Re: Trusts

Post by Dregob »

It seems like people are split close to 50/50 on the need for a trust. If I ask a lawyer who specializes in trusts I assume he will recommend one.
I spoke with "advisors" at Fidelity and TIAA (casual conversations over Zoom-I am not paying either of them a fee) and they were both of the mindset that a trust was not worth it.
bsteiner
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Re: Trusts

Post by bsteiner »

Dregob wrote: Thu Apr 22, 2021 10:19 pm It seems like people are split close to 50/50 on the need for a trust. If I ask a lawyer who specializes in trusts I assume he will recommend one.
I spoke with "advisors" at Fidelity and TIAA (casual conversations over Zoom-I am not paying either of them a fee) and they were both of the mindset that a trust was not worth it.
If you’re referring to revocable trusts a lawyer should recommend one if there’s a reason for it. They’re appropriate in some cases and in some states. But they’re overhyped and oversold and for most people in most states they aren’t necessary and tend to be a distraction.

If you’re referring to providing for children in trust rather than outright, a good lawyer will usually recommend doing so.
Dregob
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Re: Trusts

Post by Dregob »

I was not thinking of young children. Agreed.
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Lee_WSP
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Re: Trusts

Post by Lee_WSP »

Dregob wrote: Thu Apr 22, 2021 10:19 pm It seems like people are split close to 50/50 on the need for a trust. If I ask a lawyer who specializes in trusts I assume he will recommend one.
I spoke with "advisors" at Fidelity and TIAA (casual conversations over Zoom-I am not paying either of them a fee) and they were both of the mindset that a trust was not worth it.
I think some lawyers see it as an upsell and rightly or wrongly, believe that avoiding probate is a worthy end goal in itself. I disagree that the costs are worth the benefit, but that's my opinion.
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