Do I need a trust?

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills.
Post Reply
Topic Author
newly_rich2
Posts: 1
Joined: Thu Sep 23, 2021 11:59 am

Do I need a trust?

Post by newly_rich2 »

Hello, new to this board so thank you in advance.

My wife’s company went public a while back and now we are sitting on a significant amount of investment money (around $6mil). She has more stock that could push that up over the next few years. Beyond that we just have 1 rundown car and live in the house my parents used to live in (owned by them), but want to buy our own. We live in NY.

We have 3 kids under the age of 10, and have been lazy about setting up wills/trusts/etc. This level of wealth is new territory for us and I’m not sure where to start. My kids are young so I want to make sure they don’t get slapped with huge fees and probate and all that and my wife and I are pretty simple people so we’d rather invest it for them and have them be setup well when they’re older. We already have utma accounts setup but I’m guessing we could do better.

How do I go about doing this? I know I need to talk to a lawyer but what are the basics I should know? Do I need a trust? What kind works for this? Do I also need a will? I googled around and saw stuff about grantor trusts and irrevocable and whatnot all very confusing so any help is appreciated!!

Thank you all god bless!
niagara_guy
Posts: 1168
Joined: Tue Feb 11, 2020 7:32 am

Re: Do I need a trust?

Post by niagara_guy »

I believe you need the help of a good attorney that you trust. You have the assets to protect your kids if both parents die, but it sounds like you do not have the legal documents in place to protect them (who would be their guardians, …). do you need a trust? Your attorney will guide you with this. You may also need help from a tax professional to minimize your taxes.

Maybe others will chime in with their opinions.
User avatar
nss20
Posts: 57
Joined: Wed Jan 01, 2020 12:36 pm

Re: Do I need a trust?

Post by nss20 »

You need a boilerplate will with living (revocable) trusts for you and your wife. You also need to transfer your accounts to the living trusts. it will allow you to specify who will take care of your minor children if both of you die for any reason. This is the bare minimum and you should do this urgently. In a somewhat similar situation a long time ago, when my lawyer heard of this, he set up a will for us that day!

You need to consider irrevocable trusts. In your case, it would appear to be a good idea. Since you are a careful spender, by the time you retire your money will be many times what you have today. By putting say $1-2m in an irrevocable trust you will remove it from your portfolio and if you set it up properly, you can have that part of the money grow faster than the remaining part. As a result, by the time you retire, you will take a large part out of your estate. This is long-term advice for you to think about and discuss with your lawyer.
hachiko
Posts: 941
Joined: Fri Mar 17, 2017 1:56 pm

Re: Do I need a trust?

Post by hachiko »

You have enough money where
1) you can afford to pay a good lawyer,
2) a good lawyer would be willing to help you (i.e. they will expect you to have future legal needs other than just doing some boiler-plate estate planning), and
3) you can actually benefit from having a good lawyer help you.

So hire a good lawyer and let them do the work for you.

Note that you're going to see a lot of people saying "you shouldn't pay more than $2k for x" and "I only paid $500 for x." For most people, basic estate documents for $1k are perfectly fine. I paid about $1,000 to have our will and a basic trust drawn up. This is not what you should be looking for.
Made money. Lost money. Learned to stop counting.
niagara_guy
Posts: 1168
Joined: Tue Feb 11, 2020 7:32 am

Re: Do I need a trust?

Post by niagara_guy »

Here's how I would start. I would get a recommendation for a lawyer or two from my tax advisor (if you have one). Then I would interview several lawyers (I think at least 3) to see what they would recommend in general terms. You might get conflicting advice (one might recommend a trust and one not) and then I would pick the one that seems to be the best fit. You might also get good recommendations from you friends or coworkers.

My parents, who had very limited assets, had a trust created about 40 years ago. In hind site it was probably not a good move for them. Of course, for someone with a large net worth the answer might be just the opposite.

Before you actually have the documents drafted you could, if you wish, post here with some of the details to get feedback.
JBTX
Posts: 11227
Joined: Wed Jul 26, 2017 12:46 pm

Re: Do I need a trust?

Post by JBTX »

newly_rich2 wrote: Fri Sep 24, 2021 9:47 am Hello, new to this board so thank you in advance.

My wife’s company went public a while back and now we are sitting on a significant amount of investment money (around $6mil). She has more stock that could push that up over the next few years. Beyond that we just have 1 rundown car and live in the house my parents used to live in (owned by them), but want to buy our own. We live in NY.

We have 3 kids under the age of 10, and have been lazy about setting up wills/trusts/etc. This level of wealth is new territory for us and I’m not sure where to start. My kids are young so I want to make sure they don’t get slapped with huge fees and probate and all that and my wife and I are pretty simple people so we’d rather invest it for them and have them be setup well when they’re older. We already have utma accounts setup but I’m guessing we could do better.

How do I go about doing this? I know I need to talk to a lawyer but what are the basics I should know? Do I need a trust? What kind works for this? Do I also need a will? I googled around and saw stuff about grantor trusts and irrevocable and whatnot all very confusing so any help is appreciated!!

Thank you all god bless!
One trust available is a revocable living trust. It is useful for minimizing probate, and has other advantages, but adds complexity and is often unnecessary, depending on the state and probate fees.

Another trust is something like an "A/B" trust that can be useful for estate tax planning. Seems like you don't have enough right now to worry about it but laws can and do change.

You may want to consider setting up irrevocable trusts for your kids that come to life upon your death. They can be part of your will, or part of a revocable living trust. These provide asset protection for your kids, and can have spendthrift provisions. Trust tax rates are higher though.

I'm not an attorney. Ultimately you need to find a good one, especially at your wealth level. Look for one that has been recognized in the legal community, not someone offering a free steak dinner.

@bsteiner is a nationally recognized estate planning attorney, based in New York, I think, and posts here.
User avatar
Lee_WSP
Posts: 10401
Joined: Fri Apr 19, 2019 5:15 pm
Location: Arizona

Re: Do I need a trust?

Post by Lee_WSP »

You will want to leave your estate in trust for the children. Whether that is testamentary or living is a different question.

But what you really need is a complete estate plan. Not just whether you want a trust (you usually do).
User avatar
GerryL
Posts: 3902
Joined: Fri Sep 20, 2013 11:40 pm

Re: Do I need a trust?

Post by GerryL »

Lee_WSP wrote: Fri Sep 24, 2021 12:51 pm You will want to leave your estate in trust for the children. Whether that is testamentary or living is a different question.

But what you really need is a complete estate plan. Not just whether you want a trust (you usually do).
Yes. It's not the amount of money, it's what you hope to achieve. And for that you need a complete estate plan.

I did some reading before finally sitting down with a lawyer (scheduled to sign the papers in about a week), and the research I did on my own helped me figure out what questions I needed to ask. One book I found useful is Living Trusts for Everyone by Ronald Farrington Sharp.
Hockey10
Posts: 1108
Joined: Wed Aug 24, 2016 12:20 pm
Location: Philadelphia suburbs

Re: Do I need a trust?

Post by Hockey10 »

Here is some good Bogleheads approved info on managing a windfall:

https://www.bogleheads.org/wiki/Managing_a_windfall
bsteiner
Posts: 9210
Joined: Sat Oct 20, 2012 9:39 pm
Location: NYC/NJ/FL

Re: Do I need a trust?

Post by bsteiner »

Probating a Will in New York is generally not difficult, expensive or burdensome, so revocable trusts are not commonly used in New York.

You'll want to provide for your children in trust rather than outright. You can do that in your Wills.

The New York estate tax exclusion amount is $5,930,000, and there's no portability for the New York estate tax. Also, the exclusion amount is phased out between $5,930,000 and $6,226,500 (so an estate of $6,226,500 pays New York estate tax of $538,992). So you'll want to provide for each other in trust rather than outright, so as to try to keep the surviving spouse's estate under $5,930,000. You can do that in your Wills as well.

You're relatively young and well below the Federal estate tax exclusion amount (which is presently $11.7 million but is scheduled to revert to $5,850,000, in each case indexed from 2021) in 2026). However, if that's a concern, you could begin shifting assets to the next generation. There are various ways to do this.
Duzz78
Posts: 158
Joined: Sat May 15, 2021 9:10 pm

Re: Do I need a trust?

Post by Duzz78 »

GerryL wrote: Fri Sep 24, 2021 1:01 pm
Lee_WSP wrote: Fri Sep 24, 2021 12:51 pm You will want to leave your estate in trust for the children. Whether that is testamentary or living is a different question.

But what you really need is a complete estate plan. Not just whether you want a trust (you usually do).
Yes. It's not the amount of money, it's what you hope to achieve. And for that you need a complete estate plan.

I did some reading before finally sitting down with a lawyer (scheduled to sign the papers in about a week), and the research I did on my own helped me figure out what questions I needed to ask. One book I found useful is Living Trusts for Everyone by Ronald Farrington Sharp.
Agree. Its what you want to achieve. To do so you need a complete estate plan.

You need a will whether you have a trust or not. You also need the other legal docs that go with a will, the POAs, and advanced directives or living wills. A lawyer can draw up those documents for you. And he could refer you to another person who handles the financial end if his office does not have such.

However, speaking with an estate planner may be your better move. They can assist you in determine whether a trust and the type of trust would benefit you. They also know about taxes and can again assist you in this area to protect your kids, your assets, and your estate from paying unnecessary taxes or tax amounts. They can also help you fund your trust. By funding I mean move your assets (financial accounts, property title, etc.) into the trust name. And they can do wills, POAs, and advanced directives.

Finally, either the lawyer or your estate planner can assist with future issues and questions. Such as moving your newly owned property into the your established trust. Or updating your will when such updates need to be made. Reasons for updates are change status of family, guardianship changes, digital assets, state estate code changes, and federal changes (such as HIPAA laws). Generally, updating your will every 10 years is good if no other forced changes occur. You usually don't update a trust.
ivgrivchuck
Posts: 1672
Joined: Sun Sep 27, 2020 6:20 pm

Re: Do I need a trust?

Post by ivgrivchuck »

newly_rich2 wrote: Fri Sep 24, 2021 9:47 am How do I go about doing this? I know I need to talk to a lawyer but what are the basics I should know? Do I need a trust? What kind works for this? Do I also need a will? I googled around and saw stuff about grantor trusts and irrevocable and whatnot all very confusing so any help is appreciated!!

Thank you all god bless!
First take a deep breath :)

I assume that both of you and your spouse are relatively young and in good health. The probability of both you dying in the next 5 years is extremely low. You have very likely a plenty of time to figure everything out.

Step 1. Figure out a sensible investment strategy for that windfall. Most people here would recommend the 3-fund portfolio. It's a good choice regardless of portfolio size ($1000 to $100M).

Step 2. You need a will and your spouse needs a will. How is the money distributed in the event of death? In the unlikely case that both of you die, who is going to be the guardian for your children.

Step 3. Now, the trust part. Why do you think that you need a trust? Is it just to optimize taxes? Do you want your children (as long as they are young) to receive the money incrementally in case of your death? Do you have a trusted successor trustee in mind to carry out your wishes and administer the trust? Maybe you don't need the trust just yet?
25% VTI | 25% VXUS | 12.5% AVUV | 10% AVDV | 2.5% VWO | 25% BND/SCHR/SCHP
User avatar
Sandtrap
Posts: 19591
Joined: Sat Nov 26, 2016 5:32 pm
Location: Hawaii No Ka Oi - white sandy beaches, N. Arizona 1 mile high.

Re: Do I need a trust?

Post by Sandtrap »

newly_rich2 wrote: Fri Sep 24, 2021 9:47 am Hello, new to this board so thank you in advance.

My wife’s company went public a while back and now we are sitting on a significant amount of investment money (around $6mil). She has more stock that could push that up over the next few years. Beyond that we just have 1 rundown car and live in the house my parents used to live in (owned by them), but want to buy our own. We live in NY.

We have 3 kids under the age of 10, and have been lazy about setting up wills/trusts/etc. This level of wealth is new territory for us and I’m not sure where to start. My kids are young so I want to make sure they don’t get slapped with huge fees and probate and all that and my wife and I are pretty simple people so we’d rather invest it for them and have them be setup well when they’re older. We already have utma accounts setup but I’m guessing we could do better.

How do I go about doing this? I know I need to talk to a lawyer but what are the basics I should know? Do I need a trust? What kind works for this? Do I also need a will? I googled around and saw stuff about grantor trusts and irrevocable and whatnot all very confusing so any help is appreciated!!

Thank you all god bless!
The only person that can answer this is competent and reputable legal counsel or a law firm for comprehensive estate planning that is specific to "you" and your needs and goals.

Seek legal counsel for estate planning.

For one insight in human and family dynamics regarding estate planning:
Read: "Beyond the Grave", by Condon (avail. softcover at Amazon.com)

j :D
Wiki Bogleheads Wiki: Everything You Need to Know
User avatar
markjk
Posts: 540
Joined: Wed Oct 07, 2020 6:01 am

Re: Do I need a trust?

Post by markjk »

Congratulations on your success.

Get a professional to help.

Anything that has named beneficiaries (IRA, 401K, etc.) are quite simple. You name beneficiaries and move on. Any assets like houses, cars, more complicated financial instruments, other belongings, etc. are more difficult and require a will to make sure your wishes are followed. But ... a will although sufficient to make sure your wishes are met, doesn't avoid probate and probate can be a real time sink and pain for your executor.

At your wealth level, a trust is definitely worth considering. Frankly, I think a trust is worth considering for everyone as it helps avoid probate which also has the bonus of keeping your financial information out of public record. It's really a double bonus. It's not terribly hard to set up a trust either but there are a few things you need to consider before making such a move. For example, when you move your assets (say a house) into a trust I believe you must make sure the trust is reflected on the insurance policy.

I've recently researched will/trust so I'm not an expert by any means but after all of the investigation, I'm considering a trust as well.

I'd go trust and get help from professionals. I'd also set it up ASAP since kids are involved.
bling
Posts: 1457
Joined: Sat Jan 21, 2012 11:49 am

Re: Do I need a trust?

Post by bling »

i did my trust earlier this year. i read the book "beyond the grave", which has been recommended on BH in prior threads. it was really helpful for me because the book outlines all the things that can go wrong when you create a trust and really makes you think about all the edge cases.

definitely go with a lawyer, since many laws are state-specific. seek referrals from friends/colleagues.
Post Reply