I am currently in the process of updating my estate planning and looking for input from the BH Community if I am approaching this correctly.
Currently, I have Will, Health Care Proxy, General Durable Power of Attorney, and a Declaration not to artificially prolong life in a terminal condition. These document were all created by an attorney in 2015.
I am in my late 50's, single, just retired and my estate is substantially over the current exemption limits. Last week I had an paid initial conference with a lawyer who is a fellow of the American College of Trust and Estate Counsel (ACTEC) on whether I should be do something now to take advantage of the $11.7M gift tax exemption before it is lowered in 2026 or possibly sooner. After discussions whether my four[4] heirs would benefit from receiving $3M or $1M I decided on the latter since the heirs already have enough and charity would benefit more and not worrying about the federal gift tax exemption. The attorney said since the bulk of my estate is going to charity she recommended just a RLT. If things change in the future the RLT can be changed or terminated while obviously the irrevocable can not.
Currently my abode/domicile is Massachusetts but I do plan on moving to New Hampshire or possibly Tennessee or Florida. Not completely sure I can handle the heat and humidity in TN or FL so I feel NH is the better choice.
I have read many posts on the BH forum and it seems like revocable trusts are more common in community property states which MA and NH are NOT.
Also, revocable trusts seem to be unusual in states where probating a Will isn't difficult. MA follows the Uniform Probate Code ("UPC") adopted in March of 2012 and supposedly makes probate very easy. NH, TN and FL do not follow the UPC and I would assume the RLT would be helpful.
The attorney recommended creating the RLT now since it would centralize the administration of everything, gives more guidance, streamlines everything and simplifies the administration after I pass away. She said the RLT would "follow me" in whatever state I live in.
Also, the RLT would provide the opportunity to dictate what happens if I would become incapacitated and/or unable to pay my bills and who would manage this, making it an easier process for the person I designate. The attorney also mentioned banks don't always accept POA if they are older than 5 years in Massachusetts, but with a RLT the trustee would have the ability to much easier manage the assets.
My intentions would be to leave $1M each to 4 heirs and everything else would be equally divided among 3 charities (Alzheimer's Research, The Salvation Army, my church). I tried using Charity Navigator at https://www.charitynavigator.org to select the best Alzheimer's charity where the money will go to research verses administration & fundraising cost. There are a lot of Alzheimer's 503c charities and any input on the best Alzheimer's charity would be appreciated.
Regarding my church the attorney said she could have the documents directing the money could only be used for the maintenance of the buildings and living expenses for the members that live at the monastery. My point here is I don't want in any way for the Catholic Archdiocese to receive any money due to the abuse cover-ups.
I do have substantial tax deferred retirement accounts and the attorney recommended making these accounts payable directly to Alzheimer's charity and The Salvation Army as beneficiaries since I would not be providing direction how the money is spent for these two charities. I have plenty of other assets to pay my final bills, give to my church and 4 heirs with my taxable accounts.
Again I plan to move out of Massachusetts. COVID has really delayed my plans on moving due to lack of housing inventory and even when I do move the ability to buy items I need for the new home since purchasing new house furnishings have considerable delays. Thus I have just been staying put living in MA.
Setting up the RLT now would provide a vehicle to put the new home I purchase into the RLT verses my name.
Some additional questions to the forum are:
- Is a RLT a good choice for my situation since the bulk of my estate is going to charity?
- Whether I should setup a RLT now or wait until I move to another state? Presently all of my assets have beneficiary designation, TOD, POD and the bank accounts are Totten Trusts. The attorney said the RLT is governed by the state you die in for tax purposes and the laws regarding RLT between Massachusetts and New Hampshire are very similar so there wouldn't be a problem going forward with the RLT now.
- Should I use a charitable remainder annuity trust (CRAT) now since I am in the 23.8% capital gains and dividend tax rate, a 35% marginal tax rate. My taxable accounts generate over $350K in qualified dividends. Thus a CRAT or CRUT I would get a charitable donation deduction to offset the taxes I pay now. I have over $10M in unrealized CG in my taxable account that could fund a CRT.
- The attorney said she could setup the trust administered under New Hampshire Law and it doesn't matter where I live now, but the new Will states everything pours into the Trust and the POA would still be Massachusetts documents. She said there would be no problem with the Will and POA being Massachusetts documents since once I move to New Hampshire none of it matters and Massachusetts isn't going to tax the estate. Massachusetts does have nasty estate tax once you are one dollar over a million with I think a 5 year look back. So my question to BH is would you create an RLT administered under New Hampshire Law while living in Massachusetts or just wait to move out of Mass?
- Are there any provisions that a BH member with a RLT forgot to include in their RLT that might be applicable to my situation?
- Should I consider creating additional trusts at the same time as updating my Will and creating the RLT so there would be some economy of scale since the decision making process is pretty much the same?
I thought about leaving more than $1M each to 4 people but they are all doing well financially and just feel leaving the majority to charity benefits society much better.
Thank you for reading this post and offering any insights on the pros and cons before I give the estate attorney the go ahead to create the RLT.