Interactive Estate/Trust/Beneficiary CALCULATOR? [NY]

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nyc212
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Interactive Estate/Trust/Beneficiary CALCULATOR? [NY]

Post by nyc212 »

Has anyone found an online interactive calculator which accepts your assets and beneficiaries as input and produces a report that indicates the (total) amount to each beneficiary?

Or, has anyone received such a report from an estate attorney?

I'm not looking for the simple flowcharts found on the internet.

I'm looking for a sensitivity analysis/scenario planning tool that is based upon Federal and State laws, such as NY Estate Exemption has a CLIFF.

I should be able to list all assets and beneficiaries, then plug in assumptions (e.g. include/don't include Retirement assets, change beneficiary allocations, etc.) in Bypass/Disclaimer Trust and output a Report.

Right now, I do everything manually in a clunky excel spreadsheet. Cannot believe this has not been webized into an online tool.
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Lee_WSP
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Re: Interactive Estate/Trust/Beneficiary CALCULATOR? [NY]

Post by Lee_WSP »

Quite honestly, tax minimization is at the bottom of the list of priorities when deciding which assets go into which trust at the drafting stage. It matters greatly in the estate administration stage, but since you’re still alive, there’s no point in running the numbers.

So, to answer your question, no. There’s both very little demand and very little benefit in crunching those numbers.
afan
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Re: Interactive Estate/Trust/Beneficiary CALCULATOR? [NY]

Post by afan »

Wow. Not focussing on tax minimization would be terrible estate planning.

I do not know of such software and I work through scenarios on a spreadsheet. I agree it is tedious and I worry about missing cliffs.

I would hope that an attorney who is an expert in taxes and estates would set up a trust to minimize estate and income taxes and maximize the money that goes to heirs. If they are not doing that, what are they being paid for?
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Re: Interactive Estate/Trust/Beneficiary CALCULATOR? [NY]

Post by Lee_WSP »

afan wrote: Tue Jul 05, 2022 5:08 pm Wow. Not focussing on tax minimization would be terrible estate planning.
Let me rephrase. The choices op is contemplating are so basic, there's little to no thought to it.

Retirement accounts go to spouse, if not then the choice isn't which trust, it's how much control?

If there's a QTIP, you don't decide when you draft the trust, you let the estate administrator choose the most tax effective choices. Same with retirement accounts and any other assets.
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Re: Interactive Estate/Trust/Beneficiary CALCULATOR? [NY]

Post by afan »

But how much is there in the estate at death?

Gifting strategies can affect that.

Should one do Roth conversions- paying income taxes now to reduce the size of the taxable estate?

How do state inheritance or estate taxes affect the calculations?

Different rates of return, varying income tax rates and estate tax rates can change the outcomes. Different assumptions about the income tax rates of the beneficiaries will also lead to different conclusions about what to leave, and how to leave it.

Other than the changes already in law, there is little guidance on how taxes may change. However, different investment approaches with different sets of assets can affected the expected rates of return in each pot.

The pattern of withdrawals during retirement can also affect the cumulative estate and income taxes paid.

All of these must be decided during life. For much of it, by the time of death it is too late to optimize.
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Re: Interactive Estate/Trust/Beneficiary CALCULATOR? [NY]

Post by Lee_WSP »

That’s not the question OP asked. OP is asking for something that simply does not exist and is unplannable. A good plan is a flexible plan.
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nyc212
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Re: Interactive Estate/Trust/Beneficiary CALCULATOR? [NY]

Post by nyc212 »

afan wrote: Tue Jul 05, 2022 5:08 pm Wow. Not focussing on tax minimization would be terrible estate planning.

I do not know of such software and I work through scenarios on a spreadsheet. I agree it is tedious and I worry about missing cliffs.

...
I agree, afan. I think that running numbers scenarios is essential to understanding who will receive what $$$ after the death of both parties.

I think it is a grave mistake to not run these numbers. And it is crazy that there is no software for this.
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Re: Interactive Estate/Trust/Beneficiary CALCULATOR? [NY]

Post by Lee_WSP »

You’re both looking at it backwards. You’re trying to figure out how to get $X to Johnny & Sally or trying to figure out how much Johnny & Sally will receive. That’s now how tax planning is done. The planning aspect is giving the fiduciaries flexibility to deal with the tax problems when they arise and constructing the vehicles to insulate the assets. Among other strategies, but those are the big ones in trusts & estates.
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Re: Interactive Estate/Trust/Beneficiary CALCULATOR? [NY]

Post by celia »

Even if you had such a “calculator”, there are things you can’t predict/ control such as a beneficiary dying right before you or disclaiming part/ all of the assets.

Accounting for various (possibly changing) state estate rules and tax brackets would be a major headache too.
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Re: Interactive Estate/Trust/Beneficiary CALCULATOR? [NY]

Post by nyc212 »

Lee_WSP wrote: Fri Jul 08, 2022 1:43 pm You’re both looking at it backwards. You’re trying to figure out how to get $X to Johnny & Sally or trying to figure out how much Johnny & Sally will receive. That’s now how tax planning is done.
Yes, that is part of it. But the situation becomes more complex when it is not ONE or TWO beneficiaries, but FIVE or SIX or more.
I view estate planning like budgeting. You have to run the numbers to the end, and under different scenarios.
Lee_WSP wrote: Fri Jul 08, 2022 1:43 pm The planning aspect is giving the fiduciaries flexibility to deal with the tax problems when they arise and constructing the vehicles to insulate the assets. Among other strategies, but those are the big ones in trusts & estates.
Lee -- That sounds very abstract. Granted that we should "giv[e] the fiduciaries flexibility to deal with the tax problems when they arise and constructing the vehicles to insulate the assets".

I can't imagine a mom and pop restaurant owner or a Fortune 500 corporation bases their futures on "flexibility" in lieu of running numbers. All companies have to run the numbers. Public companies share their estimates as "guidance" to the public.

I've spent the last week working with an attorney, revising our RLTs and when I manually ran the numbers for the various beneficiaries, I encountered MANY errors/unintended provisions. I think forcing yourself to run the numbers helps pinpoint portions of estate documents that need to be revised/clarified.

By way of example, I think 99% of grantors do not know/understand that:
- If you fund a Bypass Trust with Retirement assets, a separate Disclaimer Trust is created.
- If the Grantor does not make specific dispositive provisions for the Disclaimer Trust assets, it waterfalls to the Residue/Remainder and is distributed pro rata as separate (multiple) IRAs, etc.

The devil is in the details. Gotta run the numbers to find the weak points of the estate plan.
Appreciate you weighing in.

# # # # # # # # #
Additional Note. I just had a thought. Running the numbers matters less if your estate is (1) well below the Federal and State exemption amount and (2) your state has portability.

Conversely, (1) if your estate value is close to the state Estate Exemption amount, (2) if you state has a "cliff" and (3) if your state does not have portability, then must run numbers, firstly to optimize the assets to fund the first to die spouse's Bypass Trust ,and secondly to estimate the bequests to various beneficiaries.

Maybe I am the rare casualty of the perfect storm of (1) assets close to the state's exemption amount, (2) a state that has a cliff, (3) a state with no portability and (4) my spouse and I have more than two beneficiaries.

So, one question to ask is, under what circumstances is it necessary to run numbers.
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Re: Interactive Estate/Trust/Beneficiary CALCULATOR? [NY]

Post by afan »

I don't think you are that rare.

As I indicated, if you want to maximize the after tax money to heirs, even if there is only one, you have to decide whether to reduce your taxable estate by doing Roth conversions. You have to compare your expected future tax brackets to those of your heirs. If there is more than one heir, then they could be in different brackets.

Will you move to a state with different income and death taxes? Should you? In what states will your heirs live and what tax regimes will they face? Are they better off getting assets in irrevocable trusts or outright? Depends a lot on their incomes, their states and their lines of work.

It is easy to see why there apparently is no such software. It would require building in so many different sets of state tax laws and juggling so many factors that it may be impossible to optimize.

Running a scenario, entering the result in a spreadsheet, running another scenario and adding it to the sheet may be the best you can do. That forces you to do each one by hand and make some sort of system for how to account for future tax liabilities for heirs.

You cannot leave it to your executor to decide to do a series of Roth conversions over the 10 years leading up to your death. It is too late. There could be millions of dollars at stake.

You cannot leave it to your executor to decide whether to set up an irrevocable trust during life or to site it where there would be no state taxes. By the time the executor comes along, it is too late. There could be millions of dollars at stake.

Same for establishing a SLAT. "Wait for the executor" is not a solution.

What high basis assets does one have that would be perfect for putting in a trust during life? Should the proceeds of a liquidity event be kept in the owners' names? Or should that money go into an irrevocable trust as cash, to be invested there? No stepped up basis issues.

I don't see how one can avoid making these decisions in life. Waiting until death and having executors and trustees deal with it then throws away the opportunities to do the planning.
Last edited by afan on Fri Jul 08, 2022 5:29 pm, edited 1 time in total.
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Lee_WSP
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Re: Interactive Estate/Trust/Beneficiary CALCULATOR? [NY]

Post by Lee_WSP »

nyc212 wrote: Fri Jul 08, 2022 3:45 pm So, one question to ask is, under what circumstances is it necessary to run numbers.
Diminution based planning. Ie living irrevocable trusts.

Gifting planning.

Similar scenarios to the above.

Your case where it appears you want to give some beneficiaries a fractional share and some a pecuniary share.

Unfortunately running the numbers is only possible as a flow chart like exercise. You have to know the three plans you’re comparing. Any more than three options and it gets very complicated.
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