Estate Planning for Young Family

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
Jon_PassiveInvestor
Posts: 212
Joined: Sat Mar 12, 2011 10:23 pm

Estate Planning for Young Family

Post by Jon_PassiveInvestor » Mon Jan 13, 2020 1:05 pm

I recently sold my business for a large sum (over 1 million) and it now represents all our cash assets. We also own a car and our home. I'm 31 and my wife is 30. Our son is 4. Zero debt.

What would the easiest and cheapest process be for setting up an estate?

For our Vanguard (Roth and taxable) accounts, we have each spouse listed as the beneficiary and the same for life insurance policies.

Thank you!

fabdog
Posts: 884
Joined: Wed Jan 16, 2013 1:59 pm
Location: Williamsburg VA

Re: Estate Planning for Young Family

Post by fabdog » Mon Jan 13, 2020 1:14 pm

The beneficiary designations are fine, the biggest issue you have to address is who would you like to take care of your son if something happens to both of you, and how to direct the estate to handle the money in that case.

Ask people you trust locally who is a good estate attorney to consult with. You could go with anything from a will that creates a trust and nominates guardians for your son if something happens to setting up a living trust now that handles that as well

Mike

User avatar
JoeRetire
Posts: 4528
Joined: Tue Jan 16, 2018 2:44 pm

Re: Estate Planning for Young Family

Post by JoeRetire » Mon Jan 13, 2020 1:29 pm

Jon_PassiveInvestor wrote:
Mon Jan 13, 2020 1:05 pm
What would the easiest and cheapest process be for setting up an estate?
That depends. You have an estate - all of your assets. It is already "set up". So the cheapest thing would be to do nothing. But presumably you mean something different?

Everyone with children should have a will.
Virtually everyone with children (or others dependent on their continued income) should have enough life insurance.
IMHO, virtually everyone with children should be funding a 529 Plan.

IMHO, you should at least be talking with an estate attorney. You may also want to spend a few hours with a fee-only fiduciary financial planner.
Very Stable Genius

Topic Author
Jon_PassiveInvestor
Posts: 212
Joined: Sat Mar 12, 2011 10:23 pm

Re: Estate Planning for Young Family

Post by Jon_PassiveInvestor » Mon Jan 13, 2020 1:40 pm

JoeRetire wrote:
Mon Jan 13, 2020 1:29 pm
Jon_PassiveInvestor wrote:
Mon Jan 13, 2020 1:05 pm
What would the easiest and cheapest process be for setting up an estate?
That depends. You have an estate - all of your assets. It is already "set up". So the cheapest thing would be to do nothing. But presumably you mean something different?

Everyone with children should have a will.
Virtually everyone with children (or others dependent on their continued income) should have enough life insurance.
IMHO, virtually everyone with children should be funding a 529 Plan.

IMHO, you should at least be talking with an estate attorney. You may also want to spend a few hours with a fee-only fiduciary financial planner.
Then I’m good? I have a will and lots of life insurance. Maybe I thought an “estate” was a specific type of structure. Vanguard asked me if I wanted to name my spouse or my estate as the main beneficiary. What is that estate referencing then?

fabdog
Posts: 884
Joined: Wed Jan 16, 2013 1:59 pm
Location: Williamsburg VA

Re: Estate Planning for Young Family

Post by fabdog » Mon Jan 13, 2020 3:13 pm

Then I’m good? I have a will and lots of life insurance. Maybe I thought an “estate” was a specific type of structure. Vanguard asked me if I wanted to name my spouse or my estate as the main beneficiary. What is that estate referencing then?
If your will documents you and your spouses wishes on custody for your son, then yes.

When Vanguard says spouse or estate, they are asking if you want to leave it to your spouse or estate. In this case your "estate" would any assets that weren't passed by beneficiary designation, and would constitute your estate.

Mike

Topic Author
Jon_PassiveInvestor
Posts: 212
Joined: Sat Mar 12, 2011 10:23 pm

Re: Estate Planning for Young Family

Post by Jon_PassiveInvestor » Mon Jan 13, 2020 4:21 pm

fabdog wrote:
Mon Jan 13, 2020 3:13 pm
Then I’m good? I have a will and lots of life insurance. Maybe I thought an “estate” was a specific type of structure. Vanguard asked me if I wanted to name my spouse or my estate as the main beneficiary. What is that estate referencing then?
If your will documents you and your spouses wishes on custody for your son, then yes.

When Vanguard says spouse or estate, they are asking if you want to leave it to your spouse or estate. In this case your "estate" would any assets that weren't passed by beneficiary designation, and would constitute your estate.

Mike
But what if we both die? Where would Vanguard assets go? Would my will designate that? Right now, we have my parents are custodians of the assets until our kids are 18.

fabdog
Posts: 884
Joined: Wed Jan 16, 2013 1:59 pm
Location: Williamsburg VA

Re: Estate Planning for Young Family

Post by fabdog » Mon Jan 13, 2020 4:24 pm

But what if we both die? Where would Vanguard assets go? Would my will designate that? Right now, we have my parents are custodians of the assets until our kids are 18
Your will can designate where you want the assets to go, if you both pass, and there is no living beneficiary. You can set it up for the assets to go into a trust that your parents manage for the kids, into a UTMA account that your parents can manage. If your will doesn't say where they go, it follows the laws of your state on how those assets are distributed.

Read your will and see what it says about assets if you both die... if it doesn't say... get it updated

Mike

Topic Author
Jon_PassiveInvestor
Posts: 212
Joined: Sat Mar 12, 2011 10:23 pm

Re: Estate Planning for Young Family

Post by Jon_PassiveInvestor » Mon Jan 13, 2020 4:36 pm

fabdog wrote:
Mon Jan 13, 2020 4:24 pm
But what if we both die? Where would Vanguard assets go? Would my will designate that? Right now, we have my parents are custodians of the assets until our kids are 18
Your will can designate where you want the assets to go, if you both pass, and there is no living beneficiary. You can set it up for the assets to go into a trust that your parents manage for the kids, into a UTMA account that your parents can manage. If your will doesn't say where they go, it follows the laws of your state on how those assets are distributed.

Read your will and see what it says about assets if you both die... if it doesn't say... get it updated

Mike
So, is setting up a trust not worth my time? I'm in Texas so we already don't have any estate taxes.

fabdog
Posts: 884
Joined: Wed Jan 16, 2013 1:59 pm
Location: Williamsburg VA

Re: Estate Planning for Young Family

Post by fabdog » Mon Jan 13, 2020 5:23 pm

I'm afraid I don't know. It's up to you and what you want to accomplish. We have one to manage our assets and make life simpler for our daughter to manage when we both pass. But that doesn't make it right or wrong for you.

Perhaps do some reading on the topic and/or see a lawyer. And what's the best option for you now may not be the best option some years down the road

Mike

User avatar
JoeRetire
Posts: 4528
Joined: Tue Jan 16, 2018 2:44 pm

Re: Estate Planning for Young Family

Post by JoeRetire » Mon Jan 13, 2020 9:20 pm

Jon_PassiveInvestor wrote:
Mon Jan 13, 2020 1:40 pm
Then I’m good? I have a will and lots of life insurance.
Maybe you are good. Maybe there's more you should do, or should do more effectively.

You don't know what you don't know.
Maybe I thought an “estate” was a specific type of structure.
Nope. Nothing to do with structure.
Vanguard asked me if I wanted to name my spouse or my estate as the main beneficiary. What is that estate referencing then?
That estate is the collection of assets you have when you pass.

The vanguard is asking if your wife gets everything when you pass or if everything goes into your estate and is then divided up according to your will instead.
Very Stable Genius

User avatar
JoeRetire
Posts: 4528
Joined: Tue Jan 16, 2018 2:44 pm

Re: Estate Planning for Young Family

Post by JoeRetire » Mon Jan 13, 2020 9:22 pm

Jon_PassiveInvestor wrote:
Mon Jan 13, 2020 4:36 pm
So, is setting up a trust not worth my time? I'm in Texas so we already don't have any estate taxes.
That depends on what you want to achieve.

Sometimes a trust is necessary. Sometimes not.
Very Stable Genius

User avatar
cchrissyy
Posts: 17
Joined: Fri May 05, 2017 10:35 pm

Re: Estate Planning for Young Family

Post by cchrissyy » Mon Jan 13, 2020 9:31 pm

if i was you, I'd meet an estate lawyer to accomplish the following
- medical directives and power of attorney. the law probably presumes the spouse gets this but maybe your wishes are different or maybe you are both incapacitated at the same time. what do you want to happen in that case?
- custody for the child
- if the child is inheriting 100% of the assets, then make a trust which will hold everything until a certain age and decide who will manage it. Should it be the person with custody or somebody else?

beth65
Posts: 112
Joined: Mon May 08, 2017 1:51 pm

Re: Estate Planning for Young Family

Post by beth65 » Mon Jan 13, 2020 9:46 pm

A will only covers you if you die. A will does not cover all of the specifics of what happens if you are incapacitated, or if you die and your spouse remarries, but you want to ensure that your money goes to only your children and not any future stepchildren of your spouse. Probate can be expensive and very time-consuming.

I cannot recommend this book highly enough. The author, an estate planning attorney, gives many great real-life scenarios. Asset planning is very important, and a boiler plate will likely won’t protect your assets:

https://www.amazon.com/Estate-Planning- ... 1975780752

senex
Posts: 336
Joined: Wed Dec 13, 2017 4:38 pm

Re: Estate Planning for Young Family

Post by senex » Mon Jan 13, 2020 11:12 pm

OP, you started by asking about cheapest and easiest. If your will is up to date (including naming guardian for child), cheapest and easiest is to do nothing.

Next level (in my lay opinion) is to redo will to leave child’s inheritance in a trust described in the will (i.e. not created while living). (If your will already says this, great). Doing so allows you to control trustee and conditions/ages for disbursements. Without one, child may get huge lump sum at age 18-21 (varies by state), which many people consider hazardous. The cheap way to redo a will is a software will, which can cover the basics.

After that it becomes a value judgement on optimizations and contingency planning. An attorney (more expensive than software) can help think through scenarios, identify what “else” you ought to know, customize a plan, and optimize various things like asset protection language for trusts. From what I gather informally on Bogleheads, many people with your size estate use an estate attorney. An attorney can simply talk to you and setup a will, or can get as expensive and complicated as you desire.

Texas has free statutory forms for medical directive and power of attorney, so the cheap and easy answer there is to just use those.

A trust created while living can provide some incremental benefits for rare cases like you and wife both alive but incapacitated or other special risks. It can also keep trust assets out of probate, which may be overkill for Texas (which I think I recall reading is not a burdensome probate state). I personally think those benefits are not worth the complexity of creating a trust while living, but I expect in some cases it is prudent.

Royal Blue
Posts: 62
Joined: Wed Dec 18, 2019 4:07 pm

Re: Estate Planning for Young Family

Post by Royal Blue » Tue Jan 14, 2020 6:55 am

cchrissyy wrote:
Mon Jan 13, 2020 9:31 pm
if i was you, I'd meet an estate lawyer to accomplish the following
- medical directives and power of attorney. the law probably presumes the spouse gets this but maybe your wishes are different or maybe you are both incapacitated at the same time. what do you want to happen in that case?
- custody for the child
- if the child is inheriting 100% of the assets, then make a trust which will hold everything until a certain age and decide who will manage it. Should it be the person with custody or somebody else?
I agree with the above. As a father with four kids, I too sold my company and did the necessary estate planning. It costs a few bucks but I sleep better knowing my ducks are in a row!

LookinAround
Posts: 133
Joined: Tue Mar 27, 2018 5:41 am
Location: Chicagoland

Re: Estate Planning for Young Family

Post by LookinAround » Tue Jan 14, 2020 9:20 am

BocaEli wrote:
Tue Jan 14, 2020 6:55 am
cchrissyy wrote:
Mon Jan 13, 2020 9:31 pm
if i was you, I'd meet an estate lawyer to accomplish the following
- medical directives and power of attorney. the law probably presumes the spouse gets this but maybe your wishes are different or maybe you are both incapacitated at the same time. what do you want to happen in that case?
- custody for the child
- if the child is inheriting 100% of the assets, then make a trust which will hold everything until a certain age and decide who will manage it. Should it be the person with custody or somebody else?
I agree with the above. As a father with four kids, I too sold my company and did the necessary estate planning. It costs a few bucks but I sleep better knowing my ducks are in a row!
Another +1

While you don't need to overpay for a high end estate attorney, don't think "cheapest" either. "Lo barato se vuelve caro" is a Spanish saying which means "the cheap becomes expensive". You need someone who will make you think through all possible outcomes and how who you want them handled (e.g. what happens if you and your wife die at or near the same time?) The attorney will also ensure no scenario has to go through probate - which takes time and $$ and can make your finances public record.

It's good to spend the money upfront to ensure
> All your wishes for different outcomes are spelled out and covered
> You keep things out of probate and tax efficient
> You're not forcing someone else to make decisons for you (if both you and wife die at same time)

Topic Author
Jon_PassiveInvestor
Posts: 212
Joined: Sat Mar 12, 2011 10:23 pm

Re: Estate Planning for Young Family

Post by Jon_PassiveInvestor » Tue Jan 14, 2020 9:24 am

LookinAround wrote:
Tue Jan 14, 2020 9:20 am
BocaEli wrote:
Tue Jan 14, 2020 6:55 am
cchrissyy wrote:
Mon Jan 13, 2020 9:31 pm
if i was you, I'd meet an estate lawyer to accomplish the following
- medical directives and power of attorney. the law probably presumes the spouse gets this but maybe your wishes are different or maybe you are both incapacitated at the same time. what do you want to happen in that case?
- custody for the child
- if the child is inheriting 100% of the assets, then make a trust which will hold everything until a certain age and decide who will manage it. Should it be the person with custody or somebody else?
I agree with the above. As a father with four kids, I too sold my company and did the necessary estate planning. It costs a few bucks but I sleep better knowing my ducks are in a row!
Another +1

While you don't need to overpay for a high end estate attorney, don't think "cheapest" either. "Lo barato se vuelve caro" is a Spanish saying which means "the cheap becomes expensive". You need someone who will make you think through all possible outcomes and how who you want them handled (e.g. what happens if you and your wife die at or near the same time?) The attorney will also ensure no scenario has to go through probate - which takes time and $$ and can make your finances public record.

It's good to spend the money upfront to ensure
> All your wishes for different outcomes are spelled out and covered
> You keep things out of probate and tax efficient
> You're not forcing someone else to make decisons for you (if both you and wife die at same time)
Yes, that's where my will designates my Father to manage the assets for my son until he is 18 years old. This is what we want to happen if we both die.

LookinAround
Posts: 133
Joined: Tue Mar 27, 2018 5:41 am
Location: Chicagoland

Re: Estate Planning for Young Family

Post by LookinAround » Tue Jan 14, 2020 2:35 pm

Jon_PassiveInvestor wrote:
Tue Jan 14, 2020 9:24 am
Yes, that's where my will designates my Father to manage the assets for my son until he is 18 years old. This is what we want to happen if we both die.
Do you really mean "will"? As IMHO much better have it in a living trust (or might be another vehicle if an estate lawyer recommends something else in your case)

But sounds like you;re already planning to create a trust. Way to go :thumbsup

Topic Author
Jon_PassiveInvestor
Posts: 212
Joined: Sat Mar 12, 2011 10:23 pm

Re: Estate Planning for Young Family

Post by Jon_PassiveInvestor » Tue Jan 14, 2020 4:42 pm

LookinAround wrote:
Tue Jan 14, 2020 2:35 pm
Jon_PassiveInvestor wrote:
Tue Jan 14, 2020 9:24 am
Yes, that's where my will designates my Father to manage the assets for my son until he is 18 years old. This is what we want to happen if we both die.
Do you really mean "will"? As IMHO much better have it in a living trust (or might be another vehicle if an estate lawyer recommends something else in your case)

But sounds like you;re already planning to create a trust. Way to go :thumbsup
I’m actually sticking with a will here in Texas. Keeping it simple. Probate is a breeze here :)

Post Reply