WoodSpinner wrote: ↑Thu Aug 10, 2017 10:22 pm
Went to see an attorney about doing a trust and was quoted a price of $3200
for a trust, will, PoAs etc.
She advised against
having the trust be beneficiaries of my 401K/ IRA (which is 80% of my estate, mid 7 figures).
Suggested we put the house and the Taxable account into the trust.
We live in CA which does have some nasty probate costs, but best I can tell there won't be anything that has to go through probate. All of the accounts have PoD beneficiaries (wife first, then daughter) and alternates set up. House is jointly owned with my wife.
I do have a current will (Nola Press Willmaker) and have been revising it regularly.
I do not expect to be hit with Fed or State Estate taxes (would love to have to deal with that problem
Seems to me that $3200 for a trust is overkill to protect a small part of the estate.
For $59 you can do a simple Living Trust through Nolo and protect against the probate risk of both My wife and I dying at the same time and leaving my daughter to deal with the house. I have read Beyond the Grave ( great book) but don't see any real complexities that I have to deal with at this point. I trust both of them to manage the money ( with some help from an FA).
- - Am I missing any significant advantages?
- Any missing risks?
- Can I trust Nolo Press to put together the trust/willdocuments with the right rigor?
-Any other questions I should be researching?
The question in the subject line is probably the least important issue, so I'll deal with it last.
Condon's book is useful. However, he focuses on the two end points (providing for children outright and providing for children in trusts that they don't control). Most of our clients opt for a middle ground, where they provide for their children in trusts that the children control.
You said your retirement benefits are in the mid 7 figures. I've assumed that they're $5.5 million, since that's the midpoint between $1 million and $9,999,999. Since you said that your retirement benefits are 80% of your assets, I've assumed that your other assets are about $1.4 million, so that your total assets are about $7 million.
FIREchief wrote: ↑Thu Aug 10, 2017 10:50 pm
... Did she mention a separate trust specifically to receive these qualified retirement plan assets? If she is unfamiliar with such trusts, then you need to find a better attorney.
You've assumed that the original poster and his wife are providing for their daughter in trust rather than outright. Our clients almost always provide for their children in trust rather than outright. This keeps the children's inheritances out of their estates for estate tax purposes. That's no longer relevant for most people, but for a $7 million inheritance that's likely to be important. Providing for the daughter in trust rather than outright will also protect her inheritance against her creditors and spouses.
While a lawyer who can do an estate plan for $3,200 may be sufficient for many couples, it's not reasonable to expect her to be familiar with trusts for retirement benefits.
FIREchief wrote: ↑Fri Aug 11, 2017 12:15 am
... Perhaps the most ideal approach is to maximize Roth conversions so that RMDs held (accumulated) within the trust do not generate significant tax liabilities for the trust. ... the first-to-die spouse could leave a meaningful amount of retirement plan assets directly to your child (in trust) so as to mitigate eventual estate taxes payable by the surviving spouse.
While there are lots of benefits to a Roth conversion, in this case the original poster may not have sufficient nonretirement assets to pay the tax on a Roth conversion.
Whether to leave some of the retirement benefits to the daughter at the first death is complicated. Most married people leave their retirement benefits to the spouse so that the spouse can roll them over, possibly do Roth conversions, name new beneficiaries, and get a longer stretch. For example, if the spouse lives long enough, it may make sense for the spouse to leave some or all of the retirement benefits to or in trust for the grandchildren. On the other hand, the portability amount is not indexed for inflation, and there's no portability for the GST exemption.
FIREchief wrote: ↑Fri Aug 11, 2017 12:22 am
... I don't think $3200 is too much to pay for a robust and meaningful estate plan. My concern is that the lawyer selling this to the OP apparently is not familiar with qualified retirement plan trusts and may just be selling a "turn the crank" boilerplate A/B trust. I've encountered several such "trust mills" among local attorneys (very nicely dressed folks in nice offices in nice parts of town), but by the end of the initial consultations I concluded that I knew more about these things from my own research than they appeared to know from their law school, continuing education, etc. My favorite litmus test was to ask them if they knew who Natalie Choate was. Do you know who Natalie is?
Again, while a lawyer who can do an estate plan for $3,200 may be sufficient for many couples, you can't expect to get one who's familiar with Natalie at that price level.
letsgobobby wrote: ↑Fri Aug 11, 2017 12:33 am
... Bruce Steiner has also written about trusts for retirement accounts and does post here regularly. ...
Thanks for the kind words.
Here's my article in the March 2004 issue of BNA Tax Management's Estates, Gifts & Trusts Journal on trusts as beneficiaries of retirement benefits: https://www.elderlawanswers.com/Documen ... nefits.pdf
; and here's my article in the April 2013 issue of Trusts & Estates on Roth conversions: http://kkwc.com/wp-content/uploads/2015 ... r_ATRA.pdf
FIREchief wrote: ↑Fri Aug 11, 2017 3:47 am
... A conduit trust forces the RMDs to be paid out to the beneficiary(s) as they are withdrawn from the inherited IRAs. An accumulation trust allows some or all of the RMDs to be retained within the trust. Since a conduit trust forces a stream of payouts, it doesn't provide robust asset protection. ...
For these reasons, conduit trusts for children or grandchildren rarely make any sense. I don't know why there's so much discussion of this point.
afan wrote: ↑Fri Aug 11, 2017 8:47 am
... I suggest you do what many of us bsteiner groupies do: Search for and read all his posts. There is a tremendous amount of expert information, explained for a lay readership. Much easier going than Choate's book. ....
Thanks for the kind words.
FIREchief wrote: ↑Fri Aug 11, 2017 4:21 pm
afan wrote:... Last year the Senate Finance Committee unanimously passed a provision that would eliminate the lifetime stretch for inherited retirement assets. If that makes it into law, then the conduit trust would do nearly nothing. Beneficiaries would be forced to take all the money out over a short time and then remove it from the trust.
Although we can't discuss the topic here, folks who are interested may wish to review the following paper:
https://www.ataxplan.com/wp-content/upl ... ebsite.pdf
I think the practical approach is to draft based on current law, and revisit it if this change is enacted.
pfrank wrote: ↑Fri Aug 11, 2017 5:02 pm
... Once we had kids, we met with an estate attorney. ... He did the revocable trust, wills, power of attorney, living will, and health care proxies for $4,500 (I live in MA). ...
Revocable trusts used to make sense in Massachusetts. The probate process in Massachusetts used to be more complicated. However, Massachusetts enacted the Uniform Probate Code effective in 2012, which greatly simplified the process. Massachusetts also used to require trusts under a Will to file periodic accountings. However, Massachusetts also adopted the Uniform Trust Code effective in 2012, which eliminated this requirement. So in most cases there's no longer any need for a revocable trust in Massachusetts.
Turning to the subject line for this thread, you can put the same dispositive terms in your Will or in a revocable trust. The benefits of doing a good job with respect to the dispositive provisions are likely to be many times greater than any difference in cost between doing or not doing a revocable trust.
While people often discuss costs, the issue is more a matter of nuisance than a matter of cost. There's much more to do with the court in California than in most states.
Professor David Horton of the University of California, Davis, School of Law examined every estate in Alameda County (Oakland) in a single year, and wrote about it in the Georgetown Law Review: https://georgetownlawjournal.org/articl ... robate/pdf
. His analysis is balanced, and is thus worth reading.
In this case, the spouse or daughter would probably be the executor, and probably wouldn't charge executor's commissions (fees). If the lawyer works based on the statutory schedule for attorneys' fees, since the retirement benefits are 80% of the estate, and pass outside the Will, if the legal fees are based on the statutory schedule, and applied only to the probate assets, they're likely to be on the low side for an estate of this size.
Nevertheless, revocable trusts are commonly used in California. So the lawyer may be able to do them more efficiently than in a state where they're not commonly used.
Again, this is probably the least important issue.