Simple Last Will/Testamentary Trust Question

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davos8923
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Simple Last Will/Testamentary Trust Question

Post by davos8923 » Fri Mar 15, 2019 2:42 pm

Hello,

I'm creating a basic 'last will and testament' through Legalzoom and have a couple questions.

My wife and I have financial assets and life insurance, and a small child. We have a guardian in place as per the will should we both pass before child is 18, and are creating a testamentary trust (also as part of the will through Legalzoom) for our child to receive the money at some point in their 20s (still deciding when exactly). We're going to appoint the guardian as trustee, and this leads me to my questions:

1. I know the trustee would have "access" to the funds for the child's use (food, clothes, etc.) while raising them, but are there stipulations on this? As in, let's say our child isn't to receive their money until age 25 but wants to go to college at 18. Would the trustee be able to use the child's money for college tuition?

2. My wife is my primary (and only) beneficiary on my life insurance and financial accounts. Is this sufficient given a will is in place? As in, if we both passed away tomorrow, would everything then just go to our child's trust as per the will? Or does the "trust" need to be explicitly stated as a beneficiary? If so, I'm unsure how to even do this given the trust wouldn't technically exist yet (it's only a 'thing' if we pass away).

Thanks! :)

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davos8923
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Re: Simple Last Will/Testamentary Trust Question

Post by davos8923 » Fri Mar 15, 2019 2:45 pm

Ugh, sorry, can a mod please move this to the personal finance sub-forum?

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RickBoglehead
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Re: Simple Last Will/Testamentary Trust Question

Post by RickBoglehead » Fri Mar 15, 2019 2:52 pm

Any stipulations in a trust as to use of funds need to be spelled out, or the trustee uses their judgement and fiduciary responsibility.

If you go first, and your insurance and financial accounts go to your wife, then her will leaves everything to the trust, the trust gets it all, depending what is left.

If she goes first, do you get her accounts and life insurance?

What if you pass simultaneously?

I would not use a website or software to protect my minor child.... A testamentary trust does not avoid probate.

IANAL
Last edited by RickBoglehead on Fri Mar 15, 2019 3:10 pm, edited 1 time in total.
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Re: Simple Last Will/Testamentary Trust Question

Post by sport » Fri Mar 15, 2019 2:57 pm

RickBoglehead wrote:
Fri Mar 15, 2019 2:52 pm
I would not use a website or software to protect my minor child....
Absolutely. If the will/trust is ever needed, there is no way to correct any problems.

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Re: Simple Last Will/Testamentary Trust Question

Post by bsteiner » Fri Mar 15, 2019 3:14 pm

davos8923 wrote:
Fri Mar 15, 2019 2:42 pm
...
1. I know the trustee would have "access" to the funds for the child's use (food, clothes, etc.) while raising them, but are there stipulations on this? As in, let's say our child isn't to receive their money until age 25 but wants to go to college at 18. Would the trustee be able to use the child's money for college tuition?
...
It depends on what the Will says. You can include whatever provisions you want as to when and for what purposes the trustees may, must or may not make distributions.
davos8923 wrote:
Fri Mar 15, 2019 2:42 pm
...
2. My wife is my primary (and only) beneficiary on my life insurance and financial accounts. Is this sufficient given a will is in place? As in, if we both passed away tomorrow, would everything then just go to our child's trust as per the will? Or does the "trust" need to be explicitly stated as a beneficiary? If so, I'm unsure how to even do this given the trust wouldn't technically exist yet (it's only a 'thing' if we pass away).
...
The life insurance passes in accordance with the beneficiary designation on file with the insurance company. If there's no beneficiary (including if your wife is the only beneficiary but she doesn't survive you), it passes in accordance with the default provisions of the policy, probably to your estate.

JGoneRiding
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Re: Simple Last Will/Testamentary Trust Question

Post by JGoneRiding » Fri Mar 15, 2019 3:19 pm

Ianal. Generally the trusts include an "educational " stipulation so as long as it's a health and welfare and education trust should be non issue.

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Re: Simple Last Will/Testamentary Trust Question

Post by LadyGeek » Fri Mar 15, 2019 3:24 pm

davos8923 wrote:
Fri Mar 15, 2019 2:45 pm
Ugh, sorry, can a mod please move this to the personal finance sub-forum?
Sure. This thread is now in the Personal Finance (Not Investing) forum (trust).

To get our attention sooner, report the post using the ! in the top-right corner of the post. One of the reasons is "Wrong forum". (Thanks to the member who did just that.)

Update: davos8923 had a duplicate post, which I've removed. I merged the one reply (JGoneRiding) into this thread.
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senex
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Re: Simple Last Will/Testamentary Trust Question

Post by senex » Fri Mar 15, 2019 3:36 pm

RickBoglehead wrote:
Fri Mar 15, 2019 2:52 pm
What if you pass simultaneously?
If his wife is dead, the insurance company can't pay her, so they probably pay the money to his estate. The will controls who gets the estate. It sounds like his will says "all to wife, else all to child" -- if so, then the child would get the proceeds either in trust (if the will creates a trust) or as UTMA (if the will doesn't create a trust). (I'm not positive on the UTMA point; please correct me if I'm wrong)

If OP has modest assets (unclear) and wants to leave all to wife, else all to child -- I don't understand the skepticism about software. I have high confidence in software for simple, modest situations.

An attorney could help you micromanage the trust terms, and could make smoother the trust creation & administration, but that costs a lot of money. Whether it's worth it depends on your financial situation, priorities, health, and risk tolerance.

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davos8923
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Re: Simple Last Will/Testamentary Trust Question

Post by davos8923 » Fri Mar 15, 2019 3:53 pm

senex wrote:
Fri Mar 15, 2019 3:36 pm
RickBoglehead wrote:
Fri Mar 15, 2019 2:52 pm
What if you pass simultaneously?
If his wife is dead, the insurance company can't pay her, so they probably pay the money to his estate. The will controls who gets the estate. It sounds like his will says "all to wife, else all to child" -- if so, then the child would get the proceeds either in trust (if the will creates a trust) or as UTMA (if the will doesn't create a trust). (I'm not positive on the UTMA point; please correct me if I'm wrong)

If OP has modest assets (unclear) and wants to leave all to wife, else all to child -- I don't understand the skepticism about software. I have high confidence in software for simple, modest situations.

An attorney could help you micromanage the trust terms, and could make smoother the trust creation & administration, but that costs a lot of money. Whether it's worth it depends on your financial situation, priorities, health, and risk tolerance.
senex,

Thank you. You are correct; it's "all to wife, else all to child", and would then go to the testamentary trust as per the will. So I guess that said I don't need a secondary beneficiary.

Assets would be at least $2 million or so (much of which would be life insurance payouts), depending on when we hypothetically died.

My research has shown the same as what you said; the software should be fine for my simple situation.

QUESTION: I've seen it mentioned here (earlier in this thread) that a trust doesn't avoid probate. Given I can't add a minor as a beneficiary, what other option would I have to avoid "probate"?

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CAsage
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Re: Simple Last Will/Testamentary Trust Question

Post by CAsage » Fri Mar 15, 2019 4:20 pm

Maybe put all your assets in a Living trust, with you and your wife as current trustees, then a list of successor trustees, and have the life insurance payable to the Trust? Note that I am free associating and guessing here.... Depending on your state, probate is an over-rated fear. Bad in CA, easy peasy in other states...… Note that you are protecting against a long shot.
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delamer
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Re: Simple Last Will/Testamentary Trust Question

Post by delamer » Fri Mar 15, 2019 5:15 pm

davos8923 wrote:
Fri Mar 15, 2019 3:53 pm
senex wrote:
Fri Mar 15, 2019 3:36 pm
RickBoglehead wrote:
Fri Mar 15, 2019 2:52 pm
What if you pass simultaneously?
If his wife is dead, the insurance company can't pay her, so they probably pay the money to his estate. The will controls who gets the estate. It sounds like his will says "all to wife, else all to child" -- if so, then the child would get the proceeds either in trust (if the will creates a trust) or as UTMA (if the will doesn't create a trust). (I'm not positive on the UTMA point; please correct me if I'm wrong)

If OP has modest assets (unclear) and wants to leave all to wife, else all to child -- I don't understand the skepticism about software. I have high confidence in software for simple, modest situations.

An attorney could help you micromanage the trust terms, and could make smoother the trust creation & administration, but that costs a lot of money. Whether it's worth it depends on your financial situation, priorities, health, and risk tolerance.
senex,

Thank you. You are correct; it's "all to wife, else all to child", and would then go to the testamentary trust as per the will. So I guess that said I don't need a secondary beneficiary.

Assets would be at least $2 million or so (much of which would be life insurance payouts), depending on when we hypothetically died.

My research has shown the same as what you said; the software should be fine for my simple situation.

QUESTION: I've seen it mentioned here (earlier in this thread) that a trust doesn't avoid probate. Given I can't add a minor as a beneficiary, what other option would I have to avoid "probate"?
For the relevant accounts, my primary beneficiary is my husband and the secondary beneficiaries are the testamentary trusts for each of my kids (50% per kid).

These beneficiary designations are on file with the institutions holding my accounts and were set up to sync with the provisions of my will.

There is no intermidiate step where the asset goes to my kids and THEN gets put into a trust. I would proceed carefully.

apple44
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Re: Simple Last Will/Testamentary Trust Question

Post by apple44 » Fri Mar 15, 2019 5:23 pm

I'm an attorney, and my advice to you is: Find a real lawyer who specializes in wills and estates!

Like I said, I'm an attorney but I don't practice wills and estates law, and I thought how hard could it be? My family situation is simple! I could do some research and figure it out! So I did it for my parents, and my father passed away, and...... well let's just say I don't tell people I did my father's will!

Wills and Estates law is actually very very complicated (partly due to its long history) and it varies state by state. In your original post, you didn't even mention which state you are in, which indicates you didn't know that it is a very significant factor. So please just find an attorney who knows this stuff!

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Re: Simple Last Will/Testamentary Trust Question

Post by Nutmeg » Fri Mar 15, 2019 9:29 pm

apple44 wrote:
Fri Mar 15, 2019 5:23 pm
I'm an attorney, and my advice to you is: Find a real lawyer who specializes in wills and estates!

Like I said, I'm an attorney but I don't practice wills and estates law, and I thought how hard could it be? My family situation is simple! I could do some research and figure it out! So I did it for my parents, and my father passed away, and...... well let's just say I don't tell people I did my father's will!

Wills and Estates law is actually very very complicated (partly due to its long history) and it varies state by state. In your original post, you didn't even mention which state you are in, which indicates you didn't know that it is a very significant factor. So please just find an attorney who knows this stuff!
I agree completely. I am a retired attorney who didn’t specialize in trusts and estates but i have learned a bit about them as a trustee! My spouse and I paid a specialist to prepare new estate planning documents every time we moved to a new state, and then once when our circumstances changed for another reason. We did this because every state’s laws are different, because I recognize that I don’t know what I don’t know, and because it was worth the cost to us in order to protect our children.

Also, if a mistake is made in a testamentary trust, it can be problematic to amend it after it has been created. We amended the trust for which I am a trustee once due to extenuating circumstances, but it was expensive and required the signature of every beneficiary (or, for minors, a representative).

123
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Re: Simple Last Will/Testamentary Trust Question

Post by 123 » Sat Mar 16, 2019 12:48 pm

Sounds like your use of Legalzoom is a Legalzero.
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FBN2014
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Re: Simple Last Will/Testamentary Trust Question

Post by FBN2014 » Mon Mar 18, 2019 9:50 am

With a $2 million estate you would be wise to use an estate planning attorney. It should cost 3-6K but will be money well spent.
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Re: Simple Last Will/Testamentary Trust Question

Post by smackboy1 » Mon Mar 18, 2019 11:35 am

davos8923 wrote:
Fri Mar 15, 2019 2:42 pm
I'm creating a basic 'last will and testament' through Legalzoom and have a couple questions.

My wife and I have financial assets and life insurance, and a small child. We have a guardian in place as per the will should we both pass before child is 18, and are creating a testamentary trust (also as part of the will through Legalzoom) for our child to receive the money at some point in their 20s (still deciding when exactly). We're going to appoint the guardian as trustee, and this leads me to my questions:

1. I know the trustee would have "access" to the funds for the child's use (food, clothes, etc.) while raising them, but are there stipulations on this? As in, let's say our child isn't to receive their money until age 25 but wants to go to college at 18. Would the trustee be able to use the child's money for college tuition?

2. My wife is my primary (and only) beneficiary on my life insurance and financial accounts. Is this sufficient given a will is in place? As in, if we both passed away tomorrow, would everything then just go to our child's trust as per the will? Or does the "trust" need to be explicitly stated as a beneficiary? If so, I'm unsure how to even do this given the trust wouldn't technically exist yet (it's only a 'thing' if we pass away).
Regardless of whether the estate plan is created using software or a lawyer, I find that people often fail to plan for unlikely but catastrophic scenarios. People just don't know what they don't know. This is where an experienced estates and trusts lawyer can add value because they can anticipate the unlikely scenarios and a client can ask them for answers to open ended questions. Here are some thoughts:

- If the guardian is also the trustee is there a check and balance against them misappropriating funds? Who decides if a home remodel or expensive vacation should be paid for by the trust?

- The Cinderella scenario. Wife predeceases. Husband remarries. New wife spends all the money on her children. Or maybe husband is convinced to change his will (or maybe he becomes incompetent and new wife wielding a durable POA changes his will) leaving everything to new wife. Child gets disinherited.

- Husband and wife are responsible for an accident. Wife survives but is permanently disabled and needs around the clock medical care. And they are successfully sued for a judgment that exceeds the insurance coverage.

- At age 40 child marries a gold digger then gets divorced.

- A $2MM insurance policy owned by an irrevocable life insurance trust (ILIT) can have many advantages. Can an ILIT be created using software?

- What if state or fed estate taxes change and the exemption <$1MM?

etc.
Disclaimer: nothing written here should be taken as legal advice, but I did stay at a Holiday Inn Express last night.

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Re: Simple Last Will/Testamentary Trust Question

Post by Spirit Rider » Mon Mar 18, 2019 12:15 pm

sport wrote:
Fri Mar 15, 2019 2:57 pm
RickBoglehead wrote:
Fri Mar 15, 2019 2:52 pm
I would not use a website or software to protect my minor child....
Absolutely. If the will/trust is ever needed, there is no way to correct any problems.
There are many reasons not to use a website or software, but this is not one of them. When a will/trust are used assuming they are valid under state law, the resolution of any drafting problems is the same regardless of the source of the drafting of the will/trust. My own personal experience as an executor/trustee is that general practice lawyers with minimal estate planning experience can be problematic.

Most wills/trusts drafted by estate planning lawyers are done so with the use of software. The differences are in the sophistication of the software (professional/individual) and the estate/trust knowledge of the user (lawyer/individual). The main reason for not using websites or software is the size and complexity of the estate. Individuals don't know what they don't know and don't know how to make the correct choices/entries.

This is similar to using tax software vs. a professional tax preparer. Let's take TurboTax. There is very little that a CPA can do on a tax return, that TurboTax can't do and what they can't do is usually disclosed. However, it is relatively easy to file an incorrect tax return with TurboTax or any other tax software. The user might no know enough of the underlying factor or even know that such a factor exists and they make incorrect entries. Garbage in garbage out.

The same is true of wills/trusts. If you have a very simple set of facts and circumstances and the amount of money involved is low then in either situation doing without professional assistance may be appropriate. However, once the complexity or dollar value increases, it is just not worth the risk.

The real value of an estate/trust lawyer is their practical knowledge. They know what questions to ask, ones you haven't even thought about and the potential ramifications of different choices. The likely will/trust documents will be generated by software with maybe some tweaks here or there.

In my opinion, the worst place to have a will/trust drafted is through a general practice lawyer where a small part of their services is estate planning. At least Legal Zoom and Nolo are relatively up to date with each state's will/trust law. You best bet is a law firm specializing in estate planning.

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