Estate strategy for my 90+ year old mother - is this right?

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
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Old Sage(brush)
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Estate strategy for my 90+ year old mother - is this right?

Post by Old Sage(brush) »

I am the executor named in mom's estate docs, and have been handling her finances for last 9 years or so since passing of her spouse (my father). They had a trust set up to avoid state estate tax at the time of my father's death, and as part of his probate/estate process the trust was funded. Since that time my mom moved to a state where estate tax is no longer a concern given her level of assets. So, that is the legacy structure. In rough terms, she currently has slightly over $1M in financial assets, which are split 50/50 between the trust and personal investment accounts. Which, btw, are invested roughly 30% equity mutual funds/70% bond funds. Her spend rate net (after SS) is about $75K/year.

I received advice from an estate lawyer that suggested everything she has should be put in the trust. This sounds easy but re-title of everything was more complicated than you would think and as I looked into it I decided there was little benefit. (And, yes, I do not have great confidence in the competency of the estate lawyers I was dealing with). I've done my own research/due diligence and decided instead to have her investment accounts at Vanguard, Fidelity and her bank to all be structured as TOD accounts with beneficiary designations between my two siblings and me, as designated in the will. I've left the trust in place, although I wouldn't be setting it up now, but it just seems like it is ok to leave it, and in the unlikely event she spends down everything from non-trust sources, there would be some protection of assets in the trust. It does cause some administrative inconvenience, separate tax filing for example. My believe is that when she passes it will be relatively easy and efficient to simply distribute assets from the personal investment accounts per the beneficiary designations, distribute assets from the trust per the trust document and otherwise avoid probate since she has virtually no other assets. Am I missing something here, or do wise and experienced people here have other suggestions? Thanks as always for any thoughts.
LeeMKE
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Re: Estate strategy for my 90+ year old mother - is this right?

Post by LeeMKE »

I'm watching this thread as I've had similar advice, always coming from those who would benefit by my estate therefore having need of their services instead of passing assets with TOD.
The mightiest Oak is just a nut who stayed the course.
clip651
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Re: Estate strategy for my 90+ year old mother - is this right?

Post by clip651 »

If you don't trust the advice from the lawyer you've already consulted, consider getting a second opinion. This stuff can be simple or complicated. Details matter.

best wishes,
cj
bsteiner
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Re: Estate strategy for my 90+ year old mother - is this right?

Post by bsteiner »

How can Mom contribute assets to the credit shelter trust under Dad's Will? It would create substantial complexity. She would have a trust that's in part a grantor trust and in part not a grantor trust.

The key issue is whether there's a reasonable chance that any of the children will have a taxable estate, get divorced, outlive his/her spouse and remarry, or want Medicaid. If so, then she should revise her Will to leave her assets and exercise her power of appointment over the credit shelter trust under Dad's Will so the assets will go to the children in separate trusts for their benefit rather than outright. If not, then given the modest amount of each child's share, she could simply leave her estate to her children outright.

In most states other than California, probating a Will shouldn't be difficult. Someone will fill out some forms and submit them with a death certificate and a check for the filing fee. While her estate is modest, it's large enough that unless she's in California it shouldn't be worth worrying about this.

The other possibility on these numbers is Medicaid planning. She could give away some of her assets (either to or in trust for her children or to a trust in which she receives the income but can't receive principal) and retain the rest.
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ixohoxi
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Re: Estate strategy for my 90+ year old mother - is this right?

Post by ixohoxi »

For Real Estate you will need to retitle in the name of the trust. Hopefully that was done for your father's estate but if not you will need to do that.
For bank accounts you can leave them titled in your mom's name and ask the bank to set up a TOD (transfer on death) to the trust. They will have her fill out a new signature card and you will sign as trustee.
For brokerage/mutual fund accounts you can leave it titled to her and set up POD (pay on death) / beneficiary to the trust. Your mom will sign the beneficiary form.
We just went through this last winter. My mom passed in April and it all worked perfectly.
Henceforth, content shall be my aim, and anticipation my joy. -Alfred Billings Street
senex
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Re: Estate strategy for my 90+ year old mother - is this right?

Post by senex »

If all assets are financial with beneficiary or TOD, and she has no sizable debts, and you're asking if it's easy & efficient to distribute without probate: yes, in my experience. You email a death certificate to Vang/Fid/whomever, fill out some simple forms, and the balances transfer within a few weeks, no courts, no public records, no fees, etc. Given her amount of money, split 3 ways, that's how I would do it if in your shoes.

Even in "easy" probate states, why spent 6+ months dealing with courts, bureaucracies, fees, public records, etc, if the estate is small & simple enough to avoid it?

I was going to say I have never heard of someone contributing to a trust created by a different person. Then I saw bsteiner (an expert) say above that it is possible. But the idea of "substantial complexity" would scare me far away from your original attorney & his suggestion, given the amount of money at stake.
Topic Author
Old Sage(brush)
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Re: Estate strategy for my 90+ year old mother - is this right?

Post by Old Sage(brush) »

Great, thanks all for the feedback. I'd say the last post by Senex confirms for me the approach I am following.
Gill
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Re: Estate strategy for my 90+ year old mother - is this right?

Post by Gill »

bsteiner wrote: Mon Jul 13, 2020 2:12 pm How can Mom contribute assets to the credit shelter trust under Dad's Will? It would create substantial complexity. She would have a trust that's in part a grantor trust and in part not a grantor trust.
Bruce, if she contributes assets to the credit shelter trust, doesn't the transfer then become subject to the terms of that trust? Is it the retained life estate that makes that portion a grantor trust? Isn't there also a reportable gift to the remaindermen of the remainder interest?
Gill
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal
johnnyc321
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Re: Estate strategy for my 90+ year old mother - is this right?

Post by johnnyc321 »

My problem with your post is this is your mother's assets and estate plan and you describe what you are doing because you want to do it. What is her opinion on this issue? In what capacity are you completing these actions? Do the documents you are working under (power of attorney?), provide you with the specific authority to complete these transactions (beneficiary designation)?
bsteiner
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Re: Estate strategy for my 90+ year old mother - is this right?

Post by bsteiner »

Gill wrote: Mon Jul 13, 2020 2:39 pm
bsteiner wrote: Mon Jul 13, 2020 2:12 pm How can Mom contribute assets to the credit shelter trust under Dad's Will? It would create substantial complexity. She would have a trust that's in part a grantor trust and in part not a grantor trust.
Bruce, if she contributes assets to the credit shelter trust, doesn't the transfer then become subject to the terms of that trust? Is it the retained life estate that makes that portion a grantor trust? Isn't there also a reportable gift to the remaindermen of the remainder interest?
Gill
Yes. If she contributes assets to a trust of which she's a beneficiary, it's likely to be a grantor trust.

It's also likely to be a gift of the entire value under Section 2702, though it may be possible for it to be an incomplete gift. On these numbers, estate and gift taxes probably won't matter.
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