Trust for 86 year old?

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Topic Author
privateID
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Trust for 86 year old?

Post by privateID »

I manage my 86 year old mother-in-law's money. She has about $3M. She has 3 children who will inherit everything. The money is in the following locations:

Vanguard:
Stock index Mutual funds (18%)
individual stocks (high cost basis) (22%)
Muni-bond funds (limited-term and intermediate-term) (40%)
IRA - TIPS (11%)

Lincoln
403B - invested in fixed option paying > 3% (2%)

Tiaa-Cref
TDA - invested in fixed option paying > 3% (1%)

Savings Bonds
EE and I bonds (4%) - All the EE mature in the next 3 years. The I bonds mature in 20 years or so.

Chase
Bank accounts (2%)

Misc
Owns a car, some jewelry. Rents an apartment. No longer owns any property.

My question is whether a trust is a desirable thing to set up? I am currently an agent on her Vanguard account and have a POA. It took me a long time (5 years) just to get to this point, but things are running smoothly. From my understanding, the trade-off is the hassle and cost to set up a trust vs the hassle and cost of eventual probate.

Thoughts?
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JazzTime
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Re: Trust for 86 year old?

Post by JazzTime »

The problem with just having a POA is that the POA dies with her. You have no authority at that point to do anything.

Depending on the state, probate isn't necessarily a big deal. The difficulty, at least as I saw it, is the endless delay and need to obtain permission to do anything. Once the executor/administrator is appointed, you then need to run around and file your appointment everywhere. I leave it to those with more expertise in this area to comment further.

A trust can really make life much simpler once you complete the initial steps. The trust document itself need not be overly complex. You merely want to permit the trustee to manage everything and to distribute the assets as specified in the trust. The difficulty is that you need to present the trust document everywhere the assets are located and retitle the accounts in the name of the trust. That, of course, can be a bit time consuming. But once completed, everything is easy peasy. In my view, it makes sense to simplify things even further by consolidating some accounts to the extent feasible.

For example, in a situation I was involved with, I didn't see any sense trying to maintain multiple bank accounts. I consolidated the accounts into one bank with a checking and a savings portion. That way, as trustee, I could simply write a check as needed to pay the grantor's expenses. And her social security check was deposited automatically.

In your case, the assets are much greater and you have multiple types of accounts so things are a little more complicated.

You could consolidate the 403b and IRA accounts and simply name beneficiaries on the account. The resulting account would then go to the beneficiaries without probate.
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Lee_WSP
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Re: Trust for 86 year old?

Post by Lee_WSP »

Unless probate is notoriously difficult, avoiding it only avoids some minor annoyances and hassle. You still need to file the final tax returns and pay the final bills and cut off any unknown creditors.

The biggest advantage I tout is the ability for someone to step in and manage your finances if you decide you no longer want to or are unable to.

I’m a big proponent of leaving all inheritances in trust rather than outright. Beneficiaries may have effective control over their own sub trust, but that one’s up to the grantor.
Island John
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Re: Trust for 86 year old?

Post by Island John »

I have been through this with both my parents and an in-law. Seeing the complexities of what I would have been facing without them, I was extremely happy that we had trusts in place in all cases.

As JazzTime says, having a trust in place will greatly simplify the process when your mother-in-law passes.

The POA could be very valuable if the individual becomes incapacitated and others need to make medical or financial decisions for her.

I believe that current law still holds that the assets in a trust would receive stepped up basis when she passes and this could be a significant factor to lower taxes on the estate. Even if taxes are not a significant concern, there are many other advantages.

In any case, you should absolutely speak to a lawyer that handles trusts and estates to get their input on how a trust might benefit your mother-in-law and her heirs. Most lawyers will provide an introductory meeting at no charge. You have nothing to lose by getting a professional opinion.
Retired2013
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Re: Trust for 86 year old?

Post by Retired2013 »

Almost everything listed can be done by Beneficiary. No trust or probate for 99% of the items listed. Just make sure the beneficiaries are listed on all of the accounts including life insurance policies. Why would you want a trust for the car and jewlery? Just make sure you leave enough behind to pay the bills.
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Sandtrap
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Re: Trust for 86 year old?

Post by Sandtrap »

Seek legal counsel and talk about what would best fit “your mother in law” specifically.

consult with an attorney for estate planning.

A cardiologist for heart issues
Etc

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miket29
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Re: Trust for 86 year old?

Post by miket29 »

She could make the Vanguard and bank account transfer-on-death (TOD) and make sure the retirement accounts have beneficiaries listed. I think bonds are only allowed to have a single beneficiary. Some money should be reserved, or you and your siblings should come to an agreement, on what will be used to pay her final tax return and also other end-of-life expenses. Even in a state like CA where probate is a hassle the residual (car, jewelry) would fall under the small-estate probate rules assuming it isn't a very expensive car.
bsteiner
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Re: Trust for 86 year old?

Post by bsteiner »

Lee_WSP wrote: Sat Jan 08, 2022 2:45 pm Unless probate is notoriously difficult, avoiding it only avoids some minor annoyances and hassle. You still need to file the final tax returns and pay the final bills and cut off any unknown creditors.
...
I’m a big proponent of leaving all inheritances in trust rather than outright. Beneficiaries may have effective control over their own sub trust, but that one’s up to the grantor.
Agreed.

Our clients almost always provide in their Wills for their children to inherit in separate trusts for their benefit rather than outright. That keeps the children's inheritances out of their estates for estate tax purposes, and protects their inheritances from their creditors and spouses, and Medicaid.
Topic Author
privateID
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Re: Trust for 86 year old?

Post by privateID »

Thanks for the replies. Here's a little more about my situation. My MIL is 86, in decent health, but really starting to have cognitive issues. I have some concerns about going through the hassle of setting up a trust where I imagine it will involve multiple trips to banks, phone calls to financial companies, etc. So, a part of me is willing to trade more hassle down the road that does not involve my MIL to make things easier today. In addition, all 3 children are in their 50s and secure in life. It's not like a delay in getting some money will be a big deal. And, most can be transferred by setting up a TOD (something I should've set up 5 years ago on her Vanguard account). Having said that, I want to do what's financially prudent because that is what they all want me to do. If there are some real advantages, other than some hassle, I will be willing to do the trust.
Our clients almost always provide in their Wills for their children to inherit in separate trusts for their benefit rather than outright. That keeps the children's inheritances out of their estates for estate tax purposes, and protects their inheritances from their creditors and spouses, and Medicaid.
Re: Trust for 86 year old?
This does seem like an advantage of setting up trusts. In fact, this would argue for everyone to set up a trust. I imagine the children could inherit the money and then set up trusts for themselves.
Gill
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Re: Trust for 86 year old?

Post by Gill »

privateID wrote: Sun Jan 09, 2022 11:43 am I imagine the children could inherit the money and then set up trusts for themselves.
No, setting up their own trusts do not usually have the same benefits that trusts established for them by another do. You normally can't escape your creditors, spouse or Medicaid by establishing your own trust.
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
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privateID
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Re: Trust for 86 year old?

Post by privateID »

Gill wrote: Sun Jan 09, 2022 11:49 am
privateID wrote: Sun Jan 09, 2022 11:43 am I imagine the children could inherit the money and then set up trusts for themselves.
No, setting up their own trusts do not usually have the same benefits that trusts established for them by another do. You normally can't escape your creditors, spouse or Medicaid by establishing your own trust.
Gill
I will look into this more. Thanks. So when people say "can't escape your creditors, spouse or Medicaid", can you be more specific as to what cases you are talking about? All the children are relatively financially secure. I don't believe they will qualify for any Medicaid benefits given their savings. Spouses (which includes me), I guess are a concern.
Gill
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Re: Trust for 86 year old?

Post by Gill »

privateID wrote: Sun Jan 09, 2022 11:55 am
Gill wrote: Sun Jan 09, 2022 11:49 am
privateID wrote: Sun Jan 09, 2022 11:43 am I imagine the children could inherit the money and then set up trusts for themselves.
No, setting up their own trusts do not usually have the same benefits that trusts established for them by another do. You normally can't escape your creditors, spouse or Medicaid by establishing your own trust.
Gill
I will look into this more. Thanks. So when people say "can't escape your creditors, spouse or Medicaid", can you be more specific as to what cases you are talking about? All the children are relatively financially secure. I don't believe they will qualify for any Medicaid benefits given their savings. Spouses (which includes me), I guess are a concern.
This statement is often made by bsteiner and others meaning leaving an estate in trust for another, usually a child, rather than outright protects these assets from claims of creditors of the beneficiary such as the result of a lawsuit, protects the property in the event of a divorce and might enable the beneficiary to qualify for Medicaid when the beneficiary might not otherwise qualify. It would seem the biggest concern for you would be the claim of a judgment creditor which exceeds your individually owned assets and insurance coverage.
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
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privateID
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Re: Trust for 86 year old?

Post by privateID »

miket29 wrote: Sat Jan 08, 2022 4:55 pm She could make the Vanguard and bank account transfer-on-death (TOD) and make sure the retirement accounts have beneficiaries listed.
When I look at MIL accounts, she has 3 kinds of accounts: IRA, brokerage and mutual funds. I see the IRA has a beneficiary of her descendants, the brokerage account has the 3 children listed and I don't believe there are any beneficiaries on the mutual funds. Some questions:

1) Is "descendants" enough on the IRA, or is it better to list each child? If you put "descendants", it includes the designation per stirpes which is desirable here.
2) I don't see any way to put a beneficiary on the mutual funds. Is there a way? If not, if I upgrade the mutual fund account, which I believe makes it a brokerage account, will it then have the beneficiaries specified (or at least have the ability to set it up)?
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Lee_WSP
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Re: Trust for 86 year old?

Post by Lee_WSP »

If she foresees needing or wanting someone to step into her shoes financially, then a living trust is going to be more robust and widely accepted and possibly easier than trying to enforce powers of attorney.

Whether a particular beneficiary designation is sufficient is going to be up to the servicer. However, I cannot see why they would prefer the designation to fail rather than interpret “descendants” to mean “my lineal descendants per stirpes”. Another alternative is they interpret it in a slightly different way. You’d have to ask the servicer, but lineal descendants per stirpes is the tried and true legal language.
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privateID
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Re: Trust for 86 year old?

Post by privateID »

Lee_WSP wrote: Sun Jan 09, 2022 1:20 pm If she foresees needing or wanting someone to step into her shoes financially, then a living trust is going to be more robust and widely accepted and possibly easier than trying to enforce powers of attorney.
Her money is in 3 main places -
1) Vanguard - I am an agent on her account and it has has the powers I need.
2) Paper savings bonds - Not much we can do with them other than cash them or perhaps assign a new beneficiary. There are over a hundred of them. Can you even put these in a trust? Seems like a huge hassle given the sheer number of them.
3) Bank accounts - We got the POA signed at her bank. There should be no issue using it there.

So, I'm not sure where "more robust and widely accepted and possibly easier than trying to enforce powers of attorney" comes into to play. I am really not against doing a trust, but I just don't see lots of advantages, especially if most of her accounts have TOD/beneficiaries on them. I believe that will be the case once I upgrade her Vanguard mutual funds to merge into her Vanguard brokerage account. So far, it has been mentioned that a trust "keeps the children's inheritances out of their estates for estate tax purposes, and protects their inheritances from their creditors and spouses, and Medicaid." I am investigating how much value I feel that really has for her situation.
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Lee_WSP
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Re: Trust for 86 year old?

Post by Lee_WSP »

privateID wrote: Sun Jan 09, 2022 2:17 pm
Lee_WSP wrote: Sun Jan 09, 2022 1:20 pm If she foresees needing or wanting someone to step into her shoes financially, then a living trust is going to be more robust and widely accepted and possibly easier than trying to enforce powers of attorney.
Her money is in 3 main places -
1) Vanguard - I am an agent on her account and it has has the powers I need.
2) Paper savings bonds - Not much we can do with them other than cash them or perhaps assign a new beneficiary. There are over a hundred of them. Can you even put these in a trust? Seems like a huge hassle given the sheer number of them.
3) Bank accounts - We got the POA signed at her bank. There should be no issue using it there.

So, I'm not sure where "more robust and widely accepted and possibly easier than trying to enforce powers of attorney" comes into to play. I am really not against doing a trust, but I just don't see lots of advantages, especially if most of her accounts have TOD/beneficiaries on them. I believe that will be the case once I upgrade her Vanguard mutual funds to merge into her Vanguard brokerage account. So far, it has been mentioned that a trust "keeps the children's inheritances out of their estates for estate tax purposes, and protects their inheritances from their creditors and spouses, and Medicaid." I am investigating how much value I feel that really has for her situation.
Each situation is different. If you already have the banks and brokerages accepting the POA, there's no further advantages to a living trust for this particular situation in that regard.

If she banked with Wells Fargo however....
chemocean
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Re: Trust for 86 year old?

Post by chemocean »

privateID wrote: Sun Jan 09, 2022 2:17 pm
Lee_WSP wrote: Sun Jan 09, 2022 1:20 pm If she foresees needing or wanting someone to step into her shoes financially, then a living trust is going to be more robust and widely accepted and possibly easier than trying to enforce powers of attorney.
Her money is in 3 main places -
1) Vanguard - I am an agent on her account and it has has the powers I need.
2) Paper savings bonds - Not much we can do with them other than cash them or perhaps assign a new beneficiary. There are over a hundred of them. Can you even put these in a trust? Seems like a huge hassle given the sheer number of them.
She can not retitle paper savings bond. She would need to convert them to electronic bonds, and then retitle them in Treasury Direct. I don't know if you can do this process as POA.
If the rates are good, the renamed co-owner or beneficiaries can assume ownership of the bonds until maturity of the bond upon her death as a non-taxable event. BUt beneficiary of bonds will be responsible for the accrued interest at redemption or maturity.
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Re: Trust for 86 year old?

Post by SuzBanyan »

Are you currently keeping your spouse and siblings apprised of what you are doing to manage MILs assets? With a POA, you should be accounting to your MIL and to her children only with her permission. But to minimize you own possible liability, you should at least be accounting to MIL.

With current assets of $3M, each of your MIL’s children stands to gain a substantial inheritance, probably when they are in their 50s or 60s. This makes it more likely leaving the assets to her children in trust (which could be trust set up under her will when she passes) might keep the kids from owing estate taxes when they pass.
miket29
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Re: Trust for 86 year old?

Post by miket29 »

privateID wrote: Sun Jan 09, 2022 12:43 pm
1) Is "descendants" enough on the IRA, or is it better to list each child? If you put "descendants", it includes the designation per stirpes which is desirable here.
2) I don't see any way to put a beneficiary on the mutual funds. Is there a way? If not, if I upgrade the mutual fund account, which I believe makes it a brokerage account, will it then have the beneficiaries specified (or at least have the ability to set it up)?
Regarding (1) I don't see any reason not to specifically list each child, which could include a per stirpes designation. But IANAL. In my IRA account at Vanguard I have "full name per stirpes" which Vanguard told me will work.

For (2), are these held at Vanguard in the old style mutual funds account? I converted mine to the brokerage account several years ago when Vanguard started requesting. My brokerage account at Vanguard allows TOD beneficiaries.

As far as the creditor/spouse protection discussed earlier, if you decide on a trust in order to get these benefits be sure to tell your estate lawyer you want these protections. Again, IANAL, but my understanding is that there are rules regarding the trustee and discretionary nature of the trust(s) that must followed when drafting in order to get the protection.
Last edited by miket29 on Sun Jan 09, 2022 3:24 pm, edited 3 times in total.
bsteiner
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Re: Trust for 86 year old?

Post by bsteiner »

privateID wrote: Sun Jan 09, 2022 2:17 pm
Lee_WSP wrote: Sun Jan 09, 2022 1:20 pm If she foresees needing or wanting someone to step into her shoes financially, then a living trust is going to be more robust and widely accepted and possibly easier than trying to enforce powers of attorney.
Her money is in 3 main places -
1) Vanguard - I am an agent on her account and it has has the powers I need.
2) Paper savings bonds - Not much we can do with them other than cash them or perhaps assign a new beneficiary. There are over a hundred of them. Can you even put these in a trust? Seems like a huge hassle given the sheer number of them.
3) Bank accounts - We got the POA signed at her bank. There should be no issue using it there.

So, I'm not sure where "more robust and widely accepted and possibly easier than trying to enforce powers of attorney" comes into to play. I am really not against doing a trust, but I just don't see lots of advantages, especially if most of her accounts have TOD/beneficiaries on them. I believe that will be the case once I upgrade her Vanguard mutual funds to merge into her Vanguard brokerage account. So far, it has been mentioned that a trust "keeps the children's inheritances out of their estates for estate tax purposes, and protects their inheritances from their creditors and spouses, and Medicaid." I am investigating how much value I feel that really has for her situation.
You're conflating different concepts.

Since your power of attorney is working, unless she's in a state where probating a Will is difficult (such as California) or expensive (such as Delaware), the principal benefit of creating a trust for her own benefit is to run up some legal fees now.

However, the benefit of providing for her children in trust (under her Will) rather than outright is to keep her children's inheritances out of their estate and protect their inheritances from their creditors and spouses, and Medicaid.

If she wants to do that, she should revoke the beneficiary designations on her taxable accounts.

If her retirement benefits were larger, she might leave them to her children in separate trusts as well. However, since each child's share of her retirement benefits is relatively small, it may not be worth the effort to do that, and she could keep them payable to her children.

She should leave the savings bonds alone. Her executors will be able to (i) accrue the interest on her final income tax return (which they might do if she dies early in the year and has very little income that year), (ii) accrue the interest on the estate's income tax return (where the deduction for administration expenses may offset the income from the bonds), or (iii) do neither of the above, and let the beneficiaries of the estate pick up the income when the bonds mature, or when they cash them in, if sooner).

Given her age and the amount involved, she may want to consider consulting with competent tax/estates counsel.
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privateID
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Re: Trust for 86 year old?

Post by privateID »

bsteiner wrote: Sun Jan 09, 2022 3:14 pm However, the benefit of providing for her children in trust (under her Will) rather than outright is to keep her children's inheritances out of their estate and protect their inheritances from their creditors and spouses, and Medicaid.
First, let me say I appreciate all the replies. I really want to do the right thing. I was approached by the three children when their father passed away to manage their mom's money and I have always taken the responsibility seriously. I keep good records of everything I have done and I have updated them at least yearly.

This appears to be the main advantage of the trust from what I am reading here (I guess also avoiding probate, but I am not sure I buy that argument given the TOD/beneficiary designations in place). To be clear, this advantage is not for my MIL as she will only endure the hassles of setting up the trust with no other benefit to her except leaving inheritances the best way possible, which is important. Let me take these points one by one:

Inheriting money in a trust, rather than outright,
1) "keeps her children's inheritances out of their estate and protect their inheritances from their creditors". So, my wife inherits a million dollars and someone sues us. They may not be able to go after the money in that trust. Is that the case we are talking about? Is there no way to set up a trust after the inheritance to do that?

2) "and spouses" - tough one for me to comment on being that I am the spouse. I will say two of the siblings are married for a very long time. The other one has never been married. I certainly understand that things change, but can't other documents be done at that time (like a pre-nup in the future)?

3) ", and Medicaid." - Is this case we run out of money and I have to go into a home and they won't be able to go after my wife's money? I don't consider myself rich, but I think I am far away from qualifying for Medicaid.

We are planning to talk to a lawyer about estate planning, but I get alot out of understanding things through Bogleheads first. And, let's be real, the estate planning lawyer sells a product called a trust. I want to understand why I need it before being convinced about why I need it.
bsteiner
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Re: Trust for 86 year old?

Post by bsteiner »

privateID wrote: Sun Jan 09, 2022 4:54 pm
bsteiner wrote: Sun Jan 09, 2022 3:14 pm However, the benefit of providing for her children in trust (under her Will) rather than outright is to keep her children's inheritances out of their estate and protect their inheritances from their creditors and spouses, and Medicaid.
First, let me say I appreciate all the replies. I really want to do the right thing. I was approached by the three children when their father passed away to manage their mom's money and I have always taken the responsibility seriously. I keep good records of everything I have done and I have updated them at least yearly.

This appears to be the main advantage of the trust from what I am reading here (I guess also avoiding probate, but I am not sure I buy that argument given the TOD/beneficiary designations in place). To be clear, this advantage is not for my MIL as she will only endure the hassles of setting up the trust with no other benefit to her except leaving inheritances the best way possible, which is important. Let me take these points one by one:

Inheriting money in a trust, rather than outright,
1) "keeps her children's inheritances out of their estate and protect their inheritances from their creditors". So, my wife inherits a million dollars and someone sues us. They may not be able to go after the money in that trust. Is that the case we are talking about? Is there no way to set up a trust after the inheritance to do that?

2) "and spouses" - tough one for me to comment on being that I am the spouse. I will say two of the siblings are married for a very long time. The other one has never been married. I certainly understand that things change, but can't other documents be done at that time (like a pre-nup in the future)?

3) ", and Medicaid." - Is this case we run out of money and I have to go into a home and they won't be able to go after my wife's money? I don't consider myself rich, but I think I am far away from qualifying for Medicaid.

We are planning to talk to a lawyer about estate planning, but I get a lot out of understanding things through Bogleheads first. And, let's be real, the estate planning lawyer sells a product called a trust. I want to understand why I need it before being convinced about why I need it.
1. Correct. The trust assets don't belong to the beneficiary, so the creditor can't reach them. If the inheritance is outright, it's possible but difficult for the recipient to set up a trust for his/her own benefit. Money in a trust is like toothpaste in a tube. It's easy to take it out, but once you take it out, it's hard to put it back.

About 1/3 of the states allow self-settled asset protection trusts where you can put your own money into a trust for your own benefit and it may be protected against your creditors. However, you have to do it before the creditor problem exists. In other words, you can protect against the person you run over tomorrow (assuming you weren't planning to run him/her over), but you can't protect against the person you ran over yesterday. If you're not in one of those states, you may be able to set this up in one of those states, with someone (usually a trust company) in one of those states as a trustee. You can't do this with all of your assets. There are also different rules for when it works in bankruptcy. Given the cost and complexity of this, it's best to have the assets protected in advance by having the parent's Will leave it in a trust that's protected from the inception.

2. One of them could outlive his/her spouse and remarry.

Good lawyers don't sell products any more than doctors sell prescriptions. You're paying for the lawyer's time and expertise.

It's possible that there's some reason not yet mentioned that a revocable trust might be appropriate. It might help to know in what state she lives.
donall
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Re: Trust for 86 year old?

Post by donall »

I am not an attorney and was an executor/trustee for a relative 4 years ago. Every account (with the exception of the working checking account) was titled in the trust including Treasury Direct. Funds were available, even when the relative was disabled for end of life medical expenses as well as funeral expenses.

Distributing the trust assets went smoothly and was private. Out of state real estate was easy to sell. Even the Ibonds in the Treasury Direct account were distributed in-kind by filling out a TD form. The extra $1000 spent on the trust was worth every penny.
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privateID
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Re: Trust for 86 year old?

Post by privateID »

bsteiner wrote: Sun Jan 09, 2022 5:26 pm It's possible that there's some reason not yet mentioned that a revocable trust might be appropriate. It might help to know in what state she lives.
Colorado

Is it common that adults keep their inherences in the trusts?
donall wrote:Every account (with the exception of the working checking account) was titled in the trust including Treasury Direct. Funds were available, even when the relative was disabled for end of life medical expenses as well as funeral expenses.
The bonds are all paper and there are over 100 of them. Would take alot of error prone work just to put them on a form corectly with the serial numbers to convert to TD. I am not questioning the accessibility to her money. I feel I have it right now, so it is not adding or making that worse. I am just trying to understand, in real terms for the family, what benefits we would be getting with a trust. So, when you distributed the trust, did the assets stay in a trust to give you the benefits being talked about here?
bsteiner
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Re: Trust for 86 year old?

Post by bsteiner »

privateID wrote: Sun Jan 09, 2022 7:52 pm
bsteiner wrote: Sun Jan 09, 2022 5:26 pm It's possible that there's some reason not yet mentioned that a revocable trust might be appropriate. It might help to know in what state she lives.
Colorado

Is it common that adults keep their inheritances in the trusts?
...
Colorado is a Uniform Probate Code state, which means simplified procedures.

So far nothing in the facts presented suggests the need for a revocable trust; and it may be a distraction from more important issues.

If the Will provides for the children in separate trusts for their benefit, the children usually keep the trusts unless the amount involved is too small to warrant administering trusts, or where the chance that a child might need any of the protections (creditors, current spouses, future spouses, estate tax, Medicaid) is small.
privateID wrote: Sun Jan 09, 2022 7:52 pm ...
The bonds are all paper and there are over 100 of them. Would take a lot of error prone work just to put them on a form correctly with the serial numbers to convert to TD. ...
She could leave the bonds alone until they mature. After her death, her executors can either cash them in or distribute them.
miket29
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Re: Trust for 86 year old?

Post by miket29 »

privateID wrote: Sun Jan 09, 2022 4:54 pm 2) "and spouses" - tough one for me to comment on being that I am the spouse. I will say two of the siblings are married for a very long time. The other one has never been married. I certainly understand that things change, but can't other documents be done at that time (like a pre-nup in the future)?
Attorney Jeffrey Condon wrote a book "Beyond the Grave" about trusts and includes many stories where things didn't work out as the deceased intended. An example situation would be where your MIL would not want any of her estate to pass to a subsequent wife should your current wife pre-decease you and you remarry. A trust can ensure it passes to her grandchildren.
bsteiner
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Re: Trust for 86 year old?

Post by bsteiner »

miket29 wrote: Sun Jan 09, 2022 8:35 pm Attorney Jeffrey Condon wrote a book "Beyond the Grave" about trusts and includes many stories where things didn't work out as the deceased intended. An example situation would be where your MIL would not want any of her estate to pass to a subsequent wife should your current wife pre-decease you and you remarry. A trust can ensure it passes to her grandchildren.
Actually most clients don't mind if their child appoints (leaves) the balance of his/her trust to his/her surviving spouse. They just don't want the child's spouse to be able to take it.
Topic Author
privateID
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Re: Trust for 86 year old?

Post by privateID »

bsteiner wrote: Sun Jan 09, 2022 8:01 pm So far nothing in the facts presented suggests the need for a revocable trust; and it may be a distraction from more important issues.

If the Will provides for the children in separate trusts for their benefit, the children usually keep the trusts unless the amount involved is too small to warrant administering trusts, or where the chance that a child might need any of the protections (creditors, current spouses, future spouses, estate tax, Medicaid) is small.
Just want to be clear here. Nothing in the facts presented suggests the need for a revocable trust unless we decide to set up her will to establish separate trusts for their benefits. Or are you saying those extra benefits don't seem like they apply here?
bsteiner wrote: Sun Jan 09, 2022 8:01 pm She could leave the bonds alone until they mature. After her death, her executors can either cash them in or distribute them.
To be clear here as well - the paper bonds do not currently list the children as beneficiary. All the paper bonds were co-owned with her spouse who passed away 5 years ago. No issues re-titling them after the eventual death?
chemocean
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Re: Trust for 86 year old?

Post by chemocean »

bsteiner wrote: Sun Jan 09, 2022 5:26 pm
privateID wrote: Sun Jan 09, 2022 7:52 pm ...
The bonds are all paper and there are over 100 of them. Would take a lot of error prone work just to put them on a form correctly with the serial numbers to convert to TD. ...
She could leave the bonds alone until they mature. After her death, her executors can either cash them in or distribute them.
What is the process of the beneficiary redeeming paper bonds that are not in their name that have been distributed to them by the executor? Do they apply to TD including the pertinent parts of the will with form, or can it be done at a bank with a copy of the will?
Katietsu
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Re: Trust for 86 year old?

Post by Katietsu »

privateID wrote: Sun Jan 09, 2022 9:48 pm
bsteiner wrote: Sun Jan 09, 2022 8:01 pm So far nothing in the facts presented suggests the need for a revocable trust; and it may be a distraction from more important issues.

If the Will provides for the children in separate trusts for their benefit, the children usually keep the trusts unless the amount involved is too small to warrant administering trusts, or where the chance that a child might need any of the protections (creditors, current spouses, future spouses, estate tax, Medicaid) is small.
Just want to be clear here. Nothing in the facts presented suggests the need for a revocable trust unless we decide to set up her will to establish separate trusts for their benefits. Or are you saying those extra benefits don't seem like they apply here?
The decision to create a trust for MIL and move her assets to it while still alive is separate from the decision to provide for the inheritance to go to separate trusts for her children.

You can do the former without doing the latter. Or you can do the latter without the former. Or both or neither.
Last edited by Katietsu on Sun Jan 09, 2022 10:40 pm, edited 1 time in total.
bsteiner
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Re: Trust for 86 year old?

Post by bsteiner »

privateID wrote: Sun Jan 09, 2022 9:48 pm
bsteiner wrote: Sun Jan 09, 2022 8:01 pm So far nothing in the facts presented suggests the need for a revocable trust; and it may be a distraction from more important issues.

If the Will provides for the children in separate trusts for their benefit, the children usually keep the trusts unless the amount involved is too small to warrant administering trusts, or where the chance that a child might need any of the protections (creditors, current spouses, future spouses, estate tax, Medicaid) is small.
Just want to be clear here. Nothing in the facts presented suggests the need for a revocable trust unless we decide to set up her will to establish separate trusts for their benefits. Or are you saying those extra benefits don't seem like they apply here?
bsteiner wrote: Sun Jan 09, 2022 8:01 pm She could leave the bonds alone until they mature. After her death, her executors can either cash them in or distribute them.
To be clear here as well - the paper bonds do not currently list the children as beneficiary. All the paper bonds were co-owned with her spouse who passed away 5 years ago. No issues re-titling them after the eventual death?
She doesn't need a revocable trust to provide for her children in trust under her Will (or for that matter to provide for her children outright under her Will).

It's a good thing that she didn't name beneficiaries on her bonds. That way, her executors have the most flexibility. They may (i) accrue the interest on her final income tax return (which might make sense if she dies early in the year), (ii) accrue the interest on the estate's income tax return (in which case the deduction for administration expenses may offset the income), or (iii) do neither of the above and let the beneficiaries of her estate continue to defer the interest.
Last edited by bsteiner on Mon Jan 10, 2022 3:25 am, edited 1 time in total.
twh
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Re: Trust for 86 year old?

Post by twh »

Unless you are trying to protect her from scammers or she has dementia, she doesn't need a trust. Just TOD all the accounts and sell anything else you can't do TOD. I think some states let the car title pass more easily as well...unless it is a real expensive car, it may not be worth the work. Nothing to do now with the jewelry or other stuff.
Goodman60
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Re: Trust for 86 year old?

Post by Goodman60 »

While leaving money in trust for adult kids, instead of outright sounds good for asset protection purposes, what happens later? When the adult child dies and the grandkids (or others) inherit? You can't impart asset protection forever, can you?
bsteiner
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Re: Trust for 86 year old?

Post by bsteiner »

Goodman60 wrote: Mon Jan 10, 2022 7:57 am While leaving money in trust for adult kids, instead of outright sounds good for asset protection purposes, what happens later? When the adult child dies and the grandkids (or others) inherit? You can't impart asset protection forever, can you?
In many if not most states you can. In the others you can for a long time, at least until 21 years after the death of the last one in being (alive or in gestation) at your death.
donall
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Re: Trust for 86 year old?

Post by donall »

When rereading the posts, it seems that there is little need for a trust, assuming all accounts have beneficiaries. The Treasury Direct Bonds are under $100,000, so probate will not need to be opened and the bonds can be redeemed with a completed form (listing all the bonds!), death certificate, and whatever else Treasury Direct requires. If your state has a small estate procedure, that can easily take care of any remaining assets. The TD form is here https://www.treasurydirect.gov/forms/sav5394.pdf

At 86, change is difficult and it is best to leave things simple. I don’t think my parents would want to make changes (what’s a trust?) in their 80s. Many octogenarians prefer to see and feel the physical bond or currency.

My previous remarks concerning Trusts were predicated on the probate situation and “bad reviews” that our county has.

Added TD link
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privateID
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Re: Trust for 86 year old?

Post by privateID »

As I said, the only accounts that do not have beneficiaries are her paper savings bonds and her bank accounts (checking/saving at Chase where we keep about $50K total). Sounds like the savings bonds are fine that way (as noted above, perhaps better since would have more flexibility with them). Should her bank accounts have TODs set up? Some comments above mention leaving some money in her name to settle her estate. So, is the thinking there not to put TODs on her bank account and use that to settle her estate?

I also just want to say how amazing is this Boglehead board. I do believe you need to do your own research and consult with professionals where appropriate, but I feel this board arms me with what questions to look for answers. We are going to meet with an state attorney in a few weeks. I feel with the knowledge I have learnt here, and other searches on the internet, I can go into that meeting as an educated consumer. I appreciate all the experts on this board as well as anecdotal accounts from non-experts. This truly is a unique board. I only hope to be able to help others when I can as much as I have been helped.
Topic Author
privateID
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Re: Trust for 86 year old?

Post by privateID »

donall wrote: Mon Jan 10, 2022 10:31 am The Treasury Direct Bonds are under $100,000, so probate will not need to be opened and the bonds can be redeemed with a completed form (listing all the bonds!), death certificate, and whatever else Treasury Direct requires.
The savings bonds are currently worth $124K. However, 72K of that will mature and be cashed in within 3 years. The other 52K are I-bonds that mature in 2033. In my searches, I have seen the value of $50K, not $100K you mention, as some sort of dividing line.
twh
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Re: Trust for 86 year old?

Post by twh »

privateID wrote: Mon Jan 10, 2022 11:31 am As I said, the only accounts that do not have beneficiaries are her paper savings bonds and her bank accounts (checking/saving at Chase where we keep about $50K total). Sounds like the savings bonds are fine that way (as noted above, perhaps better since would have more flexibility with them). Should her bank accounts have TODs set up? Some comments above mention leaving some money in her name to settle her estate. So, is the thinking there not to put TODs on her bank account and use that to settle her estate?

I also just want to say how amazing is this Boglehead board. I do believe you need to do your own research and consult with professionals where appropriate, but I feel this board arms me with what questions to look for answers. We are going to meet with an state attorney in a few weeks. I feel with the knowledge I have learnt here, and other searches on the internet, I can go into that meeting as an educated consumer. I appreciate all the experts on this board as well as anecdotal accounts from non-experts. This truly is a unique board. I only hope to be able to help others when I can as much as I have been helped.
When you say "have TODs set up", what that means is just filling out the beneficiaries of the accounts. If the institution has it as a possibility, you can have backup beneficiaries and add the grandchildren as backup to the child. I know some places have that flexibility.

Settling her affairs can be handled out of the working checking account. Just get your name as a co-owner of the working checking account and make sure there is enough money in there to pay for a funeral and whatever else you might expect. Don't remove MIL's name from the checking account after she passes. Having your MIL's name on that account will help you deposit any checks that may come to her after death that are made out to her...just photo deposit the check. Strictly speaking this isn't the right way, but believe me it is a whole lot easier. And, when you aren't talking about substantial amounts of money, I don't see a problem.
Fat Tails
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Re: Trust for 86 year old?

Post by Fat Tails »

Trusts for asset protection for the trustees might be useful. However, you may want to look at the federal income tax rates for trusts. They are significant. Also, IRAs with trusts as beneficiaries can pose some problems as the IRAs must be empties within 10 years, but at high tax rates of trusts. With these account sizes, I dont think a trust provides much value.

Note, I am not a tax/estate expert.

Good luck.
“Doing well with money has little to do with how smart you are and a lot to do with how you behave.” - Morgan Housel
donall
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Re: Trust for 86 year old?

Post by donall »

privateID wrote: Mon Jan 10, 2022 11:39 am
donall wrote: Mon Jan 10, 2022 10:31 am The Treasury Direct Bonds are under $100,000, so probate will not need to be opened and the bonds can be redeemed with a completed form (listing all the bonds!), death certificate, and whatever else Treasury Direct requires.
The savings bonds are currently worth $124K. However, 72K of that will mature and be cashed in within 3 years. The other 52K are I-bonds that mature in 2033. In my searches, I have seen the value of $50K, not $100K you mention, as some sort of dividing line.
Note link indicates $100,000 value.

https://www.treasurydirect.gov/indiv/re ... edeath.htm
Topic Author
privateID
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Re: Trust for 86 year old?

Post by privateID »

donall wrote: Tue Jan 11, 2022 12:57 pm
privateID wrote: Mon Jan 10, 2022 11:39 am
donall wrote: Mon Jan 10, 2022 10:31 am The Treasury Direct Bonds are under $100,000, so probate will not need to be opened and the bonds can be redeemed with a completed form (listing all the bonds!), death certificate, and whatever else Treasury Direct requires.
The savings bonds are currently worth $124K. However, 72K of that will mature and be cashed in within 3 years. The other 52K are I-bonds that mature in 2033. In my searches, I have seen the value of $50K, not $100K you mention, as some sort of dividing line.
Note link indicates $100,000 value.

https://www.treasurydirect.gov/indiv/re ... edeath.htm
I think the $50K figure I saw was about having an estate go to probate in Colorado. So, not sure how the Colorado rules merge with the treasure direct rules. I know alot of people around here love savings bonds, but I have to say I find them to be quite a pain. First, many of her bonds are maturing as her memory is going making it a challenge to cash them. Second, although there is some flexibility for cashing them in, inheriting them also could present issues in my savings where they mature after I start taking SS. Just seems like alot of potential work when I would be looking to simplify things.

In 3 years we will be down to around $60K in savings bonds and maybe $50K in the bank. Everything else has a beneficiary. Does that mean we still have to go through probate? Should I even be concerned about that?
twh
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Re: Trust for 86 year old?

Post by twh »

privateID wrote: Tue Jan 11, 2022 10:33 pm
donall wrote: Tue Jan 11, 2022 12:57 pm
privateID wrote: Mon Jan 10, 2022 11:39 am
donall wrote: Mon Jan 10, 2022 10:31 am The Treasury Direct Bonds are under $100,000, so probate will not need to be opened and the bonds can be redeemed with a completed form (listing all the bonds!), death certificate, and whatever else Treasury Direct requires.
The savings bonds are currently worth $124K. However, 72K of that will mature and be cashed in within 3 years. The other 52K are I-bonds that mature in 2033. In my searches, I have seen the value of $50K, not $100K you mention, as some sort of dividing line.
Note link indicates $100,000 value.

https://www.treasurydirect.gov/indiv/re ... edeath.htm
I think the $50K figure I saw was about having an estate go to probate in Colorado. So, not sure how the Colorado rules merge with the treasure direct rules. I know alot of people around here love savings bonds, but I have to say I find them to be quite a pain. First, many of her bonds are maturing as her memory is going making it a challenge to cash them. Second, although there is some flexibility for cashing them in, inheriting them also could present issues in my savings where they mature after I start taking SS. Just seems like alot of potential work when I would be looking to simplify things.

In 3 years we will be down to around $60K in savings bonds and maybe $50K in the bank. Everything else has a beneficiary. Does that mean we still have to go through probate? Should I even be concerned about that?
Personally, I would cash them all in now while it easy. Bulk up the working checking account and put the rest in the brokerage as cash.
Topic Author
privateID
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Re: Trust for 86 year old?

Post by privateID »

twh wrote: Wed Jan 12, 2022 1:35 am
privateID wrote: Tue Jan 11, 2022 10:33 pm
donall wrote: Tue Jan 11, 2022 12:57 pm
privateID wrote: Mon Jan 10, 2022 11:39 am
donall wrote: Mon Jan 10, 2022 10:31 am The Treasury Direct Bonds are under $100,000, so probate will not need to be opened and the bonds can be redeemed with a completed form (listing all the bonds!), death certificate, and whatever else Treasury Direct requires.
The savings bonds are currently worth $124K. However, 72K of that will mature and be cashed in within 3 years. The other 52K are I-bonds that mature in 2033. In my searches, I have seen the value of $50K, not $100K you mention, as some sort of dividing line.
Note link indicates $100,000 value.

https://www.treasurydirect.gov/indiv/re ... edeath.htm
I think the $50K figure I saw was about having an estate go to probate in Colorado. So, not sure how the Colorado rules merge with the treasure direct rules. I know alot of people around here love savings bonds, but I have to say I find them to be quite a pain. First, many of her bonds are maturing as her memory is going making it a challenge to cash them. Second, although there is some flexibility for cashing them in, inheriting them also could present issues in my savings where they mature after I start taking SS. Just seems like alot of potential work when I would be looking to simplify things.

In 3 years we will be down to around $60K in savings bonds and maybe $50K in the bank. Everything else has a beneficiary. Does that mean we still have to go through probate? Should I even be concerned about that?
Personally, I would cash them all in now while it easy. Bulk up the working checking account and put the rest in the brokerage as cash.
The only thing holding us back from potentially going to probate are these bonds. They are earning good interest. Fixed rate on I-bonds are 1.1% and 1.2%. All the bonds paying more than 4% interest. I feel we have 3 choices:

1) Do nothing. When my MIL passes, we can decide the best way to realize the interest. As these are good investments, this may be the financially prudent thing to do. However, may trigger probate.
2) Sell all the bonds now. Although a pain to do now, this will simplify everything else the most. Avoids probate.
3) Re-title the bonds with new beneficiaries. Would push the interest to the children which may be a bad thing. Avoids probate.

Any thoughts here?
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Lee_WSP
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Re: Trust for 86 year old?

Post by Lee_WSP »

privateID wrote: Wed Jan 12, 2022 1:00 pm
twh wrote: Wed Jan 12, 2022 1:35 am
privateID wrote: Tue Jan 11, 2022 10:33 pm
donall wrote: Tue Jan 11, 2022 12:57 pm
privateID wrote: Mon Jan 10, 2022 11:39 am

The savings bonds are currently worth $124K. However, 72K of that will mature and be cashed in within 3 years. The other 52K are I-bonds that mature in 2033. In my searches, I have seen the value of $50K, not $100K you mention, as some sort of dividing line.
Note link indicates $100,000 value.

https://www.treasurydirect.gov/indiv/re ... edeath.htm
I think the $50K figure I saw was about having an estate go to probate in Colorado. So, not sure how the Colorado rules merge with the treasure direct rules. I know alot of people around here love savings bonds, but I have to say I find them to be quite a pain. First, many of her bonds are maturing as her memory is going making it a challenge to cash them. Second, although there is some flexibility for cashing them in, inheriting them also could present issues in my savings where they mature after I start taking SS. Just seems like alot of potential work when I would be looking to simplify things.

In 3 years we will be down to around $60K in savings bonds and maybe $50K in the bank. Everything else has a beneficiary. Does that mean we still have to go through probate? Should I even be concerned about that?
Personally, I would cash them all in now while it easy. Bulk up the working checking account and put the rest in the brokerage as cash.
The only thing holding us back from potentially going to probate are these bonds. They are earning good interest. Fixed rate on I-bonds are 1.1% and 1.2%. All the bonds paying more than 4% interest. I feel we have 3 choices:

1) Do nothing. When my MIL passes, we can decide the best way to realize the interest. As these are good investments, this may be the financially prudent thing to do. However, may trigger probate.
2) Sell all the bonds now. Although a pain to do now, this will simplify everything else the most. Avoids probate.
3) Re-title the bonds with new beneficiaries. Would push the interest to the children which may be a bad thing. Avoids probate.

Any thoughts here?
IMO, probate is not the ninth circle of the inferno. I would not needlessly complicates everyone's life today for a small or no benefit tomorrow.
twh
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Re: Trust for 86 year old?

Post by twh »

privateID wrote: Wed Jan 12, 2022 1:00 pm
twh wrote: Wed Jan 12, 2022 1:35 am
privateID wrote: Tue Jan 11, 2022 10:33 pm
donall wrote: Tue Jan 11, 2022 12:57 pm
privateID wrote: Mon Jan 10, 2022 11:39 am

The savings bonds are currently worth $124K. However, 72K of that will mature and be cashed in within 3 years. The other 52K are I-bonds that mature in 2033. In my searches, I have seen the value of $50K, not $100K you mention, as some sort of dividing line.
Note link indicates $100,000 value.

https://www.treasurydirect.gov/indiv/re ... edeath.htm
I think the $50K figure I saw was about having an estate go to probate in Colorado. So, not sure how the Colorado rules merge with the treasure direct rules. I know alot of people around here love savings bonds, but I have to say I find them to be quite a pain. First, many of her bonds are maturing as her memory is going making it a challenge to cash them. Second, although there is some flexibility for cashing them in, inheriting them also could present issues in my savings where they mature after I start taking SS. Just seems like alot of potential work when I would be looking to simplify things.

In 3 years we will be down to around $60K in savings bonds and maybe $50K in the bank. Everything else has a beneficiary. Does that mean we still have to go through probate? Should I even be concerned about that?
Personally, I would cash them all in now while it easy. Bulk up the working checking account and put the rest in the brokerage as cash.
The only thing holding us back from potentially going to probate are these bonds. They are earning good interest. Fixed rate on I-bonds are 1.1% and 1.2%. All the bonds paying more than 4% interest. I feel we have 3 choices:

1) Do nothing. When my MIL passes, we can decide the best way to realize the interest. As these are good investments, this may be the financially prudent thing to do. However, may trigger probate.
2) Sell all the bonds now. Although a pain to do now, this will simplify everything else the most. Avoids probate.
3) Re-title the bonds with new beneficiaries. Would push the interest to the children which may be a bad thing. Avoids probate.

Any thoughts here?
Cash them in now. Make life easier for everyone. Your 1% is worth $1,500/year. You can put some of it in a CD if you want and get close. Interest rates are also going up.
Fremdon Ferndock
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Re: Trust for 86 year old?

Post by Fremdon Ferndock »

As far as I can determine, the cash distributions coming out of a trust is not protected from Medicaid. Qualifying for Medicaid in most cases has both an asset requirement and an income requirement and you have to meet both. While trust assets may not be countable toward the asset requirement (if the beneficiary has no discretion over distributions), the distributions are countable toward the income requirement - same as if it were a pension, etc. If you do otherwise qualify for Medicaid, trust income has to be applied toward qualified care expenses before Medicaid pays.

For example, my mother does not have a trust, but her social security and pension income are applied to her nursing home charges before Medicaid pays the balance. Since her assets are below $2,000 and her combined SS and pension income are below the limit also, she qualified for Medicaid. Otherwise, she would not have and we/she would have been stuck with private pay.
SuzBanyan
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Re: Trust for 86 year old?

Post by SuzBanyan »

Fremdon Ferndock wrote: Wed Jan 12, 2022 1:44 pm As far as I can determine, the cash distributions coming out of a trust is not protected from Medicaid. Qualifying for Medicaid in most cases has both an asset requirement and an income requirement and you have to meet both. While trust assets may not be countable toward the asset requirement (if the beneficiary has no discretion over distributions), the distributions are countable toward the income requirement - same as if it were a pension, etc. If you do otherwise qualify for Medicaid, trust income has to be applied toward qualified care expenses before Medicaid pays.

For example, my mother does not have a trust, but her social security and pension income are applied to her nursing home charges before Medicaid pays the balance. Since her assets are below $2,000 and her combined SS and pension income are below the limit also, she qualified for Medicaid. Otherwise, she would not have and we/she would have been stuck with private pay.
For an 86 year old with $3M in assets, Medicaid planning is probably not a top concern. But the OP should talk with an elder law attorney to understand what might be needed if this is of interest.
twh
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Re: Trust for 86 year old?

Post by twh »

SuzBanyan wrote: Wed Jan 12, 2022 1:51 pm
Fremdon Ferndock wrote: Wed Jan 12, 2022 1:44 pm As far as I can determine, the cash distributions coming out of a trust is not protected from Medicaid. Qualifying for Medicaid in most cases has both an asset requirement and an income requirement and you have to meet both. While trust assets may not be countable toward the asset requirement (if the beneficiary has no discretion over distributions), the distributions are countable toward the income requirement - same as if it were a pension, etc. If you do otherwise qualify for Medicaid, trust income has to be applied toward qualified care expenses before Medicaid pays.

For example, my mother does not have a trust, but her social security and pension income are applied to her nursing home charges before Medicaid pays the balance. Since her assets are below $2,000 and her combined SS and pension income are below the limit also, she qualified for Medicaid. Otherwise, she would not have and we/she would have been stuck with private pay.
For an 86 year old with $3M in assets, Medicaid planning is probably not a top concern. But the OP should talk with an elder law attorney to understand what might be needed if this is of interest.
You beat me to it...

Another point on Medicaid, since that comes up a lot. For someone with no money, a Medicaid nursing home is the best the can do. For the OP's MIL, who has $3M, she need not be in a Medicaid nursing home, even if they can structure things so that it is possible. Yes, the difference between the cost is staggering, but so is the level of care.
Topic Author
privateID
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Re: Trust for 86 year old?

Post by privateID »

Lee_WSP wrote: Wed Jan 12, 2022 1:09 pm
privateID wrote: Wed Jan 12, 2022 1:00 pm
twh wrote: Wed Jan 12, 2022 1:35 am
privateID wrote: Tue Jan 11, 2022 10:33 pm
donall wrote: Tue Jan 11, 2022 12:57 pm

Note link indicates $100,000 value.

https://www.treasurydirect.gov/indiv/re ... edeath.htm
I think the $50K figure I saw was about having an estate go to probate in Colorado. So, not sure how the Colorado rules merge with the treasure direct rules. I know alot of people around here love savings bonds, but I have to say I find them to be quite a pain. First, many of her bonds are maturing as her memory is going making it a challenge to cash them. Second, although there is some flexibility for cashing them in, inheriting them also could present issues in my savings where they mature after I start taking SS. Just seems like alot of potential work when I would be looking to simplify things.

In 3 years we will be down to around $60K in savings bonds and maybe $50K in the bank. Everything else has a beneficiary. Does that mean we still have to go through probate? Should I even be concerned about that?
Personally, I would cash them all in now while it easy. Bulk up the working checking account and put the rest in the brokerage as cash.
The only thing holding us back from potentially going to probate are these bonds. They are earning good interest. Fixed rate on I-bonds are 1.1% and 1.2%. All the bonds paying more than 4% interest. I feel we have 3 choices:

1) Do nothing. When my MIL passes, we can decide the best way to realize the interest. As these are good investments, this may be the financially prudent thing to do. However, may trigger probate.
2) Sell all the bonds now. Although a pain to do now, this will simplify everything else the most. Avoids probate.
3) Re-title the bonds with new beneficiaries. Would push the interest to the children which may be a bad thing. Avoids probate.

Any thoughts here?
IMO, probate is not the ninth circle of the inferno. I would not needlessly complicates everyone's life today for a small or no benefit tomorrow.
twh wrote:Cash them in now. Make life easier for everyone. Your 1% is worth $1,500/year. You can put some of it in a CD if you want and get close. Interest rates are also going up.
Hmmm...can you get such different opinions? Trying to compare the options. The EE bonds are paying 4%. The I-bonds are 1+% fixed plus inflation. Not sure what to compare those values to, but sounds like talking thousands over the remaining years (maybe cumulatively $10K-$20K) over something like a CD.

We did meet with a lawyer. She seemed competent. She said a trust was not merited in our case. Given that their website talks so much about trusts, I was happy to see them not to try and push a trust. She did recommend if we can get the last couple of items out of the estate - bank accounts, savings bonds - that it would certainly be better. The bank accounts are easy to do. The savings bonds are not. I have been reading past stories on Bogleheads about savings bonds. Here are some of the items:
1) It's not so easy to cash in so many bonds. Some banks have restrictions.
2) With my POA, I should (although some conflicting stories here) be able to cash the bonds for my MIL.
3) It was mentioned above, but if we can get the bonds under $100K, potentially could make the probate situation easier. By the end of the year, they will be around $100K.
4) Will need my FIL's death certificate to change title. I know I have a copy. Not sure if I need an original.

At this point, I am leaning toward waiting out the year, cashing the bonds myself whenever I am around. Expect the balance to drop below $100K. I have a hard time believing in this case that probate will cost (money+time) more than the thousands of income generated. Of course, if the family prefers to simplify things, that is what we'll do.
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Lee_WSP
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Re: Trust for 86 year old?

Post by Lee_WSP »

You need to decide whether avoiding probate is a worthwhile endeavor.
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