Is a pre-nup NOT "icky?"NotWhoYouThink wrote: ↑Wed Jan 10, 2018 8:00 pmThe big one seems to be keeping it from a spouse, which I think is kind of icky, but they can get a pre-nup if they want. What else?

Is a pre-nup NOT "icky?"NotWhoYouThink wrote: ↑Wed Jan 10, 2018 8:00 pmThe big one seems to be keeping it from a spouse, which I think is kind of icky, but they can get a pre-nup if they want. What else?
letsgobobby - you have done a commendable job of answering questions and providing accurate and meaningful answers. Just thought you might want to hear that.letsgobobby wrote: ↑Wed Jan 10, 2018 8:13 pmkeep it out of the hands of creditors if they go bankrupt, or are sued, or have a business deal go bad.NotWhoYouThink wrote: ↑Wed Jan 10, 2018 8:00 pmI don't buy warranties for electronics or carry collision/comprehensive on paid for cars after the first year or two, because I don't want to pay for insurance if I can afford to take the risk. I don't plan to leave my estate in trust because there is a cost (we can argue about how much, some say it is negligible but at least one of my kids would differ) to having the trusts, and I still don't see the payoff that I would value.
Can you name specific "options" they would have with the trust and not without that I would value? The big one seems to be keeping it from a spouse, which I think is kind of icky, but they can get a pre-nup if they want. What else?
keep it out of their estate to minimize or avoid estate taxes.
these points have been made repeatedly.
Interesting. Can you provide examples of these questions that your attorneys find annoying?NotWhoYouThink wrote: ↑Wed Jan 10, 2018 8:25 pmI ask a lot of questions which annoy attorneys, then make my own decisions.
Can't money from the revocable trust be used to settle estate issues? Are the investments too illiquid to sell easily to fund near term expenses?(3) I expect the estate will need to borrow more, unless the revocable trust is dissolved quickly.
I tend to over analyze things like this myself - almost to a point where I can't make a decision. I've read probably a half dozen books on pros/cons of Wills vs Trusts. I'm a CPA and last year did my entire 40 hours of continuing education on Estates and Trusts education. Yuck! Right now, I'm leaning toward just keeping my Will as it is and work on making the rest of my estate probate-proof.NotWhoYouThink wrote: ↑Thu Jan 11, 2018 8:05 am
I like to analyze things to death, and ask a lot of questions, and am seldom so over-awed by the intelligence and expertise of the exalted professional that I take advice without a lot of questions about why that's the best path and what other possible solutions were rejected to come up with this answer. Again, that works ok when I'm paying by the hour, less so with pricing geared toward a more transactional relationship.
And when someone who really really thinks he is giving me good advice won't accept that the course of action he is advising doesn't fit my needs and keeps insisting it really does I just don't understand, it kind of makes us both cranky.
My understanding where the trust is better than the will is the in between stage before you get to death. Will deals with what happens at death. What about being incapacitated? Who will take care of things. I have a sister who has nothing. I’m not worrying about her estate when she dies, but what happens to everything when she can’t talk, can’t think, who will pay for her bills, will she lose her house if she has nobody to pay her mortgage or property tax, basically the in between phase.PatrickA5 wrote: ↑Thu Jan 11, 2018 9:26 amI tend to over analyze things like this myself - almost to a point where I can't make a decision. I've read probably a half dozen books on pros/cons of Wills vs Trusts. I'm a CPA and last year did my entire 40 hours of continuing education on Estates and Trusts education. Yuck! Right now, I'm leaning toward just keeping my Will as it is and work on making the rest of my estate probate-proof.NotWhoYouThink wrote: ↑Thu Jan 11, 2018 8:05 am
I like to analyze things to death, and ask a lot of questions, and am seldom so over-awed by the intelligence and expertise of the exalted professional that I take advice without a lot of questions about why that's the best path and what other possible solutions were rejected to come up with this answer. Again, that works ok when I'm paying by the hour, less so with pricing geared toward a more transactional relationship.
And when someone who really really thinks he is giving me good advice won't accept that the course of action he is advising doesn't fit my needs and keeps insisting it really does I just don't understand, it kind of makes us both cranky.
BUT, I do have a meeting with one of the supposedly better estate lawyers in town, so I'm sure he'll have something different to suggest. If I do go with a Trust, I'll probably just do something simple where the sucessor trustee is the beneficiary and has power to do whatever. But, I'm not sure that does any more good than a Will that doesn't go through probate?
Possibly. The lawyer suggested the loan to the estate. The assets may not have been touchable at the time--it was fairly soon after MIL died. I "think" the sons can access the revocable trust now. It's kind of hard to keep up--there's a 3-page punch list of items to be completed. We've mostly been focusing on getting the 2017 RMDs. Plus, MIL's 1041 has to be filed next month. Did I mention that DH is in grad school, as well as having one of those pesky "job" things? I try to help him as much as I can--ironically, I love this stuff--but unfortunately, this is primarily DH's burden.NotWhoYouThink wrote: ↑Thu Jan 11, 2018 9:03 amCan't money from the revocable trust be used to settle estate issues? Are the investments too illiquid to sell easily to fund near term expenses?(3) I expect the estate will need to borrow more, unless the revocable trust is dissolved quickly.
Many people have a tendency to overestimate how unique or special their personal, and family, situation is. Probably natural enough to want to believe that you are a rose among thorns, or whatever.WannabeAgAlum wrote: ↑Thu Jan 11, 2018 10:57 amNotWhoYouThink: You asked if I was an attorney - not sure whether I should be offended or flattered. Yes, I am. I have come to accept it. "Hi, my name is WannabeAgAlum, and I'm an attorney..."
I am comfortable with mandatory outright distributions from trusts as long as the client understands the alternatives and rejects them. You clearly do and have. When kid or kid's attorney comes to me later after mom/dad have died and ask why on earth the trust mandated distributions at a set age when in today's world 50% of people divorce, creditors lurk, etc. etc. (don't want to rehash it all TOO much), I want to be able to point to the note in the file that we had the conversation and it was rejected. If it were your kid, I'd point to this lovely thread. You've been raked through the coals on this issue.
I imagine it's hard trusting other professionals when you're the smartest person in the room (not trying to take a jab at you; smart people often know they're smart). I knew a fellow who after he reviewed his trust crossed out about half of the language in the document and directed the attorney to draft it another way that would have been disastrous. The guy was much smarter than the attorney (generally), but had no clue about the tax code or estate planning. He didn't understand the provisions he was crossing out, which is probably why he crossed them out. Brilliant in his field (PhD), but did a pretty boneheaded thing. Attorneys can't just do whatever their clients want - they have to act in their clients' best interests.
As a parting thought, I'll share one more experience. Client came to attorney and asked for mandatory outright distributions immediately after death for kids' shares because he had bad experience with parents' trust. Conversation about alternatives occurred, then client wanted to involve children in the discussion (not always a good idea). Attorney and client and client's children had discussion, and children basically said "why wouldn't we want continuing trusts?" Attorney explained hassle factor, extra income tax return, learning curve, involving professionals for big decisions, etc. Given size of shares, and children's input, client went with lifetime trusts. If they would have gone with outright, then fine. At least they could make an informed decision.
Wannabe
I'll ask the lawyer about the incapacity issues. I've read that Trusts are better than POA's when dealing with banks. But, I've also read where POA's are just fine. I don't know for sure. We currently have POA's, but they are "springing" POA's that don't take affect until proven incapcitated by doctors. I want to change those to "immediate" POA's. We've been married 38 years and don't see the need for the complexity in having doctors involved in our situation.DrGoogle2017 wrote: ↑Thu Jan 11, 2018 11:49 amMy understanding where the trust is better than the will is the in between stage before you get to death. Will deals with what happens at death. What about being incapacitated? Who will take care of things. I have a sister who has nothing. I’m not worrying about her estate when she dies, but what happens to everything when she can’t talk, can’t think, who will pay for her bills, will she lose her house if she has nobody to pay her mortgage or property tax, basically the in between phase.PatrickA5 wrote: ↑Thu Jan 11, 2018 9:26 amI tend to over analyze things like this myself - almost to a point where I can't make a decision. I've read probably a half dozen books on pros/cons of Wills vs Trusts. I'm a CPA and last year did my entire 40 hours of continuing education on Estates and Trusts education. Yuck! Right now, I'm leaning toward just keeping my Will as it is and work on making the rest of my estate probate-proof.NotWhoYouThink wrote: ↑Thu Jan 11, 2018 8:05 am
I like to analyze things to death, and ask a lot of questions, and am seldom so over-awed by the intelligence and expertise of the exalted professional that I take advice without a lot of questions about why that's the best path and what other possible solutions were rejected to come up with this answer. Again, that works ok when I'm paying by the hour, less so with pricing geared toward a more transactional relationship.
And when someone who really really thinks he is giving me good advice won't accept that the course of action he is advising doesn't fit my needs and keeps insisting it really does I just don't understand, it kind of makes us both cranky.
BUT, I do have a meeting with one of the supposedly better estate lawyers in town, so I'm sure he'll have something different to suggest. If I do go with a Trust, I'll probably just do something simple where the sucessor trustee is the beneficiary and has power to do whatever. But, I'm not sure that does any more good than a Will that doesn't go through probate?
Outstanding!NotWhoYouThink wrote: ↑Thu Jan 11, 2018 8:05 am. . .
In some situations (like a fixed price agreement to develop an estate plan) attorneys seem to want to gather some pre-determined data points, plug them into their document generator, and present me with "the answer". That's kind of the business model. drive thru window? There is room in there for some discussion, but mostly they consider themselves to be the experts, and they expect me to follow their advice. Same with doctors to some extent. And Financial Advisors.
I like to analyze things to death, and ask a lot of questions, and am seldom so over-awed by the intelligence and expertise of the exalted professional that I take advice without a lot of questions about why that's the best path and what other possible solutions were rejected to come up with this answer. Again, that works ok when I'm paying by the hour, less so with pricing geared toward a more transactional relationship.Yes!
And when someone who really really thinks he is giving me good advice won't accept that the course of action he is advising doesn't fit my needs and keeps insisting it really does I just don't understand, it kind of makes us both cranky.Indeed!![]()
Thank you afan for your thoughtful post - I guess I need to do more homework here about how this would work. I understand your point about relatively low taxable income, and passing that through (his tax bracket's pretty low right now). But I guess the question then is, when you look at the long-term growth in the value of the assets, is keeping them in a trust a significant disadvantage? I suppose if you limit income and focus on long term capital gains, it's not as much of a difference as I'm thinking.afan wrote: ↑Wed Jan 10, 2018 12:54 pmThe trust tax rates only matter to the extent that the income is retained in the trust. Any income paid out to the beneficiary is taxed at the beneficiary's rates on the individual tax return. To minimize the income tax hit one can distribute any income that would be taxed at a higher rate for the trust than for the individual. The higher the beneficiary's tax rate the less difference it makes. If the beneficiary is in the top tax bracket then it saves taxes to keep the income in the trust.Dinosaur Dad wrote: ↑Sat Jan 06, 2018 11:08 pmRight now our will leaves everything to a trust, managed by my brother-in-law, who we consider to be trustworthy and knowledgeable. He would have the ability to move the assets to our son at his discretion (no set timetable).
Lately, quite frankly, I've been having second thoughts - specifically about trust tax rates, which are astronomical. It would pain this Boglehead to lose all that.
OTOH, I don't think my son (age 23) would be able to handle a large ($5 million plus) estate right now. So what we may do is change the will so that there's a clearer, more specific path e.g. x% at age 30, y% at age 40. The tax bite will still be bad, but that seems to be the right compromise.
Even for that large a trust the combination of low current dividend rates and low interest rates on Muni bonds means relatively low taxable income.
As long as you have an independent trustee making decisions about distributions the trustee can decide each year whether to make distributions and if so how much. This is almost certainly better than forcing the money out of the trust at set ages.
Our kids are analytical types. The one who will be tasked with taking over when we are too enfeebled to manage our affairs is also very knowledgeable financially. This adult child has sat patiently through explanations of the estate planning and has copies of the documents. I am fully confident that everything will be handled correctly and our attorney included an extremely helpful layperson's explanation of how this work.NotWhoYouThink wrote: ↑Thu Jan 11, 2018 2:11 pm
Maybe I should print this thread out and file it with the will/trust documents so the kids see my reasoning.
LOL. Thanks for this explanation. Many of your prior comments now make a whole lot more sense to me.NotWhoYouThink wrote: ↑Thu Jan 11, 2018 8:05 amIn some situations (like a fixed price agreement to develop an estate plan) attorneys seem to want to gather some pre-determined data points, plug them into their document generator, and present me with "the answer". That's kind of the business model. There is room in there for some discussion, but mostly they consider themselves to be the experts, and they expect me to follow their advice. Same with doctors to some extent. And Financial Advisors.
This is encouraging, because I believe it is exactly how everybody should approach something as important as estate planning. I will say that your experience departs from mine at this point. I've found the pricing structure to be more tied to my geographical area than which attorney a person uses. I think there are competent estate attorneys who have package pricing, and I think there are also hourly attorneys who are just selling a canned product.I like to analyze things to death, and ask a lot of questions, and am seldom so over-awed by the intelligence and expertise of the exalted professional that I take advice without a lot of questions about why that's the best path and what other possible solutions were rejected to come up with this answer. Again, that works ok when I'm paying by the hour, less so with pricing geared toward a more transactional relationship
Don't get cranky, find a better attorney!!And when someone who really really thinks he is giving me good advice won't accept that the course of action he is advising doesn't fit my needs and keeps insisting it really does I just don't understand, it kind of makes us both cranky.
First, I agree with everything afan has shared regarding a trust being superior to use of a DPOA. That said, there is one situation where this really isn't possible:
FIREchief: If you really want to have things go quickly with your bank/broker, use their version of the power of attorney. If I am not mistaken, they typically limit the power to accounts only at that institution. Of course your other powers of attorney will need to account for that and your EP attorney should be aware of it too.FIREchief wrote: ↑Thu Jan 11, 2018 5:21 pmFirst, I agree with everything afan has shared regarding a trust being superior to use of a DPOA. That said, there is one situation where this really isn't possible:
"LIving person has most assets in qualified retirment plans, and becomes incapacitated. Assets within living trust are readily available to successor trustee who is looking out for inapacitated individual. From time to time, assets run low and money must be withdrawn from qulified retirement plan to replenish trust."
Since qualified retirment plans can not be put into trust (during a person's lifetime), a working DPOA must be crafted to allow funds to be withdrawn for the care of the incapacitated individual. Okay, so that's the problem. I think I have found at least one solution (hopefully). I have taken my DPOA to my borkerage and asked them to have their legal department review it. They archived a copy and provided postitive feedback that it WILL be accepted in the event of my incapacitation. I won't know for certain until the time may come, but I am at least hopeful. I'm curious if anybody else has attempted this type of proactive approach.
Thanks. You are correct, however if a person's situation requires a springing POA, the banks/brokerages don't offer those. Correct?WannabeAgAlum wrote: ↑Thu Jan 11, 2018 5:31 pmFIREchief: If you really want to have things go quickly with your bank/broker, use their version of the power of attorney. If I am not mistaken, they typically limit the power to accounts only at that institution. Of course your other powers of attorney will need to account for that and your EP attorney should be aware of it too.
Wannabe
Another +1 here.daveydoo wrote: ↑Wed Jan 10, 2018 1:56 am+1. We seem to go through endless machinations on this forum about how best to prepare spouse for our eventual passing, but it's somehow different when it comes to our kids? C'est la vie? I'm gone so who cares? I don't want to control what happens, except to minimize the odds that any potential inheritance ends up with schemers or scammers. Seems like there are some pretty easy steps that can be taken.
I don't know. I generally like using powers that are effective immediately. Agents named in those powers don't have to know about them right away.FIREchief wrote: ↑Thu Jan 11, 2018 5:38 pmThanks. You are correct, however if a person's situation requires a springing POA, the banks/brokerages don't offer those. Correct?WannabeAgAlum wrote: ↑Thu Jan 11, 2018 5:31 pmFIREchief: If you really want to have things go quickly with your bank/broker, use their version of the power of attorney. If I am not mistaken, they typically limit the power to accounts only at that institution. Of course your other powers of attorney will need to account for that and your EP attorney should be aware of it too.
Wannabe
With my brokerage, I believe that my newly named POA would know the next time they logged into their on-line account. (this is a feature, not a glitch)WannabeAgAlum wrote: ↑Thu Jan 11, 2018 5:46 pmI don't know. I generally like using powers that are effective immediately. Agents named in those powers don't have to know about them right away.FIREchief wrote: ↑Thu Jan 11, 2018 5:38 pmThanks. You are correct, however if a person's situation requires a springing POA, the banks/brokerages don't offer those. Correct?WannabeAgAlum wrote: ↑Thu Jan 11, 2018 5:31 pmFIREchief: If you really want to have things go quickly with your bank/broker, use their version of the power of attorney. If I am not mistaken, they typically limit the power to accounts only at that institution. Of course your other powers of attorney will need to account for that and your EP attorney should be aware of it too.
Wannabe
Wannabe
Hmmmm. Maybe you print it out the old-fashioned way, sign it, don't submit it to brokerage yet. Give it to trusted advisor if one exists and is not a fraidy cat like me. Then let it be known who needs to be contacted should you blow a fuse. There is probably no perfect answer here.FIREchief wrote: ↑Thu Jan 11, 2018 5:52 pmWith my brokerage, I believe that my newly named POA would know the next time they logged into their on-line account. (this is a feature, not a glitch)WannabeAgAlum wrote: ↑Thu Jan 11, 2018 5:46 pmI don't know. I generally like using powers that are effective immediately. Agents named in those powers don't have to know about them right away.FIREchief wrote: ↑Thu Jan 11, 2018 5:38 pmThanks. You are correct, however if a person's situation requires a springing POA, the banks/brokerages don't offer those. Correct?WannabeAgAlum wrote: ↑Thu Jan 11, 2018 5:31 pmFIREchief: If you really want to have things go quickly with your bank/broker, use their version of the power of attorney. If I am not mistaken, they typically limit the power to accounts only at that institution. Of course your other powers of attorney will need to account for that and your EP attorney should be aware of it too.
Wannabe
Wannabe![]()
That might be a great backup plan!WannabeAgAlum wrote: ↑Thu Jan 11, 2018 6:08 pmHmmmm. Maybe you print it out the old-fashioned way, sign it, don't submit it to brokerage yet. Give it to trusted advisor if one exists and is not a fraidy cat like me. Then let it be known who needs to be contacted should you blow a fuse. There is probably no perfect answer here.FIREchief wrote: ↑Thu Jan 11, 2018 5:52 pmWith my brokerage, I believe that my newly named POA would know the next time they logged into their on-line account. (this is a feature, not a glitch)WannabeAgAlum wrote: ↑Thu Jan 11, 2018 5:46 pmI don't know. I generally like using powers that are effective immediately. Agents named in those powers don't have to know about them right away.FIREchief wrote: ↑Thu Jan 11, 2018 5:38 pmThanks. You are correct, however if a person's situation requires a springing POA, the banks/brokerages don't offer those. Correct?WannabeAgAlum wrote: ↑Thu Jan 11, 2018 5:31 pmFIREchief: If you really want to have things go quickly with your bank/broker, use their version of the power of attorney. If I am not mistaken, they typically limit the power to accounts only at that institution. Of course your other powers of attorney will need to account for that and your EP attorney should be aware of it too.
Wannabe
Wannabe![]()
Wannabe
But I'll bet that the experts you do pay by the hour really love having you as a client!NotWhoYouThink wrote: ↑Thu Jan 11, 2018 8:05 amAgain, that works ok when I'm paying by the hour, less so with pricing geared toward a more transactional relationship.
This. We (husband, his brother and brother's wife) are reaping the enormous benefits in peace of mind and ability to take care of my MIL because there is a trust in place. After a period of mental decline and 2 hip fractures, I insisted that she and her two sons meet with a competent attorney specializing in estate planning. Luckily she was still aware enough, and trusted her sons enough, to cooperate. Everything was set up at that point including placing her house and bank accounts in a trust as well as medical and legal POA and health care proxy docs. Less than 6 months later she had her 3rd hip fracture and because everything was in order we were able to get her relocated to assisted living, take care of her bills and rent out her house to defray her living costs.DrGoogle2017 wrote: ↑Thu Jan 11, 2018 11:49 am
My understanding where the trust is better than the will is the in between stage before you get to death. Will deals with what happens at death. What about being incapacitated? Who will take care of things. I have a sister who has nothing. I’m not worrying about her estate when she dies, but what happens to everything when she can’t talk, can’t think, who will pay for her bills, will she lose her house if she has nobody to pay her mortgage or property tax, basically the in between phase.
Options 1 and 2 should have the same result (assuming the accounts are not retirement accounts) following death. Option 1 is better if you want to plan for incapacity prior to death.Finridge wrote: ↑Thu Jan 11, 2018 11:02 pmFor those of you who do plan to have distributions to adult children governed by a irrevocable trust, what approach are you taking:
- Put your Vanguard accounts into a living trust that becomes irrevocable on your death?
- Keep in your own name and list the trust as the "payable on death" beneficiary. (I'm not sure if Vanguard even allows this... once when I asked them about doing this years ago, they said it was not possible.)
- Put into an irrevocable account now, with the viewpoint of not only protecting the trust assets against future creditors of your children, but also protecting against creditors you develop later. (Like, say, a judgement recorded against you after you crash into that charter bus taking the local bingo club to the casino.) One big downside I'd see with this is that I suspect this would make it impossible to get a step-up in tax basis on death.
Finridge wrote: ↑Thu Jan 11, 2018 11:02 pmFor those of you who do plan to have distributions to adult children governed by a irrevocable trust, what approach are you taking:
- Put your Vanguard accounts into a living trust that becomes irrevocable on your death?
- Keep in your own name and list the trust as the "payable on death" beneficiary. (I'm not sure if Vanguard even allows this... once when I asked them about doing this years ago, they said it was not possible.)
My understanding is that an estate and a living trust, during it's administration phase, can share a common EIN and file a single 1041 to report taxable income for both. I would really like to receive confirmation of this from one of our experts.samsmith wrote: ↑Fri Jan 12, 2018 6:24 pm
I have a question about how these two options would work in practice. Specifically, in both options while you are alive and the account owner, you would have used your SSN for the account and you would pay any taxes on the account. However, at the time of your death:
- If you have a living trust, as noted above, it should become irrevocable at your death. So does the trust need its own TIN for anything that happens between date of death and the date that the brokerage is notified by the trustee of the death.
- If you have a "payable on death" account. I assume it should just sit there until the brokerage is notified of your death. So does this account need its own TIN for anything that happens between date of death and the date that the brokerage is notified?
my simplistic view/experience:samsmith wrote: ↑Fri Jan 12, 2018 6:24 pmFinridge wrote: ↑Thu Jan 11, 2018 11:02 pmFor those of you who do plan to have distributions to adult children governed by a irrevocable trust, what approach are you taking:
- Put your Vanguard accounts into a living trust that becomes irrevocable on your death?
- Keep in your own name and list the trust as the "payable on death" beneficiary. (I'm not sure if Vanguard even allows this... once when I asked them about doing this years ago, they said it was not possible.)
I have a question about how these two options would work in practice. Specifically, in both options while you are alive and the account owner, you would have used your SSN for the account and you would pay any taxes on the account. However, at the time of your death:
- If you have a living trust, as noted above, it should become irrevocable at your death. So does the trust need its own TIN for anything that happens between date of death and the date that the brokerage is notified by the trustee of the death. I assume the notification of death would be accompanied by instructions to the brokerage to make distributions consistent with the terms of the living trust?
- If you have a "payable on death" account. I assume it should just sit there until the brokerage is notified of your death. So does this account need its own TIN for anything that happens between date of death and the date that the brokerage is notified? Once again, I assume the notification of death would be accompanied by instructions to the brokerage on how to make distributions to the payable on death beneficiary(s)?
I did not know that. Our joint revocable trust does not have a separate TIN. Vanguard sends all trust 1099 DIVs to me, since my SS number is the assigned SS number for the trust, and I file a joint return for my wife and myself. When the second of us dies, my expectation is that our executor and successor trustee (same person) will just file a final tax return for the second of us to die, using that person's SS number (which will also be the trust's assigned SS number at that time). Unless our trust earns more than $600 after we die, during the same tax year we die, I did not think anyone would need to file a separate tax return for the trust, which means it would never need to have its own TIN.curmudgeon wrote: ↑Fri Jan 12, 2018 10:23 pmYes, living trust needs a TIN. It generally takes time to wind up a trust/estate, so taxable income/changes come under the TIN (and get reflected to beneficiaries with K1s).
Assuming you're not rich enough to be in estate/inheritance tax territory, and assuming your kids wouldn't completely blow the money on excessive spending, by far the biggest risk that a trust would protect against would be divorce. In theory, a prenup could protect against that. However, a trust has the advantage of letting the parents be the bad guy instead of forcing the daughters(in your case) to ask their prospective husbands for a prenup. As for disadvantages, there's differing legal opinions on this. However, some lawyers believe appointing the beneficiary as a co-trustee could be used to invalidate the asset protection aspects of the trust, if it were challenged in court.MikeG62 wrote: ↑Thu Jan 11, 2018 5:40 pmPersonally, my biggest worry is what happens in the event of divorce. Seen way too much divorce in my extended family. It's just so common nowadays. So for this, among the other very compelling reasons offered up by others on this thread (special shout out to WannabeAgAlum, FIREchief and afan for the time and effort they dedicated here) my DW and I have chosen to go the trust route.
We have discussed the reasons why we plan to use trusts with our two adult (but as yet unmarried) daughters and both are "100% on board". In fact, they questioned why anyone with a sizable estate would do it any other way. I suppose I could show them this thread, but I won't. They understand they will have reasonable access to funds in the trust (ascertainable standard/HEMS).
The only real drawback in my eyes is cost. We have made the decision that the benefits outweigh the costs.
I wanted to echo this. Thank you. This has been a very helpful thread. One my New Year's resolutions was to finally get around to putting good estate plans in place. And now it's very clear to me that a run-of-the-mill A-B trust just won't cut it.
I don't beleive this has anything to do with which lawyer you're talking to, but everything to do with which state that lawyer practices in. In my state, current state laws are very clear. A beneficiary can be their own trustee and there is abaolutely no risk to trust assets.
I am not an expert on this, so take with a large grain of salt. But I may not have been clear; what I meant was that the trust needs a TIN *after* the death of the final grantor. In the case that I dealt with, I wanted to distribute cash, rather than stock, and as it happened, over the course of a few months, there were substantial gains that needed to be reported.fourwheelcycle wrote: ↑Fri Jan 12, 2018 10:50 pmI did not know that. Our joint revocable trust does not have a separate TIN. Vanguard sends all trust 1099 DIVs to me, since my SS number is the assigned SS number for the trust, and I file a joint return for my wife and myself. When the second of us dies, my expectation is that our executor and successor trustee (same person) will just file a final tax return for the second of us to die, using that person's SS number (which will also be the trust's assigned SS number at that time). Unless our trust earns more than $600 after we die, during the same tax year we die, I did not think anyone would need to file a separate tax return for the trust, which means it would never need to have its own TIN.curmudgeon wrote: ↑Fri Jan 12, 2018 10:23 pmYes, living trust needs a TIN. It generally takes time to wind up a trust/estate, so taxable income/changes come under the TIN (and get reflected to beneficiaries with K1s).
If I have set up a living trust (i.e., a trust that exists during my life), and if the trust is a "grantor" trust, whether revocable or irrevocable, then I can use my SSN for the trust. I also have the option of getting a separate TIN for the trust, but the income will be tied to my SSN and all income reported on my personal 1040, so it does not establish a separate taxpayer. So, yes, a living trust that is a grantor trust can get a separate TIN, but it doesn't have to. If my living trust is a non-grantor trust, it is its own taxpayer, and so must get a separate TIN. Revocable living trusts are always grantor trusts and so do not need separate TINs.curmudgeon wrote: ↑Fri Jan 12, 2018 10:23 pmmy simplistic view/experience:samsmith wrote: ↑Fri Jan 12, 2018 6:24 pmFinridge wrote: ↑Thu Jan 11, 2018 11:02 pmFor those of you who do plan to have distributions to adult children governed by a irrevocable trust, what approach are you taking:
- Put your Vanguard accounts into a living trust that becomes irrevocable on your death?
- Keep in your own name and list the trust as the "payable on death" beneficiary. (I'm not sure if Vanguard even allows this... once when I asked them about doing this years ago, they said it was not possible.)
I have a question about how these two options would work in practice. Specifically, in both options while you are alive and the account owner, you would have used your SSN for the account and you would pay any taxes on the account. However, at the time of your death:
- If you have a living trust, as noted above, it should become irrevocable at your death. So does the trust need its own TIN for anything that happens between date of death and the date that the brokerage is notified by the trustee of the death. I assume the notification of death would be accompanied by instructions to the brokerage to make distributions consistent with the terms of the living trust?
- If you have a "payable on death" account. I assume it should just sit there until the brokerage is notified of your death. So does this account need its own TIN for anything that happens between date of death and the date that the brokerage is notified? Once again, I assume the notification of death would be accompanied by instructions to the brokerage on how to make distributions to the payable on death beneficiary(s)?
Yes, living trust needs a TIN. It generally takes time to wind up a trust/estate, so taxable income/changes come under the TIN (and get reflected to beneficiaries with K1s).
POD doesn't need a TIN. The recipient will need to establish a "date of death valuation" for what they inherited to establish the new basis, and will be responsible for any taxes after that point.
It depends on state law, what the trust permits the beneficiary/trustee to do and what that person actually does. There are cases in which a beneficiary acting as trustee treats the trust as personal property, ignores limitations on distributions, then gets sued. The trust document may have sufficiently constrained the trustee's rights to provide asset protection. If the trustee exceeds these limits then the asset protection can be lost.FIREchief wrote: ↑Sat Jan 13, 2018 1:32 amI don't beleive this has anything to do with which lawyer you're talking to, but everything to do with which state that lawyer practices in. In my state, current state laws are very clear. A beneficiary can be their own trustee and there is abaolutely no risk to trust assets.
Thanks for that thorough explanation! I think you've reinforced my limited understanding of this, and it doesn't sound like I had any significant misunderstandings. I have read through some of the instructions for IRS 1041, and that's primarily where I learned about the election to combine the estate's tax return with the administrative trust's. While we do have good discussions about trusts from time to time, I haven't really seen these tax issues come up before. Like many things with the IRS, it all does start to make sense if you stare at it long enough.
Clearly, the POD account's income will go to the original owner while he is alive, And the POD income will go to the named beneficiaries (kids or kids trusts) after the assets have been successfully transferred (I looked on Fidelity's website and it looks like Fidelity requires the beneficiary to have or set up a Fidelity account to initially get the POD accounts assets. I am sure the beneficiary can then do whatever they want with the assets). But I am still hung up on the mechanics of what happens in the period between death and brokerage notification. I can easily see this period as 1-2 months. And if the death occurs in December, the brokerage may have sent out 1099s with the original owners SSN by the time they find out about the death. It seems unlikely to me that the brokerage would backdate and reissue statements and 1099s? So the deceased would have income attributed to his/her SSN after death. I get the concept that the income in the period after death and before POD distribution should be on the estate tax return, but the brokerage never got the estate's TIN number. So how does the IRS do a match?WannabeAgAlum wrote: ↑Sat Jan 13, 2018 2:41 am
For the personal POD account, the income following the date of death will typically go to the next owner - the beneficiary. If there's a month between my date of death and the date the POD beneficiary takes over the account, all the income in that month will typically show up on the beneficiary's income tax return. This makes sense since the income probably will be accumulating in the account and be paid to the beneficiary anyway. If for some reason the income is paid to me (i.e., my estate since I'm dead) during that month, then it will show up on my estate's income tax return but will be eligible for a deduction if it is subsequently paid to the POD beneficiary, which I believe it should be.