Estate planning/will for my wife and me

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Triple digit golfer
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Estate planning/will for my wife and me

Post by Triple digit golfer » Wed Feb 28, 2018 8:37 am

Hi all. I know very little about wills and estate planning and am a bit overwhelmed by what is needed and what is not. Google searches and searches on this forum are only seeming to add to my confusion.

Here is our situation:

Both 33 years old
I work a steady corporate job, wife stays at home with our 5 month old daughter

We have the following assets:
-House worth $380k with $330k remaining on mortgage
-A mix of 401(k), 403(b), Roth IRAs, Rollover IRAs, a 529 and taxable investments totaling $650k
-2 paid for cars worth approximately $10-12k each if I had to guess

We have the following relevant insurance:
-Me: Life insurance - $1 million, 30 year term policy
-Me: Life insurance - $1 million, 20 year term policy
-Me: Long-term disability insurance: Guardian policy, to age 65, own-occupation, COLA riders, all the bells and whistles
-Wife: Life insurance - $1 million, 20 year term policy

Our daughter is the secondary beneficiary on our life policies.

We just want to make sure that in the case that one of us dies, the other gets everything.
In the case the surviving spouse dies, our daughter gets everything.
In the case we both die, our daughter gets everything.

We also want to designate who would raise our daughter should be both die before she turns 18.

Do we need just a simple will? Or do we need a trust? Power of attorney?

Maybe a better question, when we meet with a lawyer and they recommend products, what are some that I should NOT entertain?

Any general advice or guidance is appreciated.

afan
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Re: Estate planning/will for my wife and me

Post by afan » Wed Feb 28, 2018 10:25 am

You both need wills to nominate a guardian for your child if you both die before she is an adult.

You probably should have at least a trust with your daughter as beneficiary to get the life insurance and your other assets if you both die while she is young. Most people would think it unwise for an 18 year old to suddenly find herself managing several million dollars. With a trust you can appoint a more experienced person to serve as trustee. The money could go out right to your daughter at an older age or remain in trust on her behalf for her life. There are several reasons keeping it in trust can be advantageous for her.

You probably also want a trust to receive your retirement assets if you both die young. This trust would provide asset protection but let your daughter benefit from stretching retirement distributions over her life rather than having to take all the money out in a few years.

You can accomplish all of the above with trusts set up in your wills.

If you create and fund living trusts then you simplify estate settlement at your death. Perhaps more importantly you make it easier for someone to take over and manage your financial affairs if you become incapacitated while still alive.

You should create durable powers of attorney and health care proxies. The DPOA would let someone of your choice, in your case initially your spouse, handle your affairs if needed. Many financial institutions refuse to accept general DPOAs. These companies require you to file one of their own forms instead. You and your wife should do that.

Since, at your ages, death of either of you and incapacity of the other is pretty unlikely, you could gamble that it will not happen soon. Then the value of a living trust would be lower. Of course, married couples often drive together which for most people is the riskiest thing they do.

At those assets levels you have no federal estate tax concerns under current law. Depending on your state there may be state level estate or inheritance taxes that would be due at the first or second death. Any estate planning lawyer will know whether that applies to you. If it does then there are strategies that can save a lot of money that would otherwise go to taxes.

Laws change frequently so you need to at least review your estate plan every five years or so. Depending on your circumstances and the laws, you may or may not need to change your plans. If you move to a different state you should check whether your plan developed for State A is still optimal for State B.

Make sure you pick an attorney who is genuinely an expert in estate planning. It is a complex and specialized field. Lots of lawyers who are not experts will happily take your money and crank out some boilerplate plans that may be out of date or simply wrong for your situation.
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama

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Sandtrap
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Location: Hawaii😀 Northern AZ.😳 Retired.

Re: Estate planning/will for my wife and me

Post by Sandtrap » Wed Feb 28, 2018 10:31 am

Welcome :D
1
Read this:
"Beyond The Grave" (wills trusts and estates) by Condon.
https://www.amazon.com/Beyond-Grave-Rev ... 791&sr=8-2
Will help prepare you for meeting with legal counsel.
2
Seek legal counsel.
3
The larger the estate, the more the need for #1, #2.

mahalo,
j :D

fmhealth
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Re: Estate planning/will for my wife and me

Post by fmhealth » Sat Mar 03, 2018 11:20 am

I can feel your pain! I've spoken with 8-9 lawyers over the past few weeks. They provided some consistency & clarity in a number of areas. We presently have a simple will & an unfunded trust.

Here's the primary point of confusion. A number of these folks feel I'm fine with the current format, others feel that my trust is worthless since it's not currently funded. Can the trust be funded subsequent to one of us passing?

Our goal is to simply transfer assets between my wife & I upon death & then on to my two adult children (50-50) upon the last survivors passing. Our original lawyer crafted these documents with these goals in mind. It appears that our simple will will adequately accomplish what we were trying to do. Do I need to make any changes?

Thanks so much for any actionable insights.

Be Well,
fmhealth

ETadvisor
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Re: Estate planning/will for my wife and me

Post by ETadvisor » Sat Mar 03, 2018 11:38 am

The RLT (revocable living trust) is a Will substitute. Some attorneys will preach it to minimize probate fees. In reality, you may still have formal probate proceedings because certain items were not transferred to trust, i.e. TPP (tangible personal property). A formal probate depending on the state is not a bad result as it can bar creditor claims after a certain date. The Will can pass your assets outright or in Trust. This is a very basic overview. I would consult with specialized estate attorney for each unique situation. If possible, get an estate attorney who is also a CPA.

gtd98765
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Re: Estate planning/will for my wife and me

Post by gtd98765 » Sat Mar 03, 2018 1:34 pm

https://www.nolo.com/legal-encyclopedia ... ts-estates

Useful info here. Also software to help.

Triple digit golfer
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Re: Estate planning/will for my wife and me

Post by Triple digit golfer » Tue Mar 13, 2018 2:50 pm

OP here. I spoke with a lawyer who recommended a will with a testamentary trust.

If I die, my wife gets everything.
If she dies, I get everything.
If we both die, our child gets everything.

We named a guardian for our daughter. That person is also the trustee of our estate who will manage the money thereafter.

Our lawyer rightfully told us that beneficiary designations on our various accounts are extremely important and determine who will get our assets. She recommended that we name each other (spouse) as primary and our daughter as secondary on all accounts.

Our life insurance policies are there to provide for our family in case one of us is not there to provide anymore. In that case, wouldn't it make the most sense to make the person we listed as our guardian and trustee the secondary beneficiary on our life insurance policies?

For 401(k), IRA, savings and other investments I have no problem making our daughter the secondary beneficiary.

Am I missing something?

delamer
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Re: Estate planning/will for my wife and me

Post by delamer » Tue Mar 13, 2018 5:24 pm

I am not an estate attorney, so keep that in mind.

But in our wills, the secondary beneficiaries on our accounts are not our kids but the testamentary trusts that benefit them. Maybe that it what you mean?

If you want the life insurance to benefit your daughter, then the proceeds should go to her in trust. Even if the guardian is totally trustworthy and will only spend the money on your daughter’s behalf, what happens if s/he dies before you daughter? If you leave the money directly to your daughter’s guardian, it becomes part the guardian’s estate.

Triple digit golfer
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Re: Estate planning/will for my wife and me

Post by Triple digit golfer » Tue Mar 13, 2018 7:27 pm

delamer wrote:
Tue Mar 13, 2018 5:24 pm
I am not an estate attorney, so keep that in mind.

But in our wills, the secondary beneficiaries on our accounts are not our kids but the testamentary trusts that benefit them. Maybe that it what you mean?

If you want the life insurance to benefit your daughter, then the proceeds should go to her in trust. Even if the guardian is totally trustworthy and will only spend the money on your daughter’s behalf, what happens if s/he dies before you daughter? If you leave the money directly to your daughter’s guardian, it becomes part the guardian’s estate.
Thanks. After further research I think the right move is for my secondary beneficiary on all accounts to be the "trustee of trust created in last will."

Does that sound reasonable?

Gill
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Re: Estate planning/will for my wife and me

Post by Gill » Tue Mar 13, 2018 7:58 pm

Triple digit golfer wrote:
Tue Mar 13, 2018 7:27 pm
delamer wrote:
Tue Mar 13, 2018 5:24 pm
I am not an estate attorney, so keep that in mind.

But in our wills, the secondary beneficiaries on our accounts are not our kids but the testamentary trusts that benefit them. Maybe that it what you mean?

If you want the life insurance to benefit your daughter, then the proceeds should go to her in trust. Even if the guardian is totally trustworthy and will only spend the money on your daughter’s behalf, what happens if s/he dies before you daughter? If you leave the money directly to your daughter’s guardian, it becomes part the guardian’s estate.
Thanks. After further research I think the right move is for my secondary beneficiary on all accounts to be the "trustee of trust created in last will."

Does that sound reasonable?
Yes, it does. You don’t want your daughter or her guardian as beneficiary. All your assets should end up in the trust if you both predecease her. You should also consider extending the trust for her lifetime to provide experienced management as well as protecting her against creditors, spouses and others who might be attracted to her wealth.
Gill

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cockersx3
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Re: Estate planning/will for my wife and me

Post by cockersx3 » Tue Mar 13, 2018 8:16 pm

Not to completely derail the thread, but we're working through the same thing in our family. In addition to the questions that the OP has put forward, one of the things we're struggling with is who to name as a trustee. While we have agreed on a guardian for the kids, that person has zero experience dealing with large sums of cash (mid seven figures with life insurance included, in our case). Our situation is complicated by the fact that our families have no idea of our net worth and would likely be very surprised if / when they find out.

If the OP hadn't been able to identify a suitable trustee, are there any options left? Can you name a bank (or better yet, Vanguard) to be the trustee for a testamentary trust in this case?

Gill
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Location: Florida

Re: Estate planning/will for my wife and me

Post by Gill » Tue Mar 13, 2018 8:26 pm

cockersx3 wrote:
Tue Mar 13, 2018 8:16 pm
Not to completely derail the thread, but we're working through the same thing in our family. In addition to the questions that the OP has put forward, one of the things we're struggling with is who to name as a trustee. While we have agreed on a guardian for the kids, that person has zero experience dealing with large sums of cash (mid seven figures with life insurance included, in our case). Our situation is complicated by the fact that our families have no idea of our net worth and would likely be very surprised if / when they find out.

If the OP hadn't been able to identify a suitable trustee, are there any options left? Can you name a bank (or better yet, Vanguard) to be the trustee for a testamentary trust in this case?
See this thread:
viewtopic.php?f=2&t=244210
Gill

frugalnotenough
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Re: Estate planning/will for my wife and me

Post by frugalnotenough » Tue Mar 13, 2018 8:39 pm

cockersx3 wrote:
Tue Mar 13, 2018 8:16 pm
Not to completely derail the thread, but we're working through the same thing in our family. In addition to the questions that the OP has put forward, one of the things we're struggling with is who to name as a trustee. While we have agreed on a guardian for the kids, that person has zero experience dealing with large sums of cash (mid seven figures with life insurance included, in our case). Our situation is complicated by the fact that our families have no idea of our net worth and would likely be very surprised if / when they find out.

If the OP hadn't been able to identify a suitable trustee, are there any options left? Can you name a bank (or better yet, Vanguard) to be the trustee for a testamentary trust in this case?
We also recently just met with two lawyers. And because I am from a different country and my husband and I want to name a guardian in my home country, the lawyer suggested to have co-trustees, one American citizen and a bank, and name the guardian the secondary trustee.

Dottie57
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Re: Estate planning/will for my wife and me

Post by Dottie57 » Tue Mar 13, 2018 9:23 pm

Triple digit golfer wrote:
Tue Mar 13, 2018 7:27 pm
delamer wrote:
Tue Mar 13, 2018 5:24 pm
I am not an estate attorney, so keep that in mind.

But in our wills, the secondary beneficiaries on our accounts are not our kids but the testamentary trusts that benefit them. Maybe that it what you mean?

If you want the life insurance to benefit your daughter, then the proceeds should go to her in trust. Even if the guardian is totally trustworthy and will only spend the money on your daughter’s behalf, what happens if s/he dies before you daughter? If you leave the money directly to your daughter’s guardian, it becomes part the guardian’s estate.
Thanks. After further research I think the right move is for my secondary beneficiary on all accounts to be the "trustee of trust created in last will."

Does that sound reasonable?
NO I think the money needs to be willed to the trust, not the trustee who is a person. I think money would become the trustees personal money - not your daughters.

P.S. you want the trust to be the owner of the insurance proceeds. The trustee makes decisions about the use of assets in the trust.

LarryAllen
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Re: Estate planning/will for my wife and me

Post by LarryAllen » Tue Mar 13, 2018 9:48 pm

Triple digit golfer wrote:
Tue Mar 13, 2018 2:50 pm
OP here. I spoke with a lawyer who recommended a will with a testamentary trust.

If I die, my wife gets everything.
If she dies, I get everything.
If we both die, our child gets everything.

We named a guardian for our daughter. That person is also the trustee of our estate who will manage the money thereafter.

Our lawyer rightfully told us that beneficiary designations on our various accounts are extremely important and determine who will get our assets. She recommended that we name each other (spouse) as primary and our daughter as secondary on all accounts.

Our life insurance policies are there to provide for our family in case one of us is not there to provide anymore. In that case, wouldn't it make the most sense to make the person we listed as our guardian and trustee the secondary beneficiary on our life insurance policies?

For 401(k), IRA, savings and other investments I have no problem making our daughter the secondary beneficiary.

Am I missing something?
Wills with T'trusts are a nice starter plan but, at least where I am in Cali, a trust is ultimately the way to go. However, a lot of young families to the t'trusts and it is certainly suitable for your ages. Generally 1/2 or 1/3 as much as a full living trust package.

JBTX
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Re: Estate planning/will for my wife and me

Post by JBTX » Tue Mar 13, 2018 10:48 pm

Not an attorney and never played one on TV. Have stayed in lots of Holiday Inn Expresses though.

Definitely need a will regardless.

Whether you need or will benefit from a revocable living trust depends on the state you live and the attorney you choose. In some cases it can save probate fees and provide other benefits, in others it may just be needless complication and a waste of money.

I would say you definitely need some sort of trust arrangement for your children. You don’t want to leave them money outright as minors, and it probably isn’t a great idea to leave millions to a young adult either. You can have the attorney tailor trust depending on when you would like the child to gain shared control or full control of the trust. This trust would likely contain non retirement assets and life insurance proceeds.

In addition you attorney will probably set up additional or sub trusts to take your IRA/401k proceeds (“qualified” assets) if both you and your wife die. There are special types of trusts that are set up (conduit or accumulation trusts) that can receive qualified assets but still stretch the RMD distributions over the beneficiary lifetimes. If you put qualified assets into a regular plain Jane trust you may lose the stretch benefits and may need to be liquidated and taxed over a shorter 5 year period.

Shikoku
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Re: Estate planning/will for my wife and me

Post by Shikoku » Wed Mar 14, 2018 12:11 am

Gill wrote:
Tue Mar 13, 2018 8:26 pm
cockersx3 wrote:
Tue Mar 13, 2018 8:16 pm
Not to completely derail the thread, but we're working through the same thing in our family. In addition to the questions that the OP has put forward, one of the things we're struggling with is who to name as a trustee. While we have agreed on a guardian for the kids, that person has zero experience dealing with large sums of cash (mid seven figures with life insurance included, in our case). Our situation is complicated by the fact that our families have no idea of our net worth and would likely be very surprised if / when they find out.

If the OP hadn't been able to identify a suitable trustee, are there any options left? Can you name a bank (or better yet, Vanguard) to be the trustee for a testamentary trust in this case?
See this thread:
viewtopic.php?f=2&t=244210
Gill
Another: viewtopic.php?t=208409
"I don't worry too much about pointing fingers at the past. I operate on the theory that every saint has a past, every sinner has a future." -- Warren Buffett

letsgobobby
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Re: Estate planning/will for my wife and me

Post by letsgobobby » Wed Mar 14, 2018 12:22 am

Triple digit golfer wrote:
Tue Mar 13, 2018 2:50 pm
OP here. I spoke with a lawyer who recommended a will with a testamentary trust.

If I die, my wife gets everything.
If she dies, I get everything.
If we both die, our child gets everything.

We named a guardian for our daughter. That person is also the trustee of our estate who will manage the money thereafter.

Our lawyer rightfully told us that beneficiary designations on our various accounts are extremely important and determine who will get our assets. She recommended that we name each other (spouse) as primary and our daughter as secondary on all accounts.

Our life insurance policies are there to provide for our family in case one of us is not there to provide anymore. In that case, wouldn't it make the most sense to make the person we listed as our guardian and trustee the secondary beneficiary on our life insurance policies?

For 401(k), IRA, savings and other investments I have no problem making our daughter the secondary beneficiary.

Am I missing something?
Certainly naming your daughter is wrong, you want the trust to be beneficiary.

You need an attorney.

I had previously worked with an attorney who did “estates and trusts and elder law.” But it turned out he specialized in smaller estates, and special needs trusts, and Medicaid planning, and guardianship. He could not suitably address some of the complexities of our situation.

After messing around wth him for many years, and based on the generous guidance of several Bogleheads (bsteiner and Gill most notably), we just met with a true estate planning expert who specializes in estates of our size. From the very first meeting it is obvious that her expertise will be worth the added costs over my community attorney. She could answer every one of my questions precisely, asked many questions I hadn’t thought of, and proposed solutions. She expects the work can be done in a few weeks time.

Moral of the story: don’t waste your time with someone who is not a true expert and who is not specifically experienced handling estates of your size. Pay now, or pay later.

jminv
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Re: Estate planning/will for my wife and me

Post by jminv » Wed Mar 14, 2018 12:38 am

You can accomplish all of your needs with a simple will. Your estate would not be complicated if something were to happen in the near future, particularly if only to one of you, and would not be too large. My estate is larger and I get by with a simple will, power of attorney, and living will from legalzoom coupled with joint tenant with rights of survivorship and beneficiary designations on all of my accounts and policies. At some point I will need to use a trust as the assets continue to grow. My father had a large estate and also got by with a simple will. All assets were transferred outside probate without hassle through beneficiary designations. In fact, it was only necessary to probate it many months later because of one small little item and even then it was only because we needed a letters testamentary for this one specific item. By this time, all assets had been already been transferred through beneficiary deisgnations. Even without the will, everything would still have transferred via beneficiary designations and we could have obtained a letter of administration to fufill the same purpose. Grandparents also used simple wills. Make sure both you and wife are named on mortgage, car, bank accounts (all joint tenant with rights of survivorship), credit cards, power, cable, everything etc. Have very detailed instructions and folders for guardian.

If you don't trust anyone for guardian assuming a very rare event occurs and you and your wife perish together, then you should be looking at a trust and a lawyer. As you age and your assets grow, you will likely want to look for trusts in any case.

letsgobobby
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Re: Estate planning/will for my wife and me

Post by letsgobobby » Wed Mar 14, 2018 4:43 am

jminv wrote:
Wed Mar 14, 2018 12:38 am
You can accomplish all of your needs with a simple will. Your estate would not be complicated if something were to happen in the near future, particularly if only to one of you, and would not be too large. My estate is larger and I get by with a simple will, power of attorney, and living will from legalzoom coupled with joint tenant with rights of survivorship and beneficiary designations on all of my accounts and policies. At some point I will need to use a trust as the assets continue to grow. My father had a large estate and also got by with a simple will. All assets were transferred outside probate without hassle through beneficiary designations. In fact, it was only necessary to probate it many months later because of one small little item and even then it was only because we needed a letters testamentary for this one specific item. By this time, all assets had been already been transferred through beneficiary deisgnations. Even without the will, everything would still have transferred via beneficiary designations and we could have obtained a letter of administration to fufill the same purpose. Grandparents also used simple wills. Make sure both you and wife are named on mortgage, car, bank accounts (all joint tenant with rights of survivorship), credit cards, power, cable, everything etc. Have very detailed instructions and folders for guardian.

If you don't trust anyone for guardian assuming a very rare event occurs and you and your wife perish together, then you should be looking at a trust and a lawyer. As you age and your assets grow, you will likely want to look for trusts in any case.
In my opinion the existence of a minor child combined with more than a small estate means a trust is absolutely necessary.

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cockersx3
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Re: Estate planning/will for my wife and me

Post by cockersx3 » Wed Mar 14, 2018 8:17 pm

Shikoku wrote:
Wed Mar 14, 2018 12:11 am
Gill wrote:
Tue Mar 13, 2018 8:26 pm
cockersx3 wrote:
Tue Mar 13, 2018 8:16 pm
Not to completely derail the thread, but we're working through the same thing in our family. In addition to the questions that the OP has put forward, one of the things we're struggling with is who to name as a trustee. While we have agreed on a guardian for the kids, that person has zero experience dealing with large sums of cash (mid seven figures with life insurance included, in our case). Our situation is complicated by the fact that our families have no idea of our net worth and would likely be very surprised if / when they find out.

If the OP hadn't been able to identify a suitable trustee, are there any options left? Can you name a bank (or better yet, Vanguard) to be the trustee for a testamentary trust in this case?
See this thread:
viewtopic.php?f=2&t=244210
Gill
Another: viewtopic.php?t=208409
Wow - great threads, especially the second one. Thanks! :beer

Triple digit golfer
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Re: Estate planning/will for my wife and me

Post by Triple digit golfer » Sat Mar 17, 2018 12:08 pm

I am trying to set my secondary beneficiary as the trust that would be created if both my wife and I died, and I am having some difficulty and getting confused.

At Vanguard, the beneficiary options are:

-Spouse
-Individual
-Trust
-Charity
-My estate

I assume that I would select trust and not my estate. Under Trust, I have the following options:

-To the trustee of a trust created under an agreement
-To the trustee of a trust created under my last will

I am concerned that I can only select to the trustee, but maybe that's just me being paranoid. I assume I would select the second option, "To the trustee of a trust created under my last will."

When I select that, I have to enter the name of the trust. Would I simply call it "Trust created under my last will"?

Would this accomplish my goal of having my Vanguard balances go into the testamentary trust that would be created if my wife and I both die? I want to make sure it doesn't go to the trustee individually, rather, to the trust.

What is the downside of simply selecting my estate?

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