Trust for 86 year old?

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
Fremdon Ferndock
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Re: Trust for 86 year old?

Post by Fremdon Ferndock »

I've been thinking about putting my I-Bonds into a trust to make things easier for my estate. As things stand, you can only name one beneficiary for your savings bonds, and no contingents. In my case, it would be better to be able to name multiple beneficiaries and/or contingents for my savings bonds which a simple trust would allow. You can ask an attorney to establish a trust for this purpose or roll your own. If you establish a trust, your bonds would have to be re-issued to the trust in electronic form at Treasury Direct. Here's some info that might be helpful.

https://thefinancebuff.com/simple-livin ... bonds.html
bsteiner
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Re: Trust for 86 year old?

Post by bsteiner »

privateID wrote: Thu Jan 13, 2022 9:13 am ...
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. ...

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.
As well as the possible hundreds of thousands of dollars that will be lost (by not revoking the beneficiary designations other than for life insurance and retirement benefits and not having a Will that leaves the assets to the children in separate trusts rather than outright) if a child loses some or all of his/her inheritances to creditors, future spouses (if a child outlives his/her current spouse and remarries) or nursing home expenses (if he/she could have otherwise received Medicaid).
twh
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Re: Trust for 86 year old?

Post by twh »

privateID wrote: Thu Jan 13, 2022 9:13 am 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.
I helped a family friend with their mother's stash of savings bonds. It was a PITA and the mother was still alive. She had paper bonds, titled in several ways. The local banks (in a major metro) would not cash them anymore. We had to create an account at Treasury Direct and the mother had to sign a lot of stuff. Then we made copies of the physical bonds and sent the *originals* to some Treasury place - in Minnesota, as I recall. Eventually it all worked out. Can only imagine how much more trouble it will be in an estate.
bsteiner
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Re: Trust for 86 year old?

Post by bsteiner »

twh wrote: Thu Jan 13, 2022 12:02 pm
privateID wrote: Thu Jan 13, 2022 9:13 am 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.
I helped a family friend with their mother's stash of savings bonds. It was a PITA and the mother was still alive. She had paper bonds, titled in several ways. The local banks (in a major metro) would not cash them anymore. We had to create an account at Treasury Direct and the mother had to sign a lot of stuff. Then we made copies of the physical bonds and sent the *originals* to some Treasury place - in Minnesota, as I recall. Eventually it all worked out. Can only imagine how much more trouble it will be in an estate.
In an estate you may have some tax planning opportunities.

The executors could:

1. Accrue the interest on the decedent's final return. They might do that if the decedent died early in the year or for some other reason was in a low bracket in the year of death.

I once brought a claim against a guardian for cashing in the decedent's savings bonds, thereby giving up that choice, when the decedent died in January with almost no income in the year she died.

2. Accrue the interest on the estate's fiduciary income tax return. They might do that if they could use the administration expenses against the income from the bonds.

3. Distribute the bonds in kind, and let the beneficiaries continue to defer the interest.

I agree that dealing with savings bonds may not be worth the effort. But in this case the taxpayer already owns them.
SuzBanyan
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Re: Trust for 86 year old?

Post by SuzBanyan »

One thing that might make sense is to clean up the bonds that are still in the deceased FIL’s name. But, being risk adverse, and not wanting to live with a relative snidely complaining for years to come that I sold MILs savings bonds which had a terrific earnings record, I would not mess with the sale of any bonds at this time.
Topic Author
privateID
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Re: Trust for 86 year old?

Post by privateID »

SuzBanyan wrote: Thu Jan 13, 2022 1:13 pm One thing that might make sense is to clean up the bonds that are still in the deceased FIL’s name. But, being risk adverse, and not wanting to live with a relative snidely complaining for years to come that I sold MILs savings bonds which had a terrific earnings record, I would not mess with the sale of any bonds at this time.
Yeah, all the bonds are made out to FIL or MIL. So, will have to provide 2 death certificates at some point.
bsteiner wrote:So far nothing in the facts presented suggests the need for a revocable trust; and it may be a distraction from more important issues.
bsteiner wrote:As well as the possible hundreds of thousands of dollars that will be lost (by not revoking the beneficiary designations other than for life insurance and retirement benefits and not having a Will that leaves the assets to the children in separate trusts rather than outright) if a child loses some or all of his/her inheritances to creditors, future spouses (if a child outlives his/her current spouse and remarries) or nursing home expenses (if he/she could have otherwise received Medicaid).
Just making sure I understand here. You do not believe, given what you have seen here, that there is any need for a revocable living trust. However, you do feel, given the amounts, that a trust established via the will, I assume irrevocable, is recommended to protect against the three items you mention. Do I have that all right? Is there any situation where children inherit money where you wouldn't recommend that assuming the amounts are sufficiently high?
bsteiner
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Re: Trust for 86 year old?

Post by bsteiner »

privateID wrote: Thu Jan 13, 2022 5:08 pm ...
bsteiner wrote:So far nothing in the facts presented suggests the need for a revocable trust; and it may be a distraction from more important issues.
bsteiner wrote:As well as the possible hundreds of thousands of dollars that will be lost (by not revoking the beneficiary designations other than for life insurance and retirement benefits and not having a Will that leaves the assets to the children in separate trusts rather than outright) if a child loses some or all of his/her inheritances to creditors, future spouses (if a child outlives his/her current spouse and remarries) or nursing home expenses (if he/she could have otherwise received Medicaid).
Just making sure I understand here. You do not believe, given what you have seen here, that there is any need for a revocable living trust. However, you do feel, given the amounts, that a trust established via the will, I assume irrevocable, is recommended to protect against the three items you mention. Do I have that all right? Is there any situation where children inherit money where you wouldn't recommend that assuming the amounts are sufficiently high?
There might be a reason not presented that a revocable trust might be appropriate. We don't know what facts weren't presented. However, we should focus on the more important issues.

If she leaves her estate to her children in trust rather than outright, but the family doesn't think it's worth having or keeping them, the trustees can (assuming the Will so permits, which if it's well drafted it will) terminate the trusts, or direct the executors not to set them up. However, you can't go the other way. If she leaves her estate to her children outright, they can't put the money in trust so as to reach the same result.
twh
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Re: Trust for 86 year old?

Post by twh »

A mentally and physically functioning 86 year old with less than $12M does not need a trust. It just makes things more complicated and costs everyone more time and money. Depending on the type of trust, for example, if the 86 year old puts all the assets in a trust and then dies, there is no stepped up basis for the assets for the beneficiaries. Now, the heirs don't pay taxes right away, but their basis of the asset is not stepped up. The trust has to file yet another tax return and the you will pay more in taxes because the tax rates for trusts are less favorable. If there is no reason to protect the assets from bad actors or bad decisions or fund a disabled child's future care, I just don't see it.
drzzzzz
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Re: Trust for 86 year old?

Post by drzzzzz »

twh wrote: Thu Jan 13, 2022 8:04 pm A mentally and physically functioning 86 year old with less than $12M does not need a trust. It just makes things more complicated and costs everyone more time and money. Depending on the type of trust, for example, if the 86 year old puts all the assets in a trust and then dies, there is no stepped up basis for the assets for the beneficiaries. Now, the heirs don't pay taxes right away, but their basis of the asset is not stepped up. The trust has to file yet another tax return and the you will pay more in taxes because the tax rates for trusts are less favorable. If there is no reason to protect the assets from bad actors or bad decisions or fund a disabled child's future care, I just don't see it.
I am confused by what you wrote - are assets in a trust (revocable or irrevocable) not stepped up at death for the beneficiaries?
twh
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Re: Trust for 86 year old?

Post by twh »

drzzzzz wrote: Fri Jan 14, 2022 10:46 am
twh wrote: Thu Jan 13, 2022 8:04 pm A mentally and physically functioning 86 year old with less than $12M does not need a trust. It just makes things more complicated and costs everyone more time and money. Depending on the type of trust, for example, if the 86 year old puts all the assets in a trust and then dies, there is no stepped up basis for the assets for the beneficiaries. Now, the heirs don't pay taxes right away, but their basis of the asset is not stepped up. The trust has to file yet another tax return and the you will pay more in taxes because the tax rates for trusts are less favorable. If there is no reason to protect the assets from bad actors or bad decisions or fund a disabled child's future care, I just don't see it.
I am confused by what you wrote - are assets in a trust (revocable or irrevocable) not stepped up at death for the beneficiaries?
I am not a lawyer. I think the answer is it depends on the type of trust. However, and I personally have seen this...a Grantor Trust assets are not stepped up.
bsteiner
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Re: Trust for 86 year old?

Post by bsteiner »

twh wrote: Fri Jan 14, 2022 12:11 pm
drzzzzz wrote: Fri Jan 14, 2022 10:46 am
twh wrote: Thu Jan 13, 2022 8:04 pm A mentally and physically functioning 86 year old with less than $12M does not need a trust. It just makes things more complicated and costs everyone more time and money. Depending on the type of trust, for example, if the 86 year old puts all the assets in a trust and then dies, there is no stepped up basis for the assets for the beneficiaries. Now, the heirs don't pay taxes right away, but their basis of the asset is not stepped up. The trust has to file yet another tax return and the you will pay more in taxes because the tax rates for trusts are less favorable. If there is no reason to protect the assets from bad actors or bad decisions or fund a disabled child's future care, I just don't see it.
I am confused by what you wrote - are assets in a trust (revocable or irrevocable) not stepped up at death for the beneficiaries?
I am not a lawyer. I think the answer is it depends on the type of trust. However, and I personally have seen this...a Grantor Trust assets are not stepped up.
Most aren't but some are. It depends. If it's revocable it will be included in the grantor's estate and get a new basis at death. If it's irrevocable it will usually but not always not be included in the grantor's estate in which case it won't get a new basis.
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