Estate Planning Basics

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
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aburntoutcase
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Estate Planning Basics

Post by aburntoutcase » Fri May 18, 2018 10:07 am

Hi,

My wife and I are about to turn 45 with two young children of ages 8 and 6 years, and we have started to think about estate planning issues in the unfortunate and hopefully unlikely event that we were both to die or both be incapacitated somehow in making financial decisions, e.g. through a grave injury. We already have each other as the beneficiary on our retirement and life insurance policies. We have my mother-in-law as the contingent beneficiary in these accounts as well - we both trust and love her implicitly and are confident that she will have the interests of her granddaughters as a paramount concern. She is a person I respect a lot, my main concern is that at age 72 it will probably be an arrangement that has a relatively short shelf-life although currently she is independent, in relatively good health for her age and mentally agile.

One area where we have immediate concerns is our taxable joint brokerage account at Vanguard. It is our largest financial account at ~60% of our net worth and Vanguard does not allow a beneficiary to be named for it.

But more broadly I have begun to realize that estate planning is a relatively complex issue even if you have someone trustworthy in mind who will inherit the assets. Are there any good book recommendations for tutorials on estate planning for those who are affluent but not extremely wealthy?Also does anyone have experience with the Vanguard Pass on Death plan and its pros/cons? Do Flagship Clients (but not Flagship Select) qualify for a no-cost discussion with a Vanguard financial advisor/planner on basics of estate planning issues?

Thanks in advance for your help!

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Alexa9
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Re: Estate Planning Basics

Post by Alexa9 » Fri May 18, 2018 10:16 am

At the minimum I would make a will with an estate lawyer and maybe talk about a trust. Write up everything beforehand as it's by the hour. I would designate your children as the only heirs personally. You could designate someone to look after them if a sibling agrees to it and someone to be the executor of the estate. You also probably want a medical living will if you were to end up in a coma.

gretah
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Re: Estate Planning Basics

Post by gretah » Fri May 18, 2018 10:23 am

I am preparing to make changes to my Will and Trust so I've been educating myself about them to be better prepared to talk with an attorney about options and specifics.

www.Nolo.com publishes self-help legal books.
I've learned a lot reading them.

Rupert
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Re: Estate Planning Basics

Post by Rupert » Fri May 18, 2018 10:25 am

Because you have minor children, I strongly advise you to consult an estate planning attorney to discuss your needs. Naming an elderly relative as the sole beneficiary of your financial accounts is a bad idea. What if she becomes incompetent (dementia, etc.) or dies suddenly shortly after you do? The money is then needed/used to take care of her or is in her estate where it may pass to her creditors or other relatives, as opposed to your children. Typically, in your circumstances you would have a will that creates a trust to hold the assets for your children. You would name the trust as beneficiary of your financial accounts. You could name the MIL as trustee and as the children's guardian if you wish, but I would recommend you name someone younger as a backup just in case.

Nolo products are pretty decent if you want to do some research before meeting with an attorney.

bsteiner
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Re: Estate Planning Basics

Post by bsteiner » Fri May 18, 2018 10:48 am

aburntoutcase wrote:
Fri May 18, 2018 10:07 am

My wife and I are about to turn 45 with two young children of ages 8 and 6 years, and we have started to think about estate planning issues in the unfortunate and hopefully unlikely event that we were both to die or both be incapacitated somehow in making financial decisions, e.g. through a grave injury. We already have each other as the beneficiary on our retirement and life insurance policies. We have my mother-in-law as the contingent beneficiary in these accounts as well - we both trust and love her implicitly and are confident that she will have the interests of her granddaughters as a paramount concern. She is a person I respect a lot, my main concern is that at age 72 it will probably be an arrangement that has a relatively short shelf-life although currently she is independent, in relatively good health for her age and mentally agile.

One area where we have immediate concerns is our taxable joint brokerage account at Vanguard. It is our largest financial account at ~60% of our net worth and Vanguard does not allow a beneficiary to be named for it.

But more broadly I have begun to realize that estate planning is a relatively complex issue even if you have someone trustworthy in mind who will inherit the assets. Are there any good book recommendations for tutorials on estate planning for those who are affluent but not extremely wealthy?Also does anyone have experience with the Vanguard Pass on Death plan and its pros/cons? Do Flagship Clients (but not Flagship Select) qualify for a no-cost discussion with a Vanguard financial advisor/planner on basics of estate planning issues?
..
Death isn't an unlikely event. The death rate is 100%.

Unless you expect your estate to be large enough to pay estate tax, your situation is routine.

You could, for example, provide in your Wills that upon the surviving spouse's death, you leave your estates to your your children, equally, in separate trusts for their benefit. You could include a disclaimer trust for the surviving spouse in case the surviving spouse waives anything passing to him or her upon the first spouse's death.

If you live in a state with a state estate tax, you might modify the above, depending on the specifics of your state's estate tax and the size of your estate.

You'll have to decide on executors, trustees and guardians, and on who gets what if no one in your immediate family is living.

You don't need to name beneficiaries for your taxable account. Even if you could, it would probably be better not to. It will pass in accordance with the surviving spouse's Will.

You'll need to name beneficiaries for your life insurance and retirement benefits. You could name the trusts for your children as the contingent beneficiaries. Note that there are some special rules governing trusts that receive retirement benefits. See my article on this subject in the March 2004 issue of BNA Tax Management's Estates, Gifts & Trusts Journal: https://www.kkwc.com/wp-content/uploads ... 132954.pdf.

I'm not aware of any good books on this. Many of the books on this are more misleading than helpful.

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aburntoutcase
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Re: Estate Planning Basics

Post by aburntoutcase » Sun May 20, 2018 6:32 pm

Rupert wrote:
Fri May 18, 2018 10:25 am
Because you have minor children, I strongly advise you to consult an estate planning attorney to discuss your needs. Naming an elderly relative as the sole beneficiary of your financial accounts is a bad idea. What if she becomes incompetent (dementia, etc.) or dies suddenly shortly after you do? The money is then needed/used to take care of her or is in her estate where it may pass to her creditors or other relatives, as opposed to your children. Typically, in your circumstances you would have a will that creates a trust to hold the assets for your children. You would name the trust as beneficiary of your financial accounts. You could name the MIL as trustee and as the children's guardian if you wish, but I would recommend you name someone younger as a backup just in case.

Nolo products are pretty decent if you want to do some research before meeting with an attorney.
I was hoping to avoid setting up a trust as I assumed the fees were significant. However I guess it has the advantage of having unbiased legal professionals managing how the funds are used. Any idea of what fees are like? We are talking about an estate that is liquid investments only (no real estate owned) that would presently be < $4M.

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aburntoutcase
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Re: Estate Planning Basics

Post by aburntoutcase » Sun May 20, 2018 6:32 pm

gretah wrote:
Fri May 18, 2018 10:23 am
I am preparing to make changes to my Will and Trust so I've been educating myself about them to be better prepared to talk with an attorney about options and specifics.

www.Nolo.com publishes self-help legal books.
I've learned a lot reading them.
Thank you I will check them out!

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aburntoutcase
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Re: Estate Planning Basics

Post by aburntoutcase » Sun May 20, 2018 6:33 pm

Rupert wrote:
Fri May 18, 2018 10:25 am
Because you have minor children, I strongly advise you to consult an estate planning attorney to discuss your needs. Naming an elderly relative as the sole beneficiary of your financial accounts is a bad idea. What if she becomes incompetent (dementia, etc.) or dies suddenly shortly after you do? The money is then needed/used to take care of her or is in her estate where it may pass to her creditors or other relatives, as opposed to your children. Typically, in your circumstances you would have a will that creates a trust to hold the assets for your children. You would name the trust as beneficiary of your financial accounts. You could name the MIL as trustee and as the children's guardian if you wish, but I would recommend you name someone younger as a backup just in case.
The above are all excellent points. Thanks very much for bringing them to my consideration.

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aburntoutcase
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Re: Estate Planning Basics

Post by aburntoutcase » Sun May 20, 2018 6:38 pm

bsteiner wrote:
Fri May 18, 2018 10:48 am
Death isn't an unlikely event. The death rate is 100%.
Yeah agreed :-) it was more about both of us dying simultaneously, but now that I think about it the odds of even that are higher than I would like. It seems like what I really need is a Will and a Trust setup and need to think about who will be involved in it. Thank you for the pointer on retirement accounts and the other sound advice.

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tadamsmar
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Re: Estate Planning Basics

Post by tadamsmar » Sun May 20, 2018 8:28 pm

You should have wills, POAs, Healthcare POAs and advanced directives.

The kids should be beneficiaries of your estate and funds, not MIL if you intend the money to support the kids rather than MIL. Name a guardian and financial guardian for your kids, but if you don't do that then the courts will do it if you die when they are minors. I suppose MIL might be OK to cover both guardian roles as long as she is competent.

If you both die at the same time, then the joint account with no beneficiary will most likely go to your estates and be covered by the wills, and that is OK unless you feel a need to avoid probate. If one dies then I imagine the other can designate beneficiaries, I have an individual account like that.

You can look into trusts, but I don't know that you need one.

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Sandtrap
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Re: Estate Planning Basics

Post by Sandtrap » Sun May 20, 2018 9:24 pm

Read:
Books on Wills, Trusts, and Estates
Beyond the Grave: The Right Way and the Wrong Way of Leaving Money to Your Children (And Others)
https://www.amazon.com/gp/product/08873 ... UTF8&psc=1

Hire legal counsel.

j

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aburntoutcase
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Re: Estate Planning Basics

Post by aburntoutcase » Mon May 21, 2018 8:25 am

tadamsmar wrote:
Sun May 20, 2018 8:28 pm
You should have wills, POAs, Healthcare POAs and advanced directives.

The kids should be beneficiaries of your estate and funds, not MIL if you intend the money to support the kids rather than MIL. Name a guardian and financial guardian for your kids, but if you don't do that then the courts will do it if you die when they are minors. I suppose MIL might be OK to cover both guardian roles as long as she is competent.

If you both die at the same time, then the joint account with no beneficiary will most likely go to your estates and be covered by the wills, and that is OK unless you feel a need to avoid probate. If one dies then I imagine the other can designate beneficiaries, I have an individual account like that.

You can look into trusts, but I don't know that you need one.
Thanks!

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aburntoutcase
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Re: Estate Planning Basics

Post by aburntoutcase » Mon May 21, 2018 8:26 am

Sandtrap wrote:
Sun May 20, 2018 9:24 pm
Read:
Books on Wills, Trusts, and Estates
Beyond the Grave: The Right Way and the Wrong Way of Leaving Money to Your Children (And Others)
https://www.amazon.com/gp/product/08873 ... UTF8&psc=1
Thanks for the book recommendation, I just ordered it.

bsteiner
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Re: Estate Planning Basics

Post by bsteiner » Mon May 21, 2018 9:18 am

aburntoutcase wrote:
Mon May 21, 2018 8:26 am
Sandtrap wrote:
Sun May 20, 2018 9:24 pm
Read:
Books on Wills, Trusts, and Estates
...
Thanks for the book recommendation, I just ordered it.
While that book is popular here, keep in mind that the author is in California, so much of what he writes is geared to community property states, particularly California.

Also note that he focuses on the two extremes, leaving assets to children outright or in trusts in which they have no control, whereas the vast majority of our clients opt for a middle ground, leaving assets to children in trusts in which each child gets to control his/her trust upon reaching a specified age.

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Sandtrap
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Re: Estate Planning Basics

Post by Sandtrap » Mon May 21, 2018 9:45 am

bsteiner wrote:
Mon May 21, 2018 9:18 am
aburntoutcase wrote:
Mon May 21, 2018 8:26 am
Sandtrap wrote:
Sun May 20, 2018 9:24 pm
Read:
Books on Wills, Trusts, and Estates
...
Thanks for the book recommendation, I just ordered it.
While that book is popular here, keep in mind that the author is in California, so much of what he writes is geared to community property states, particularly California.

Also note that he focuses on the two extremes, leaving assets to children outright or in trusts in which they have no control, whereas the vast majority of our clients opt for a middle ground, leaving assets to children in trusts in which each child gets to control his/her trust upon reaching a specified age.
Very true.
aloha
j

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Sandtrap
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Re: Estate Planning Basics

Post by Sandtrap » Mon May 21, 2018 9:46 am

aburntoutcase wrote:
Mon May 21, 2018 8:26 am
Sandtrap wrote:
Sun May 20, 2018 9:24 pm
Read:
Books on Wills, Trusts, and Estates
Beyond the Grave: The Right Way and the Wrong Way of Leaving Money to Your Children (And Others)
https://www.amazon.com/gp/product/08873 ... UTF8&psc=1
Thanks for the book recommendation, I just ordered it.
As resident legal counsel, "bsteiner", pointed out. It is a good read and has helped many but as in all books, is only part of a big picture.
Again, seek legal counsel.
aloha,
j
Last edited by Sandtrap on Mon May 21, 2018 9:54 am, edited 1 time in total.

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1210sda
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Re: Estate Planning Basics

Post by 1210sda » Mon May 21, 2018 9:50 am

aburntoutcase wrote:
Mon May 21, 2018 8:26 am
Sandtrap wrote:
Sun May 20, 2018 9:24 pm
Read:
Books on Wills, Trusts, and Estates
Beyond the Grave: The Right Way and the Wrong Way of Leaving Money to Your Children (And Others)
https://www.amazon.com/gp/product/08873 ... UTF8&psc=1
Thanks for the book recommendation, I just ordered it.
Be aware of the print date on the book. Estate Planning info can become outdated very quickly. (American Taxpayer Relief Act of 2012, for example)

1210

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1210sda
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Re: Estate Planning Basics

Post by 1210sda » Mon May 21, 2018 9:54 am

bsteiner wrote:
Fri May 18, 2018 10:48 am
You could include a disclaimer trust for the surviving spouse in case the surviving spouse waives anything passing to him or her upon the first spouse's death.
Bruce, are you saying that a surviving spouse can't disclaim unless they have a disclaimer trust??

1210

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Sandtrap
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Re: Estate Planning Basics

Post by Sandtrap » Mon May 21, 2018 10:03 am

1210sda wrote:
Mon May 21, 2018 9:54 am
bsteiner wrote:
Fri May 18, 2018 10:48 am
You could include a disclaimer trust for the surviving spouse in case the surviving spouse waives anything passing to him or her upon the first spouse's death.
Bruce, are you saying that a surviving spouse can't disclaim unless they have a disclaimer trust??

1210
Good question. Thanks.
Can a "credit shelter trust" or. . . "bypass trust", already have provisions allowing that option?
Article on Disclaimer Trust.
http://www.texasprobatelawyer.com/disclaimer-trust/
j

NextMil
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Re: Estate Planning Basics

Post by NextMil » Mon May 21, 2018 10:30 am

We just did ours. Literally signed a few hours ago. I did something with legal zoom and it was woefully inadequate which was confirmed by book recommendation and attorney we worked with on it. I can tell you that having counsel helped tremendously especially with the little details you miss and contingency planning for other issues that could come up.

Highly recommend counsel, especially if you have minor children.

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aburntoutcase
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Re: Estate Planning Basics

Post by aburntoutcase » Mon May 21, 2018 10:56 am

bsteiner wrote:
Mon May 21, 2018 9:18 am
While that book is popular here, keep in mind that the author is in California, so much of what he writes is geared to community property states, particularly California.

Also note that he focuses on the two extremes, leaving assets to children outright or in trusts in which they have no control, whereas the vast majority of our clients opt for a middle ground, leaving assets to children in trusts in which each child gets to control his/her trust upon reaching a specified age.
Thank you that is good context to have as I read it. I also ordered the NOLO book "Plan Your Estate" by Denis Clifford.

bayview
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Re: Estate Planning Basics

Post by bayview » Mon May 21, 2018 11:59 pm

bsteiner wrote:
Mon May 21, 2018 9:18 am
aburntoutcase wrote:
Mon May 21, 2018 8:26 am
Sandtrap wrote:
Sun May 20, 2018 9:24 pm
Read:
Books on Wills, Trusts, and Estates
...
Thanks for the book recommendation, I just ordered it.
While that book is popular here, keep in mind that the author is in California, so much of what he writes is geared to community property states, particularly California.

Also note that he focuses on the two extremes, leaving assets to children outright or in trusts in which they have no control, whereas the vast majority of our clients opt for a middle ground, leaving assets to children in trusts in which each child gets to control his/her trust upon reaching a specified age.
Thanks for your comment. Although the book was generally informative, and interesting (in a rather guilty-pleasure, soap-opera-watching, popcorn-eating sort of way), it never did really address our situation: second marriage for both, each with children from previous marriages, both with separate expected inheritances from families of origin which we wish to pass on to our own kids.

There is such a thing as couples trying to do the Right Thing, without having yet figured out what that Thing might be.

And it appears that half of Malibu is still not speaking to one another. :shock:
The continuous execution of a sound strategy gives you the benefit of the strategy. That's what it's all about. --Rick Ferri

bsteiner
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Re: Estate Planning Basics

Post by bsteiner » Tue May 22, 2018 12:55 pm

1210sda wrote:
Mon May 21, 2018 9:54 am
bsteiner wrote:
Fri May 18, 2018 10:48 am
You could include a disclaimer trust for the surviving spouse in case the surviving spouse waives anything passing to him or her upon the first spouse's death.
Bruce, are you saying that a surviving spouse can't disclaim unless they have a disclaimer trust??

1210
No. But the spouse may not be willing to disclaim if the disclaimed property goes in some other way.

bsteiner
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Re: Estate Planning Basics

Post by bsteiner » Tue May 22, 2018 1:45 pm

bayview wrote:
Mon May 21, 2018 11:59 pm
... Although the book was generally informative, and interesting (in a rather guilty-pleasure, soap-opera-watching, popcorn-eating sort of way), it never did really address our situation: second marriage for both, each with children from previous marriages, both with separate expected inheritances from families of origin which we wish to pass on to our own kids.

There is such a thing as couples trying to do the Right Thing, without having yet figured out what that Thing might be.
...
It's hard to generalize. The situations and the people can vary considerably. Obviously you can each have your inheritances come to you in trust rather than outright.

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