Will and estate planning

[benign_user]

kdeva wrote:

My kids are 3 and 1. We are going to meet with an attorney next month for estate planning. I wanted to ask what the forum members who will eventually have high NW do on their will. We are hoping to leave a fraction for charity and remainder split between kids split equally. In case our NW gets above a certain number, we will leave more for charity. My husband doesn’t want to leave the kids with a lot of money since he believes they need to work for their keep. What are people here comfortable leaving for their kids? $1M per kid? $5M per kid? More?

I personally did not wisen up financially until I was in my mid 30s. So, we decided we will probably want to leave the funds to the kids after they turn 35, say 50% when they turn 35 and another 50% when they turn 45. But, I wanted to know if other have done anything differently here. Of course their college and graduate education will be fully funded by us.

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I'm hoping to leave my kids 5M each.

[jfoxcpacfp]

JBME wrote:

I would say forming a trust makes the most sense when you know you’re done having kids, not based on net worth. The reason I’d wait until you are done having kids is it can minimally cost a few hundred dollars to make a change (I’ve been quoted at $500-$600). We just set ours up this year, as we’re done having kids. NW is under $500k right now. Through my work we have a benefit to get certain legal services for a reduced fee so we got the whole thing set up (including wills, power of attorney, health directive, and tax strategy planning that most here know about) for only $1000 thanks to this service. It would have cost somewhere between $3-4k otherwise, a figure I’ve researched on this site and found to generally be the most likely price

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It sounds like you are referring to a RLT, not irrevocable, right?

[stellardoc1]

jfoxcpacfp wrote:

RLT

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I just found out that there are many more types of trust. I am very naive in this.

Will need to do some reading.

Any recommended books? I thought there was a name floating around here (will trust etc? I think).

 

[JBME]

Oops, yes revocable

[jfoxcpacfp]

stellardoc1 wrote:

jfoxcpacfp wrote:

RLT

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I just found out that there are many more types of trust. I am very naive in this.

Will need to do some reading.

Any recommended books? I thought there was a name floating around here (will trust etc? I think).

 

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Deborah L. Jacobs, Estate Planning Smarts

It's on my bookshelf

[Steven Podnos MD CFP]

You have potentially many decades before your planning takes effect -if you live to your 90's, then your kids might be 70 before the documents matter.  So, there will be lots of changes between now and then.

Consider using testamentary trusts that get funded at death to avoid the hassle of decades of keeping assets in trust name (and note that in some states owning assets in trust name prevents use of better asset protection titling.  I've done probate many times and it is not the hassle as described in most cases.

Consider leaving assets inside the trust much longer than when the kids are in their 3rd or 4th decade.  That's primo time for divorce and auto accidents.  We generally recommend lifetime trusts with friendly trustees-this allows asset protection with minimal control.

[FIREshrink]

Remember it's not your net worth which should inform this decision, but the value of your estate at death. By including life insurance, this amount will be substantially higher than your net worth.

[Tim]

If you plan on carrying term life insurance to the end.
Of course I would hope you would have those proceeds used for the purpose you intended if you died earlier.

[q-school]

kdeva wrote:

My kids are 3 and 1. We are going to meet with an attorney next month for estate planning. I wanted to ask what the forum members who will eventually have high NW do on their will. We are hoping to leave a fraction for charity and remainder split between kids split equally. In case our NW gets above a certain number, we will leave more for charity. My husband doesn’t want to leave the kids with a lot of money since he believes they need to work for their keep. What are people here comfortable leaving for their kids? $1M per kid? $5M per kid? More?

I personally did not wisen up financially until I was in my mid 30s. So, we decided we will probably want to leave the funds to the kids after they turn 35, say 50% when they turn 35 and another 50% when they turn 45. But, I wanted to know if other have done anything differently here. Of course their college and graduate education will be fully funded by us.

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we've redone the wills 2x so far as the kids aged.  we changed some things including trustee.  we felt differently over time about how my sister, who would get the kids, should have access to the money.  suddenly instead of just her 2 kids, there are 4 kids.  we decided after having some more money ourselves, that it would be okay for my sister to buy a larger house for herself with some of the money.  we decided that she should have access to monies to pay the increased living expenses.   previously we had given her some money for this, but not nearly enough given the size of the estate, including life insurance.  we were initially more cost + in creating her budget, more recently we are a little more liberal with her budget should this disastrous scenario ever become reality.  other changes included making the rate we made money available to kids and the amounts that were made available.   as you, we did multiple distributions, but we have a five year gap and we were not sure we wanted to limit the younger one's funds so that he didn't have anything for a full five years after the older one started receiving.  still unresolved in my mind at least.  our family enjoys vacations, we created a vacation fund for both so that they could travel while they were young, but supervised by trustee.   we are little unresolved on whether we leave things 50/50 if they have disparate earnings as well.  i'm sure our feelings will evolve over time.

 

[Tim]

@q-school,
You hit on the two big issues we struggled with.
•Guardianship and related expenses
• Split with uneven needs (due to incomes)

We chose a Trust with a separate family member as trustee. Basically, pay what is reasonably needed.
The thought was two involved COULD help.

We now have the disparate incomes. Chose 50/50.
If we decide to assist one, so be it. No reason to penalize one for doing well. Didn’t want to chance misinterpretation related to inheritance. Of course the well to do COULD be generous and take something off the top to fund a siblings need. That’s their choice, which is completely within our desires. Purely personal, I think Johanna commented about the split previously.

[HumbleInvestor]

Do you let the guardian know when you are putting them in the trust as a guardian and potentially what they me be getting for taking care of your kids?

[jfoxcpacfp]

HumbleInvestor wrote:

Do you let the guardian know when you are putting them in the trust as a guardian and potentially what they me be getting for taking care of your kids?

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Absolutely, you need to get permission - you may find out the guardian is not willing to serve. Plus, your death is not an ideal time for the guardian to learn s/he has an expanded family.

I don’t know what you mean about “what they me (sic) be getting”.

The guardian is not expected to just “take care of” your kids, as in babysitting. This person/couple is going to step in as surrogate parents. It’s a huge responsibility, very important for you to carefully consider. Your choice may change several times while your children are minors - that’s ok. Guardians age, get divorced, change their minds, etc.

You should consider appointing a separate trustee from the guardian, but also making available adequate funds for raising your children. It’s a difficult decision and can be a very delicate balance, especially if you don’t have close family members who are willing and appropriate to serve.

[HumbleInvestor]

@jfoxcpacfp Thanks for the information. I need to set one up as well and I dont know anything about the process, mechanism etc. My little bit of info comes from movies where they suddenly assumes guardianship of family members kids because of unforeseen events. As for the question of what they get, is it in the form of a portion of assets or monthly stipend/income to ensure they are able to care for the increased family? Is that discussed as well at the time of getting the permission?

[Steven Podnos MD CFP]

I had set up guardianship for my children at one point with non relatives that included a stipend annually to allow them not to work.  But I'd urge you to sit down with a skilled estate planning attorney on this issue.  A public forum is not the place for something so important.

[jfoxcpacfp]

HumbleInvestor wrote:

As for the question of what they get, is it in the form of a portion of assets or monthly stipend/income to ensure they are able to care for the increased family? Is that discussed as well at the time of getting the permission?

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You're welcome. It can be whatever you decide it needs to be.

This is something to discuss in depth with your attorney and probably your financial advisor. There are many choices to make, including the instructions to the trustee on how much to provide, in what situations, how much latitude the trustee has, in what instances the guardian can get more (i.e. if your child wants swimming lessons, can the guardian ask for and receive money to build a swimming pool? Country club membership?) etc etc. Your choice of trustee/money manager is almost as important as choice of guardian. Some children stand to inherit 8-figure life insurance proceeds - how do you want that managed for the future benefit of your children? How much should it cost the guardian to take your children? Will they need to move?

Even more complicated for physicians whose families are not US citizens, which is applicable to many physicians.

Very, very important to have good advice and counsel when you are designing these documents and making designations. You d/n/w to be overly controlling, but you d/n want the guardian to "grow into" the assets in the trust, either.