Trust for Children in the Event of Tragedy

[MrsIMDoc]

We are expecting our first child in the upcoming year and want to be sure our finances are in order in the event that we both died and our child survived.  We are meeting with an estate attorney next week to discuss setting up a trust for our life insurance proceeds to go to in such an event occurred.  We have $3 million combined in life insurance that would enter the trust.  We want to be sure that the guardians we have appointed have adequate funds to provide for our child's needs.

Any resources or thoughts on things we should discuss with the attorney?

Another question we had was if the guardians chose to adopt our child would they lose ability to access parental social security until age 18?

I fully recognize this is a morbid topic, but I would rather set it up once and then not think about it.

 

[jfoxcpacfp]

Lots of thoughts, but specific to the situation. Might want to coordinate the attorney's recommendations with those of your CPA and/or financial planner.

The children do not lose the benefits in the event of your death as long as at least one parent had an earnings record to qualify them to receive benefits.

[DarrVao777]

MrsIMDoc wrote:

We are expecting our first child in the upcoming year and want to be sure our finances are in order in the event that we both died and our child survived.  We are meeting with an estate attorney next week to discuss setting up a trust for our life insurance proceeds to go to in such an event occurred.  We have $3 million combined in life insurance that would enter the trust.  We want to be sure that the guardians we have appointed have adequate funds to provide for our child’s needs.

Any resources or thoughts on things we should discuss with the attorney?

Another question we had was if the guardians chose to adopt our child would they lose ability to access parental social security until age 18?

I fully recognize this is a morbid topic, but I would rather set it up once and then not think about it.

 

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We just went through this morbid, confusing, and ultimately expensive journey of estate planning ourselves.

Definitely agree with discussing with the attorney.

Depending on how aggressively your attorney bills/hour, a colleague of ours recommended using one of the online sites to create a "first draft" living trust (can be easily done for <$500) so that you already have an idea of what you want in your living trust. This can save some money instead of blindly letting the estate attorney lead you around whilst running up high hourly charges. We did not do this but in retrospect, that doesn't sound like a terrible idea.

Regarding your first question, this may vary from state to state but the way our estate attorney structured this was to create a subtrust within the trust in the event my wife and I died and our child survived. The subtrust holdings would be overseen by a person that we designated until our child was 18 years old.

[EH]

It's really pretty straightforward. The attorney should review everything with you and let you know about all of the things you have choices about. We were able to get back to the lawyer by email with our decisions for things we didn't have decided at the first meeting and then met again to sign everything. I guess you could read a nolo book on trusts but i would just show up and let them do their job.

[jfoxcpacfp]

EH wrote:

It’s really pretty straightforward. The attorney should review everything with you and let you know about all of the things you have choices about.

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Pretty straightforward if only all attorneys gave good and correct advice and all attorneys thoroughly understood the tax code and all attorneys took the time necessary to understand exactly what your goals are and your various paths to accomplish them rather than using cookie cutter models...

Not to say that there are not some great estate tax planning attorneys out there, at a reasonable fee, but, like finding quality in other professionals (and lacking a good understanding of the estate tax code and its application), it can be difficult to find the needle in a haystack and to recognize it when you've found it.

[MrsIMDoc]

Ok so I found the WCI review of Living Trusts for Everyone: Why a Will is Not the Way to Avoid Probate, Protect Heirs, and Settle Estates from 2012 (https://www.whitecoatinvestor.com/living-trusts-for-everyone-a-review/).  I am going to try that one first. Any other book recommendations or blog recommendations?

 

[Kamban]

jfoxcpacfp wrote:

Not to say that there are not some great estate tax planning attorneys out there, at a reasonable fee, but, like finding quality in other professionals (and lacking a good understanding of the estate tax code and its application), it can be difficult to find the needle in a haystack and to recognize it when you’ve found it.

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Herein lies the problem. It is difficult to know who is good and by the time you find out that he / she is bad, you have lost tens of thousands of dollars.

Do you have a suggestion for a good estate planning attorney in South Carolina with reasonable fees.

[jfoxcpacfp]

Where in SC? I can check with my network.

[Kamban]

MrsIMDoc wrote:

We are expecting our first child in the upcoming year and want to be sure our finances are in order in the event that we both died and our child survived.

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First of all, congratulations on your pregnancy.

Secondly, things can go wrong however much we wish it did not. My good friend from medical school and his wife were hit head on by a driver who tried to overtake a 18 wheeler and misjudged his ability to do so safely.  My friend and his wife ( both wearing seat belts and in a car with airbags) died on the spot but their three young children sitting in the back of their car were unhurt.

After that I have become paranoid about my wife and I traveling together on a vacation and leaving my child alone. Either all three of us travel together, or one stays behind with her while the other travels.

[Kamban]

jfoxcpacfp wrote:

Where in SC? I can check with my network.

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Upstate South Carolina

[jfoxcpacfp]

Kamban wrote:

After that I have become paranoid about my wife and I traveling together on a vacation and leaving my child alone. Either all three of us travel together, or one stays behind with her while the other travels.

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I knew a couple who always traveled on separate airlines when their children were growing up - with or without the kids.

[emp2b3]

Also make sure that a legal plan is not offered by your employer as an optional benefit. For $13 per month (may sign up during open enrollment) we created a revocable living trust, digital asset trust, last will and testament, durable power of attorney, and healthcare power of attorney/living will fit each of us.

[EH]

Sure there are always truly incompetent people out there but this reminds me of all of my patients that read up on their ailments online and think they know medicine better than I do! Yes, if you have a complicated tax situation you want someone competent, but as someone who is not going to hit the estate tax, have one piece of property, and just need to avoid probate and establish guardian/trustee for my child, I still think this is estate law 101 that anyone reasonably competent can do. I asked lawyers for recommendations and honestly they weren't very concerned about who did their trust either. I chose someone strongly recommended to me and was very happy with the outcome. Everyone I know here has used someone that offers a set price for service not hourly so there wasn't any time pressure (although I think this still works out in favor for the lawyer - haha).

[jfoxcpacfp]

Kamban wrote:

jfoxcpacfp wrote:

Where in SC? I can check with my network.

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Upstate South Carolina

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PMing you.

[Craigy]

A qualified estate planning attorney should be able to walk you through all of the important points.  A few of the big ones though, are trustee selection, appropriate age and conditions for children to receive assets, reasonable expenses for education and maintenance, etc.  Picking a bank or other corporate trustee can burn through trust principal pretty quickly with large fees.  Picking an unscrupulous brother-in-law with a gambling habit can have trust principal disappearing.  You should consult an estate planning attorney who will walk you through all of this.

Regarding a bill, any competent attorney should be able to give you an engagement letter with either a fixed fee or an outline of the costs.  If you tinker a lot, lots of back and forth, your bill might creep up, but a good attorney knows how to keep a project efficient.

Not seeking an attorney because you fear selecting a bad one is a mistake.  Chances are, you're not going to be a great attorney for yourself either. In many states, a $500 online trust may not even be validly drafted or enforceable.  And worst case, a poorly drafted trust or a trust that you do not entirely understand can cause you tremendous headache, tax problems, etc years later.