your estate plan: trust or not?

[FIREshrink]

Assume you will be an above average financially successful doc, but not an extreme outlier. Take that to mean you (and/or your life partner) will die in your 70s-90s with a couple to a few million dollars.

Are you planning to leave your retirement accounts (IRAs, 401ks, etc) to a trust, or directly to beneficiaries?

Have you made your estate plan yet?

I am debating this for my estate planning. As I understand it, the pros/cons of each are:

trust - higher cost to create, higher tax rate on withdrawals in perpetuity, some loss of control, needs to be properly constructed to preserve IRA stretch, increased protection from creditors and spendthrifts

beneficiaries - lower costs, lower tax rates (dependent on beneficiary tax rates), opportunity to stretch, increased risk to creditors and spendthrifts

I have been leaning toward trusts. My estate plan is not complete but I do have a will and a trust in place, just need more complete trust planning.

Curious to know others' thoughts/plans.

[Crazyroadtodublin]

Great topic,

 

Have trusts set up, but I would hold on doing anything right now and see if Washington gets anything done

[EJ at Dads Dollars and Debts]

I set up a trust through Legal Zoom. Here is a link to both the articles I wrote on it. I did a trust for asset protection. Mainly my home. I also set up a trust so that if my wife and I die, we have a set plan for our son (now 2 years old). A plan on how we want him raised and how we want him to get the money in the trust.

As far as actually estate planning for when we die in old age. I am less concerned about that currently. I will likely donate a large chunk of our assets and hope I had thought our son how to be self sufficient without our money.

A trust through legal zoom is cheap- a couple of hundred bucks plus the price of a notary. Check out my links and let me know what you think.

[ENT Doc]

Long video, but brings up some good points and highlights some areas of needed personal research.

 

https://www.youtube.com/watch?v=sbDWyT7pOow&feature=youtu.be

[FIREshrink]

EJ at Dads, Dollars, and Debts wrote:

I set up a trust through Legal Zoom. Here is a link to both the articles I wrote on it. I did a trust for asset protection. Mainly my home. I also set up a trust so that if my wife and I die, we have a set plan for our son (now 2 years old). A plan on how we want him raised and how we want him to get the money in the trust.

As far as actually estate planning for when we die in old age. I am less concerned about that currently. I will likely donate a large chunk of our assets and hope I had thought our son how to be self sufficient without our money.

A trust through legal zoom is cheap- a couple of hundred bucks plus the price of a notary. Check out my links and let me know what you think.

Click to expand...

I'm a financial DIYer as much as the next guy but I would never make a trust for a multimillion dollar estate using an online form. Seems very risky to me. The cost to set up our trust was about $3000, over several years and 2 different iterations. I think it's money well spent. As I'm sorting through my parents' estate now, there are things they did and didn't do, even with a lawyer's help, that made things more difficult than they could have been.

 

ENT doc, that is a good video. I'm still working my way through it. At the heart of this is an individual judgment about the pros/cons of more protection vs more flexibility. Since my kids are young (minors) we opted for more protection. If we have the good fortune to live 40 more years and my children establish themselves to be sophisticated, honorable, hardworking adults we may change our plan.

 

I read Beyond The Grave twice, so I'm probably overly conservative. But esp with minor kids, I didn't want my wife to remarry after my death and somehow lose control of assets. A trust ensures against this.

[Craigy]

As a legatee, I want my money outright.  I don't want it inside a trust unless I have a creditor problem or am a ward of the state.  Generally speaking, a trust is going to impose at least some restrictions on access to funds, and also can be difficult and expensive to manage.  A trusted friend or family member can cut down on the expense vs a corporate trustee, but such a person is not always available, or such a person might not be willing to accept the liability that comes along with being a trustee.

That said, there are plenty of good reasons for a trust.  It all depends on your needs and wants, and every person is different.  If you have an estate tax problem then you should probably hire an estate planner to look into options for an inter-vivos trust and other wealth conservation strategies.  If you have a special needs child, children from previous marriages, descendants who are irresponsible with money, then something at death might suffice.  Some people just want to rule from the grave and micromanage their descendants lives long after they are gone.  Each one of these scenarios requires its own unique planning which a generic "trust" might or might not accomplish.

If you do think you have a need or a desire for a trust, you really should consult a qualified estate planning attorney in your area.  A cookie-cutter internet trust probably won't do everything you need it to do (and could even be worthless under your state law), but also, a qualified attorney will walk you through the steps you need to take personally to ensure that the purposes of your trust are accomplished.  This obviously goes for high net worth families since they have more at stake, but it goes just the same for low net worth families as well, since a wrong move or misstep can be financially devastating.

[EJ at Dads Dollars and Debts]

Fair enough. As my assets grow I likely will agree with you on this one. For now it is a house and basically telling the future guardian of my kid how I want them raised. As my net worth appreciates dramatically, then I may consider talking to some more personalized legal council. Legal Zoom does provide lawyers and I have talked to mine (the one assigned to me when I did the form) three times including on one revision. So it is not completely without guidance and it is easy to get her on the phone when needed.

 

[FIREshrink]

In handling my parents' estate, I have access to the money in the trust much more rapidly than I do the money going through probate. The former switches to my name as beneficiary within 1-2 weeks. The latter will take 5-12 months to go through probate.

[Miss Bonnie MD]

I am dealing with this now. Just signed on w lawyer to do our LWTs, POA/HCP, living wills. We will also discuss need for trust or not (will need eventually, but not sure it is a "need now"). One can argue it is a NEED now since we have minor children. I am still deciding. This is also state specific. Some states haver onerous probate. I hear NY is not one of them.

[Miss Bonnie MD]

Also, remember, these things can be updated as circumstances change - and they will. Unless you set up an irrevocable trust which was not recommended to me at this time.