Wills, trusts, guardianship

[Autoeng]

I have two sons, one who is 21 and acts like he is 12 and one who is 7. My wife and I need to redo our wills and have been discussing how to handle all of the issues.

Should my wife and I die at the same time the inheritence would be substantial (if accidental, which would be the scenerio for both at once, in excess of $1M). Because of the maturity levels of both sons we have determined that trusts would be needed.

For 21 year old son - We want to trust the money until a certain age (haven't decided that yet) where hopefully he will have more maturity. We want to have the money controlled by someone that makes safe investments and can approve some payouts prior to that magical mature age. He will have to live off of the money that he makes but I would not have a problem if he needed a car (not new and based on current salary) or other reasonable expenses that young people need help getting started with. So we need a trustee to approve whatever requests for money he might have.

This is where we have our first issue. Who to be trustee? Of family left (mothers, brothers / sisters) we feel that we could only ask one sister to do that. However she lives far away so knowing whether older son has been trying and deserves to withdraw some monies would be hard to keep up with. I do not have a problem reimbursing someone for their time to deal with this but I don't want to pay huge somes of money to a lawyer or investment counselor and the decisions about whether to release some money probably would be difficult for them to handle.

Second issue is that we don't have anyone to assume guardianship of the youngest. Again only one sister (same as for trustee) that I would ask. How do you ask someone to do this for you? Not just two huge tasks but the hugest one of all (raising your child).

Thanks

 

[nightnurse613]

The good news is you are thinking about this now (mas tarde que nunca as they say). If you think this is hard, try doing it for 6 kids! Fortunately for us, one of my daughters has the perfect temperment for this (finding someone to administer is an important first step). The next key is to live as long as possible so things like college education aren't a factor. You could make sure you and your spouse are never in the same car (just like the President) although this can make timeshare vacations more difficult. Finally, I don't think you can write down every contingency; we sat down with our daughter and left her some guidelines (if they go to college, if they graduate, what if they don't, what if they're married, etc). We wrote those down and just have to trust that she uses the common sense the good Lord gave a mule to do what's right (and hope that none of the kids sue for a bigger share).

 

[lll1929]

Good thread!!

2 weeks ago, my uncle who has no children suddenly passed and his wife is in a nursing home.

He made both me and my sister the power of attorney over his wife. He decided not to ask his brothers or sisters due to age (all are over 60).

I must say it is a significant responsibility. We are now taking care of an elderly aunt in a nursing home who has no relatives here. Plus my sister was beneficiary of a significant amount of money (not belonging to the estate).

Is there a niece or nephew of age, and maturity, who could take this responsibility? Is there a Godparent for your son?

I am now setting things up for the care of my kids too (age 12 and 13).

Good luck!!

 

[pwrshift]

As it gets into everything you want info on, I suggest you get this book right away:

http://www.amazon.com/Beyond-Grave-...d_bbs_2?ie=UTF8&s=books&qid=1220892154&sr=8-2

Planning an estate and its administration is a very tough project. It took me 3 years and a lot of legal/taxation fees to get a better grip on what I wanted to do with my estate, complicated even more due to the fact I own some private businesses. I'm an empty nester and my 3 kids are on their own, not children anymore, but at the same time I don't want them to blow what has taken me a lifetime to build. Uncle Sam also is involved, so you should investigate insurance - first to die/last to die - while you are healthy enough to be insured...and ward off excessive taxation. Hate to say it, but a million dollars ain't what it used to be ... at 5% return average it's only $50,000 a year.

I have testamentary trusts set up for each of my kids with controls on where, when and how much of the inheritance can be spent. A tough decision for you will be deciding at what 'age' they can have control over it, if at all. Incentives might be a good route ... they have to 'earn' a dollar in order to 'inherit' one dollar. There are a huge number of considerations and decisions to make, not the least a recognition that a child could marry someone and present a 50% chance divorce that could put your estate into the wrong hands. Deciding how much control you want over your money after you die is very complicated.

Brian

 

[Autoeng]

Thank you all for some very good points to ponder and link to the book.

 

[Jaybee]

Our wills in our trust have language in a section called "Specific Omissions", that says, in essence, if any person, or entity shall challenge the tems and conditions I have set down, I shall bequeath the sum of $1 in lieu of, and in place of, any other benefit, bequest",....etc..., which should take care of that problem.

We wrote those down and just have to trust that she uses the common sense the good Lord gave a mule to do what's right (and hope that none of the kids sue for a bigger share).

 

[Diane]

While you are looking at all this, you might want to put some language someplace that will allow a trustee or beneficiary access to your medical records AFTER you have died. All the power of attorney forms I have seen (not all that many, but enough) say that they terminate at death. All of the trust forms I have seen (again not all that many) give the trustee umteen powers, mostly financial, but none say anything whatsoever about HIPPA and ability of the trustee or a beneficiary to get medical records of the deceased. This could be big if there is any question about treatment, or lack thereof, at the end. If nothing else, it could give a family peace of mind as to what was or was not done.

Lacking such a pre-death provision, it would mean going to probate court and opening an estate so that a court order could be obtained ordering the hospital or doctor to release their medical information. If you are planning to use a probate proceeding to transfer assets, etc., this would not be too bad, but many people, at least those that I know, specifically set up up their estates to avoid probate.

Diane

 

[Floridaski]

Trustee decision diffcult

I have to add that you may want to consider determining a financial institution to administer the trust. Or if you do determine a family member be specific in the document what fee the family member can charge. It is often determined by state law, and should not exceed the caps set by your state law.

We have a situation where a brother is the trustee and is trying to charge double the state cap. Needless to say this family may never speak to each other again. It is very complicated and very sad - but it happens. The trust was significant and there was some work required on his part. But, not nearly enough to earn the fees, so be very specific in your will about how much fee is acceptable to you. You can find this out easily by calling local trust companies. In the long run, our family would have saved money with a trust administration firm and everyone would be on good terms!

 

[mshatty]

I have to add that you may want to consider determining a financial institution to administer the trust. Or if you do determine a family member be specific in the document what fee the family member can charge. It is often determined by state law, and should not exceed the caps set by your state law.

We have a situation where a brother is the trustee and is trying to charge double the state cap. Needless to say this family may never speak to each other again. It is very complicated and very sad - but it happens. The trust was significant and there was some work required on his part. But, not nearly enough to earn the fees, so be very specific in your will about how much fee is acceptable to you. You can find this out easily by calling local trust companies. In the long run, our family would have saved money with a trust administration firm and everyone would be on good terms!

There are some states where there is set cap on fees. You should sit down with an estate planning attorney who can inform you of the impact of decisions you want to make.

 

[rapmarks]

Our trust states that each child would get 1/3 at 30, 1/3 at 35, 1/3 at 40. We may have to change it to up those ages, we set it up 11 years ago.. You can set up the trust to give interest only til a certain age, or allows payouts for medical, educational, or special reasons. But once those funds are released to an individual, he or she can do what they want with it. you can't say they can only spend it on certain things.
We administered trusts for the family and never were paid a penny and did not expect to be paid. As trustee, you get advice from a lawyer, an accountant, and a financial advisor.

but I am still pndering why brothers and sisters over the age of 60 were to elderly to have power of attorney and also how the uncle could give power of attorney over his wife to someone else.

 

[3kids4me]

Many years ago, my cousin inherited a boatload of money from a childless aunt, and it was supposed to be in trust for her until she turned 30. She was 18 at the time, and she and her mother went to court and had the trust broken.

I recently heard of another case of this happening, and it makes me wonder how easy that is to do....

 

[jerseygirl]

My trust is set up so that my brother has full discretionary control until my daughter is 35. He has my specific (unenforceable, but I trust him implicitly) wishes in a separate letter .... e.g., book vacations for X, Y, and Z annually until timeshares can be sold (hold onto WSJ and Harborside!), okay to buy her a $35K car, not the Audi TT she wants, summer in Europe after college graduation is cool, but she's to pay her own rent afterwards if not in graduate school, don't let her buy a home until she masters the art of paying rent, living within her means, etc.

I work in the financial business, and there's a specific Advisor to handle the investment side of things ... but my brother will make all spending and disbursement decisions. I think my daughter will be ready to take control of the funds and property before she's 35, but better to be safe than sorry, I think.

Luckily, I have 3 very responsible brothers -- so there are successor trustees as well. In fact, my youngest brother was very upset that I didn't give him first authority to pull the plug. He said he's always been a good judge of who should live and who should die, so he was insulted to be the "backup."

 

[Lawlar]

Keep Assets In Trust

I could write several books on this topic (I’ve prepared many wills and trusts for clients before I retired).

The one thing I would suggest is to keep the assets in trust as long as possible. Making distributions in one-third installments (as discussed in a previous post) at ages 25/30/35 is the most common provision in the form books used by most lawyers. [The idea is that if the child spends the first third foolishly, she will have five years to learn from that mistake. If the child spends the second 1/3 foolishly there is another five years to reflect on how fast the money disappeared.]

I recommend distributions upon the death of the child (or at ages 50/55/60) [The final distribution would go to the grandkids). The reason for this advice is that as long as the assets are in the trust the assets cannot be reached by the child’s creditors (even if the child files a bankruptcy) or the spouse of the child. The trustee will have the discretion to make distributions to the child for maintenance, education and support (in addition to income distributions) so the child can be adequately provided for if she needs additional help.

I have seen many cases where the distribution was made to the child at an early age and then the assets were lost due to divorce, a car accident, gambling, and numerous other causes.

As to who should be the trustee, I recommend using a bank if the assets are large enough to interest the bank. The bank will manage the assets prudently and there is no risk of the assets being stolen. Also, if you use family members there can be family fights over how and when to use the trust assets.

 

[Autoeng]

I recommend distributions upon the death of the child (or at ages 50/55/60) [The final distribution would go to the grandkids).

Interesting approach. Please explain this line though (I recommend distributions upon the death of the child).

I understand setting the will to list ages far into the future while letting the trustee distribute prior to for expenses so that the money cannot be touched through lawsuits that would typically come earlier in a person's life but with the will written as such (payable at child's death to heirs) what if the trustee does not complete payout prior to and child has no heirs?

 

[lll1929]

but I am still pndering why brothers and sisters over the age of 60 were to elderly to have power of attorney and also how the uncle could give power of attorney over his wife to someone else.

My uncle was 4 years older than my father and they had no idea who was going to outlive who. The remaining brothers and sisters live out of town.

As a result, I guess the decision was made to leave the power of attorney in my sister and my hands. We are a very close knit family so my father ultimately makes all the final decisions anyways. We are just there to sign the papers.

The only bad thing is that he died one day after signing the papers at the attorney's office so we (my sister and I) had no idea what a Power of Attorney was. We are all learning from this experience and it certainly brought to light that we need to think about our children and estates.

I forgot to mention my Aunt has alzheimers so she is unable to do anything with the estate. That is why he set up the Power of Attoney over her.

 

[Lawlar]

Protecting Assets

Interesting approach. Please explain this line though (I recommend distributions upon the death of the child).

I understand setting the will to list ages far into the future while letting the trustee distribute prior to for expenses so that the money cannot be touched through lawsuits that would typically come earlier in a person's life but with the will written as such (payable at child's death to heirs) what if the trustee does not complete payout prior to and child has no heirs?

A good way to explain my approach is to tell you about a person who recently had lunch with me who is very wealthy. A few years ago he gave his son some real estate. The son then mortgaged the properties to develop them, to start a business, and for personal expenses. The business failed and the developed property cannot be sold in today's market. Now the properties have declined in value to below the value of the mortgages and the bank is foreclosing. The child doesn't have an income that will support the mortgage payments.

The better approach is to keep the real estate in the trust and allow the child to live on the properties. The properties can be kept in trust until the child dies and then provide that the assets will be given to the grandchildren. If the child doesn't have any children (and there are no grandchildren from any other children) then the trust wil provide that the assets will be distributed to other relatives and/or charities.

The trustee can be given very broad powers under the Trust so that a child can have a good deal of use and enjoyment of the trust assets.

 

[rapmarks]

Lawler, Is this approach recommended for everyone or just those who are concerned about a particular child wasting their inheritance?
Because what is to be gained by denying it to your child, but allowing the grandchild to have it all?
Also, does fall into the generation skipping tax scenario.

AS I read this thread, I thought of my brother in law, who my mil thought to punish in her will, but was very foolishly advised by her attorney to write it that her son would get the money if he divorced his wife. Of course, it didn't say they had to stay divorced. Anyhow, as far as I can tell, not one penny of the inheritance has been spent by all 4 people who inherited it. it is regarded as savings by all of them.

 

[Lawlar]

Everyone Has Different Desires and Needs

Lawler, Is this approach recommended for everyone or just those who are concerned about a particular child wasting their inheritance?
Because what is to be gained by denying it to your child, but allowing the grandchild to have it all?
Also, does fall into the generation skipping tax scenario.

I am just expressing my opinion of what I think is best in many situations (I am not giving legal advice and everyone really should use the best lawyer they can find to help them plan their estate).

Many parents want to give their assets outright to their children. They trust their children and don't want to try to control them from their graves. That's ok.

But stuff happens. Even the most talented and moral people can experience difficulties. For example, a medical condition might result in a hugh medical bills. Some wonderful people make poor choices when selecting a spouse. The list of possibilities goes on.

If you think about it, wouldn't it be nice to know there were assets held in trust for your benefit that no one could take from you no matter what happened?

If you keep the assets in trust for the lifetime of your children, and then to the grandchildren, the distributions to the grandchildren can be made in staggered distributions as well. [35/40/45]

We don't want to get into a generation skipping tax discussion. I'll leave that to your attorneys/CPAs.

 

[Autoeng]

I am just expressing my opinion of what I think is best in many situations (I am not giving legal advice and everyone really should use the best lawyer they can find to help them plan their estate).

Thank you for your opinions because they gave me a way of looking at my situation that I hadn't before.

Thank you,

 

[Diane]

When thinking about how to pass on assets to children don't forget about the IRS annual gift exclusion of $12,000 each. This means that two parents can give $24,000 a year to each child (or to any one person, for that matter) with no tax consequences. You could let them know it is part of their inheritance and see what they do with it.

Diane

 

[Cathyb]

We have a slightly complicated Trust -- we each have children from a former marriage AND one of my children has some long term medical issues. All our kids are over 43 yrs old. Sooooo, what we did is have the oldest child in each of our families plus a bank trustee assigned by our Trust Attorney to handle our estate upon our death. We have an A/B Trust in place.

Of course with all the timeshare fees going up so quickly on seven units, there may not be any money left when we take that path to heaven .

Accolades to you for thinking about the situation at such an early age!

 

[Autoeng]

Here is what I came up with so far.

1) Establish a trust that will hold monies and house after death.
2) Pay off remainder of house mortgage and equity line from assets.
3) Health / Dental insurance to be maintained for youngest son and paid from estate.
4) Distribute to 2 children and MIL $20,000 each. Youngest son's to be invested and available for use. Youngest son's SSI payments to be invested in separate account.
5) Trust monies to be invested to maintain principle and garner interest.
6) MIL is to move into house and raise youngest son there.
7) All household related expenses (insurance, water, natural gas, electric, water, maintenance) to be paid from estate.
8) All expenses related to raising youngest child (clothes, fees) to be paid from estate.
9) When oldest son reaches 25 distribute $20,000 to him.
10) When oldest son reaches 30 distribute ½ current liquid assets to him.

and that is as far as I have gotten. We need to decide on when to liquidate the house and distribute the remainder of the assets.

 

[rapmarks]

I know some people have it in their estate planning to liquidate their home upon their death, I really get scared thinking about it in this housing market. I can see in your scenario it being something to think about. your mil lives to be 105 and your son wants to get her out of the house.

 

[Autoeng]

That's where I'm stuck. Have to discuss with MIL.

 

[rapmarks]

If it is any consolation, we went through this when we were young and had young children. Hopefully, all this will be for naught and you will be revising everything in your old age.