Join Early Retirement Today
Reply
 
Thread Tools Display Modes
Death & inheritance
Old 09-20-2013, 09:17 AM   #1
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
calmloki's Avatar
 
Join Date: Jan 2007
Location: Independence
Posts: 7,281
Death & inheritance

Trying to work out a simple plan.
My gal and I are unmarried, that is, without paper though we've been together over 35 years. All our accounts and places are held JTWROS, so when either of us passes it will pretty much be a financial non-event for the other. Spent an hour with a high powered estate attorney and she felt our current state is good for our financial status. We earned our way here together and we wish to continue to care for each other - thing is, it would be good to leave a nice bit to some relatives. How to do that without causing a tax event, keeping control of funds till the last moment, not informing said relatives before the fact, etc.

A joint bank account requires the joint holder to have a signature card. Putting someone on a property is gifting them an amount, thus taxable and if given at death to get the awesome tax-free stepped up basis also gives the beneficiary a hassle in managing or selling that said relatives don't really have the stomach for. A will saying "Sister Lisa gets $250k"? That gets into the whole estate hassle and has the potential to really impact our surviving partner with a cash crunch problem at a mystery time. Is this a time when life insurance is called for and appropriate?

Other ideas?
calmloki is online now   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 09-20-2013, 09:52 AM   #2
Thinks s/he gets paid by the post
 
Join Date: Nov 2011
Posts: 3,877
The usual solution is a marital trust, but something similar is likely available for non-spouses as well. With such an arrangement each of the couple have his/her own trust, and can name each other as income beneficiaries. Upon first to die, the trust can pay out to the survivor for the duration of his/her life, and upon second to die the trust document can direct the remainder (typically basis/principal) be paid to others, such as relatives.
GrayHare is offline   Reply With Quote
Old 09-20-2013, 10:26 AM   #3
Thinks s/he gets paid by the post
2B's Avatar
 
Join Date: Mar 2006
Location: Houston
Posts: 4,337
If all of your assets are JTWROS, there won't be any money in the estate of the first person to die for any bequests. If you pass away first, your partner gets everything. She is then free to spend it all on "Raul the poolboy" who comforts her so well after your death.

If your goal is to leave money to some of your relatives, you need separate assets or you can set up a trust now that would provide for the surviving partner until their death. Then, other bequests can be paid. There's no guarantee that the surviving partner won't outlive everyone else. Without a trust, you can not guarantee that your partner won't leave the money to someone/something else.

All of this is actually the same as leaving everything to your spouse but setting up a trust upon death. On the assumption you have shared goals for the money after both of you die, the trust is easily set up out of community or shared property. An agreeable spouse keeps any disputes from disrupting the system. Cohabitations would need to be done in advance.
__________________
The object of life is not to be on the side of the majority, but to escape finding oneself in the ranks of the insane -- Marcus Aurelius
2B is offline   Reply With Quote
Old 09-20-2013, 10:27 AM   #4
Thinks s/he gets paid by the post
 
Join Date: Jul 2010
Location: Chicago
Posts: 1,008
Easiest way to leave your sister 250k. If it's at a bank or brokerage, just create a new account titled in your name only w/POD or TOD to your sister. This will allow you control until the last moment and transfer of assets to someone requiring only a death certificate and ID of the beneficiary when the time comes. Somebody will need to notify this person since the bank/brokerage probably won't do it.
Dimsumkid is offline   Reply With Quote
Old 09-20-2013, 10:52 AM   #5
Moderator Emeritus
 
Join Date: May 2007
Posts: 12,894
DW and I are in the same situation, except that we are married. Everything we own is held JTWROS, no kids of our own, and I would like to leave some money to my niece. I think that using life insurance for this purpose sounds good on paper, but it might get very expensive as one gets older. Personally, I want my wife to get all of our money upon my death. I trust that, upon her own death, she will leave part of her residual estate to my niece as per my expressed wishes.
FIREd is online now   Reply With Quote
Old 09-20-2013, 01:54 PM   #6
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
donheff's Avatar
 
Join Date: Feb 2006
Location: Washington, DC
Posts: 11,318
Quote:
Originally Posted by GrayHare View Post
The usual solution is a marital trust, but something similar is likely available for non-spouses as well. With such an arrangement each of the couple have his/her own trust, and can name each other as income beneficiaries. Upon first to die, the trust can pay out to the survivor for the duration of his/her life, and upon second to die the trust document can direct the remainder (typically basis/principal) be paid to others, such as relatives.
DW and I have these. I believe anyone can set them up -- not just married people. I think the term is revocable living trust. Upon my death, everything I own goes into a "My name family trust" that DW can tap for living expenses as needed at her discretion. When she dies it goes to the kids. If she is flush, she can give it to the kids earlier. Vice versa if she dies first. The idea is to limit assets in one pocket for tax purposes and to insure that our assets go to the kids regardless of future marriages, etc of the spouse. They are not foolproof in the later regard (e.g. the spouse/partner could be profligate in her spending) but should work fairly well for earmarking excess funds for a relative.
__________________
Idleness is fatal only to the mediocre -- Albert Camus
donheff is offline   Reply With Quote
Old 09-20-2013, 03:41 PM   #7
Thinks s/he gets paid by the post
gcgang's Avatar
 
Join Date: Sep 2012
Posts: 1,568
Quote:
Originally Posted by calmloki View Post
Spent an hour with a high powered estate attorney ...it would be good to leave a nice bit to some relative..How to do that without causing a tax event, keeping control of funds till the last moment, not informing said relatives ... ?
I hope you were with the HPEA at a social event. If you were paying her, shouldn't you have these answers?

I'd simply make sure I had sufficient assets in my own name to handle the desired bequests and clearly state my intentions in my will.
__________________
You know that suit they burying you in? Thar ain’t no pockets in that suit, boy.
gcgang is offline   Reply With Quote
Old 09-20-2013, 03:55 PM   #8
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
calmloki's Avatar
 
Join Date: Jan 2007
Location: Independence
Posts: 7,281
Quote:
Originally Posted by Dimsumkid View Post
Easiest way to leave your sister 250k. If it's at a bank or brokerage, just create a new account titled in your name only w/POD or TOD to your sister. This will allow you control until the last moment and transfer of assets to someone requiring only a death certificate and ID of the beneficiary when the time comes. Somebody will need to notify this person since the bank/brokerage probably won't do it.
This resonates. Gal and I both have siblings who could use the funds for their retirements - the sibs aren't really as secure as we are. To that end, I, we, are interested in a sum being transferred to our respective sibs at the time of our deaths for their immediate use. Working off of your idea, perhaps we could each individually fund a Total Stock Market account with a set amount. That way the funds are making money (supposedly) and are available for our use if we both live long long long lives. OTOH, should one of us kick off early our siblings get some cash - do I recall that POD or TOD accounts are transferred tax free?

Years after my gal's Mom passed the revocable living trust she and her husband had continues not to be settled - would prefer to have things very simple and resistant to legal challenges.
calmloki is online now   Reply With Quote
Old 09-20-2013, 04:55 PM   #9
Thinks s/he gets paid by the post
 
Join Date: Jul 2010
Location: Chicago
Posts: 1,008
Quote:
Originally Posted by calmloki View Post
do I recall that POD or TOD accounts are transferred tax free?
As long as you don't trigger federal and/or state estate taxes, it would be a tax free transfer.

Other alternatives would be to do the annual 14k tax free gifting per person or to pay someone elses bills unlimited (medical, dental, tuition) directly or fund a 529 for someone while you're still alive.
Dimsumkid is offline   Reply With Quote
Old 09-23-2013, 10:21 AM   #10
Recycles dryer sheets
 
Join Date: Apr 2010
Posts: 273
Do you not have a will? What if one of you is killed by an act of gross negligence and some one needs to be sued. Would you not want your SO to be the person to pursue this?
Sesq is offline   Reply With Quote
Old 09-23-2013, 10:44 AM   #11
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
calmloki's Avatar
 
Join Date: Jan 2007
Location: Independence
Posts: 7,281
Quote:
Originally Posted by Sesq View Post
Do you not have a will? What if one of you is killed by an act of gross negligence and some one needs to be sued. Would you not want your SO to be the person to pursue this?

No. Well, maybe we have older wills somewhere, but they only would cover personal possessions. Who gets my hand tools/firearms/old slippers? Everything else is covered by the JTWROS ownership.

Regarding ability of a survivor to sue someone for negligence in a death, no, that is not an activity I'd want to connect with either of our deaths. Not our style.
calmloki is online now   Reply With Quote
Old 09-23-2013, 12:15 PM   #12
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
MRG's Avatar
 
Join Date: Apr 2013
Posts: 11,078
All ours is JTWROS, the accounts are set up as TOD. Since we won't know our account values till were dead, we just use simple %'s. My understanding at least in this state that the assets below the Federal limit will be transferred upon receipt of Death Certificates. We did this with an attorney's aid, so we feel comfortable.

BTW- Are you set with POA, living will....?

MRG
MRG is offline   Reply With Quote
Old 09-23-2013, 01:11 PM   #13
Thinks s/he gets paid by the post
 
Join Date: Jul 2010
Location: Chicago
Posts: 1,008
Quote:
Originally Posted by MRG View Post
All ours is JTWROS, the accounts are set up as TOD. My understanding at least in this state that the assets below the Federal limit will be transferred upon receipt of Death Certificates.
MRG
The FDIC limit doesn't have anything to do with the transfer of assets upon death. You could have money in your account over the FDIC and it will still transfer. This is just insurance up to a specified amount for your account in the event something happened to your account or financial institution.
Dimsumkid is offline   Reply With Quote
Old 09-23-2013, 01:26 PM   #14
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
MRG's Avatar
 
Join Date: Apr 2013
Posts: 11,078
Quote:
Originally Posted by Dimsumkid View Post

The FDIC limit doesn't have anything to do with the transfer of assets upon death. You could have money in your account over the FDIC and it will still transfer. This is just insurance up to a specified amount for your account in the event something happened to your account or financial institution.
Sorry for not being more clear. I meant nothing about FDIC. I believe there is a Federal estate tax for assets over some limit like 5MM.

MRG
MRG is offline   Reply With Quote
Old 09-23-2013, 01:34 PM   #15
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
calmloki's Avatar
 
Join Date: Jan 2007
Location: Independence
Posts: 7,281
Quote:
Originally Posted by MRG View Post
All ours is JTWROS, the accounts are set up as TOD. Since we won't know our account values till were dead, we just use simple %'s. My understanding at least in this state that the assets below the Federal limit will be transferred upon receipt of Death Certificates. We did this with an attorney's aid, so we feel comfortable.

BTW- Are you set with POA, living will....?

MRG
We have been set up with medical POAs as well as other POAs worded as strongly as possible for some years. Remarkable how difficult making those POAs work can be, but they do work.
calmloki is online now   Reply With Quote
Old 09-23-2013, 03:34 PM   #16
Thinks s/he gets paid by the post
 
Join Date: Jun 2004
Location: W Wash
Posts: 1,644
Having just recently visited our attorney to update our wills, I want to pass along a proviso that may impact your POD/TOD provisions. Our attorney told us that at least in Wash (and claims other states as well), any provisions for gifts in a will, over-ride the TOD/POD provisions on the account as of date of the will. He also stated that if you subsequently go back and reestablish the POD/TOD provisos then they do supersede the will.
Having a will over-ride a POD/TOD was a big surprise to me but he had the legislative code to prove.
Be sure you check if this situation exists in your state.
Nwsteve
nwsteve is offline   Reply With Quote
Old 09-23-2013, 05:34 PM   #17
Thinks s/he gets paid by the post
 
Join Date: Jul 2010
Location: Chicago
Posts: 1,008
Quote:
Originally Posted by nwsteve View Post
Having just recently visited our attorney to update our wills, I want to pass along a proviso that may impact your POD/TOD provisions. Our attorney told us that at least in Wash (and claims other states as well), any provisions for gifts in a will, over-ride the TOD/POD provisions on the account as of date of the will. He also stated that if you subsequently go back and reestablish the POD/TOD provisos then they do supersede the will.
Having a will over-ride a POD/TOD was a big surprise to me but he had the legislative code to prove.
Be sure you check if this situation exists in your state.
Nwsteve
This sounds pretty crazy. If you're in one of these states, as the POD/TOD beneficiary, I'd get the assets out ASAP. For a will to override the POD/TOD, you need to file in court and get a judge to agreed to freeze the assets. The POD/TOD person has a huge time advantage to withdraw the funds and spend it. Then the court would need to declare the funds are to be repaid to the estate. The POD/TOD person can drag the process on for a long time and still not pay it back. If the person is experienced at dodging legal collections, the estate may never get any money back.
Dimsumkid is offline   Reply With Quote
Old 09-23-2013, 05:47 PM   #18
Thinks s/he gets paid by the post
 
Join Date: Jul 2010
Location: Chicago
Posts: 1,008
Quote:
Originally Posted by MRG View Post
Sorry for not being more clear. I meant nothing about FDIC. I believe there is a Federal estate tax for assets over some limit like 5MM.

MRG
The Federal estate tax kicks in at 5.25 million. Going over this amount won't stop any of your assets from transferring over at death, but it will trigger estate taxes at tax return time. You stated you're using JTWROS, if you're near the estate limit, by not having a trust (I'm assuming you're married), you'll be missing out on the 5.25 million tax free transfer.
Dimsumkid is offline   Reply With Quote
Old 09-23-2013, 06:18 PM   #19
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
MRG's Avatar
 
Join Date: Apr 2013
Posts: 11,078
Quote:
Originally Posted by Dimsumkid View Post

The Federal estate tax kicks in at 5.25 million. Going over this amount won't stop any of your assets from transferring over at death, but it will trigger estate taxes at tax return time. You stated you're using JTWROS, if you're near the estate limit, by not having a trust (I'm assuming you're married), you'll be missing out on the 5.25 million tax free transfer.
Agree 100%.

MRG
MRG is offline   Reply With Quote
Old 09-23-2013, 06:36 PM   #20
Thinks s/he gets paid by the post
 
Join Date: Jun 2004
Location: W Wash
Posts: 1,644
Quote:
Originally Posted by Dimsumkid View Post
This sounds pretty crazy. If you're in one of these states, as the POD/TOD beneficiary, I'd get the assets out ASAP. For a will to override the POD/TOD, you need to file in court and get a judge to agreed to freeze the assets. The POD/TOD person has a huge time advantage to withdraw the funds and spend it. Then the court would need to declare the funds are to be repaid to the estate. The POD/TOD person can drag the process on for a long time and still not pay it back. If the person is experienced at dodging legal collections, the estate may never get any money back.
I could not agree more--when he first told me about it, I made him repeat it to be sure I understood it. Apparently the date of the POD/TOD was established versus the will signature date determines which provision is controlling. Whatever is most recent, controls. So, you can reestablish the POD/TOD after a will is signed then they again controlled disbursement.
Having gone through disbursements of my mother's accounts which were TOD with Vanguard, I can only imagine the confusion of what was controlling. Vanguard had it pretty messed up as it was.
I would be interested in some of the ER Board attorneys weighing in on this.
Nwsteve
nwsteve is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


» Quick Links

 
All times are GMT -6. The time now is 08:07 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2024, vBulletin Solutions, Inc.