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Dirt Nap Estate Planning
Old 03-22-2014, 07:14 AM   #1
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Dirt Nap Estate Planning

DW and I have sizable accounts with Vanguard, Fido and the local bank with beneficiary designations and POD contingencies. We have one son who is 35 and married and doing well. We have a will that states if we both go, son will get all physical belongings, house, vehicles, etc.

To recap a bit, if I go first wife gets everything, if she goes, I get everything, if we both go, son gets everything.

My question, do I need a more comprehensive estate plan ? I really don't see a reason or understand why I would need a trust of any kind and I have no interest in trying to control anything from the grave. I could understand having some type trust if my situation were more complicated but my thinking right now is that I would be giving a lawyer money for drawing up something I already have in place.

Am I missing something here, what say you ?
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Old 03-22-2014, 07:29 AM   #2
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What if your son predeceases you? Have you made provision for that?
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Old 03-22-2014, 07:36 AM   #3
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What if your son predeceases you? Have you made provision for that?
Yes, DIL gets everything.
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Old 03-22-2014, 07:41 AM   #4
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Originally Posted by frayne View Post
Yes, DIL gets everything.
And if she predeceases you...
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Old 03-22-2014, 07:47 AM   #5
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And if she predeceases you...
Then I guess I would have to set something up for my two grandchildren. If they predecease me, I'll give everything to charity.
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Old 03-22-2014, 08:31 AM   #6
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Have you considered the tax implications?
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Old 03-22-2014, 08:34 AM   #7
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Assuming your assets are below the Fed Estate Tax threshold of $5M each, one question is whether you live in a state with estate tax. Some have quite low thresholds. If you live in such a state, there might be reasons to do things differently. Did you do Will yourself or consult Atty? If Atty. you might consult same with this question.
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Old 03-22-2014, 09:00 AM   #8
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When you are looking at the size of your estate, you also have to look at it combined...

IOW, you die and leave everything to DW...

She dies with both of your assets... will this trigger a taxable estate


If so, then you might want to put your assets in a trust for the benefit of your wife with your son as beneficiary.... this can be done through your will and does not have to be set up now...
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Old 03-22-2014, 09:03 AM   #9
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When you are looking at the size of your estate, you also have to look at it combined...

IOW, you die and leave everything to DW...

She dies with both of your assets... will this trigger a taxable estate


If so, then you might want to put your assets in a trust for the benefit of your wife with your son as beneficiary.... this can be done through your will and does not have to be set up now...
The marital estate tax exemption is portable since 2012 as long as the surviving spouse files an estate tax return when the first spouse passes away. Here is a good discussion on the Bypass Trust by Michael Kitces Permanent Portability Of The Estate Tax Exemption - Is It Time To Bypass The Bypass Trust For Good? | Kitces.com
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Old 03-22-2014, 09:18 AM   #10
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You mention a will. Does it include Power of Attorney, Health Care Directive, named Executor?
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Old 03-22-2014, 09:26 AM   #11
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Curious why you put your daughter-in-law in line before your 2 grandchildren,most experts would tell you to put it in trust for your grandchildren with their Mother as trustee. If your DIL should remarry, this will put her spouse, who has no blood relationship to you directly in the picture as to spending the GK's inheritance. This might seem like hair-splitting, but trustees have a fiduciary responsibility to the trust which is upheld in a court of law. It seems as if a trust would give more protections to your GK. Neither one of our SIL is in our trust agreement and they are both fine with it, as we have very young grandchildren and want to give them the best protection possible if something happens to one of our daughters.
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Old 03-22-2014, 09:32 AM   #12
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The marital estate tax exemption is portable since 2012 as long as the surviving spouse files an estate tax return when the first spouse passes away. Here is a good discussion on the Bypass Trust by Michael Kitces Permanent Portability Of The Estate Tax Exemption - Is It Time To Bypass The Bypass Trust For Good? | Kitces.com
MichaelB.......good article......thanks for the link. I might rewrite your comment: SURVIVING SPOUSE MUST FILE ESTATE TAX RETURN WHEN FIRST SPOUSE PASSES AWAY (EVEN IF NO TAX IS DUE) TO PRESERVE PORTABILITY OF DECEASED SPOUSE'S EXEMPTION so that the point is not missed. I would worry too about survivor remembering that point so some method of tickling from the grave would be useful.
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Old 03-22-2014, 09:57 AM   #13
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Assuming your assets are below the Fed Estate Tax threshold of $5M each, one question is whether you live in a state with estate tax. Some have quite low thresholds. If you live in such a state, there might be reasons to do things differently. Did you do Will yourself or consult Atty? If Atty. you might consult same with this question.
+1
The state estate tax(0% exemption, 4.5% of everything) came as a complete surprise when DF recently passed. Everything was passed to the heirs(children and GC) via TOD.The state he died in takes 4-6 months to process. Since we had no knowledge I used an existing brokerage account. Guess what, it got frozen the day of the TOD. I can buy funds etc. cannot withdraw anything from the account.
Perhaps an attorney would have informed us about this little gotcha.

I also think the DIL being a trustee would be a great idea. If I remember correctly, the estate tax is much higher(in that state) to transfer to non-blood relative.

MRG
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Old 03-22-2014, 10:18 AM   #14
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MichaelB.......good article......thanks for the link. I might rewrite your comment: SURVIVING SPOUSE MUST FILE ESTATE TAX RETURN WHEN FIRST SPOUSE PASSES AWAY (EVEN IF NO TAX IS DUE) TO PRESERVE PORTABILITY OF DECEASED SPOUSE'S EXEMPTION so that the point is not missed. I would worry too about survivor remembering that point so some method of tickling from the grave would be useful.
+1

I share the concern and your rewritten version makes the point more clearly.
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Old 03-22-2014, 01:59 PM   #15
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This seems like it would be uncommon, but if one spouse dies, the other could remarry, or just go bonkers, and give money away until there was nothing left for the son. Some guy you don't know could get all your money. A trust could prevent that.

A trust could also address what happens if all of you, with DIL, all die together in a car accident. Without heirs, maybe go backwards through the family tree, or give a bunch to charity?
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Old 03-22-2014, 04:12 PM   #16
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we went 2 weeks ago here in nyc to see an estate attorney. all our old paperwork was outdated. we also set up 2 disclaimer trusts since we have both nys and nyc taxes.

that alone made the 5k we paid well worth it.

i see "predeceasing" being mentioned. it cost us 500k in fees and having to buy out partners in a real estate business because the sentance pertaining to predeceasing was missing from the trust and wills of an inheritance.

it is so important to have this stuff done by a real pro and specialist. not even a general practioner is good enough.
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Old 03-22-2014, 04:44 PM   #17
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Since we had no knowledge I used an existing brokerage account. Guess what, it got frozen the day of the TOD. I can buy funds etc. cannot withdraw anything from the account.
Perhaps an attorney would have informed us about this little gotcha.

MRG
Technically, a TOD account isn't frozen the day of death, it's still fully active for use until someone contacts the brokerage and tells them the person died, then it'll be frozen until the beneficiary produces a death certificate (or equivalent) and ID's to process the account transfer.

As far as an attorney informing you about a TOD, it's not their job unless you ask specifically about it. The main intent of TOD is to avoid using an attorney and probate. It's entirely up to the user of the TOD to understand the use of this designation.
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Old 03-22-2014, 05:35 PM   #18
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Technically, a TOD account isn't frozen the day of death, it's still fully active for use until someone contacts the brokerage and tells them the person died, then it'll be frozen until the beneficiary produces a death certificate (or equivalent) and ID's to process the account transfer.

As far as an attorney informing you about a TOD, it's not their job unless you ask specifically about it. The main intent of TOD is to avoid using an attorney and probate. It's entirely up to the user of the TOD to understand the use of this designation.
Sorry I didn't explain this well. The TOD happened just as you described. The proceeds have been transferred to the heirs accounts. The proceeds can be invested, they cannot be withdrawn from the accounts until the state validates their estate taxes have been collected. There's one additional release that is required. This process is estimated to take 4-6 months.

DF did do estate planning with his attorney. He may have been given the proper information, he had memory issues. An example of poor planning.
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Old 03-22-2014, 08:22 PM   #19
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Technically, a TOD account isn't frozen the day of death,
Don't you mean that "technically" it is frozen at deate of death but for practical purposes you might be able to get away with transactions in the account until the depository learns of the death?
Bruce
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Old 03-22-2014, 09:21 PM   #20
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The marital estate tax exemption is portable since 2012 as long as the surviving spouse files an estate tax return when the first spouse passes away. Here is a good discussion on the Bypass Trust by Michael Kitces Permanent Portability Of The Estate Tax Exemption - Is It Time To Bypass The Bypass Trust For Good? | Kitces.com

Thanks for posting... this is news to me... I have not kept up with the new laws...
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