Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Setting up trust after receiving a small inheritance?
Old 05-24-2014, 07:12 PM   #1
Thinks s/he gets paid by the post
gauss's Avatar
 
Join Date: Aug 2011
Posts: 1,712
Setting up trust after receiving a small inheritance?

Gauss is going to receive a small (mid five figure) inheritance from his recently dearly departed father. It is not a life changing amount of money.

Instead of taking possession of the funds and assets directly and combining it with our other funds, I had an idea of transferring the inheritance assets into a revocable trust.

This would have the advantage of keeping the funds separate. We could see over time what DD's money has grown into and the possible good it could do down the road.

We could name it something like "The Dear Dad of Gauss' Memorial Trust" so that when we see financial statements we would be reminded of Dad.

I have pointed out purely emotional reasons for considering doing this. I am not doing this for any particular financial advantage.

Has anyone else considered doing something like this and does anyone have any thought on if it might be a particularly good or bad idea.

Thanks for your input.

-gauss

p.s. FWIW, Gauss and Mrs. Gauss do not have any children or siblings. Once 2 remaining parents and 1 grandmother have passed we will have no legal heirs outside of each other.
__________________

__________________
gauss is offline   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 05-24-2014, 07:20 PM   #2
Thinks s/he gets paid by the post
steelyman's Avatar
 
Join Date: Feb 2011
Location: Triangle
Posts: 3,218
I will do this (but it'll be "The Steelyman Trust"). I haven't done it because I want to change states. You retain control over the assets even in trust.
__________________

__________________

steelyman is offline   Reply With Quote
Old 05-24-2014, 07:51 PM   #3
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Sep 2005
Location: Northern IL
Posts: 18,282
Basically, what you are doing is 'compartmentalizing' these funds. Often, that's not a good thing, as it makes people think they are somehow magically different, but money is fungible.

In this case though, you clearly point out that it is for emotional reasons. I don't think that's 'bad' in any way. I think it makes perfect (emotional) sense for what you want to achieve.

Maybe, at some point in the future, if you feel your finances are in good shape and you would never need to tap that money, you might want to make a charitable contribution in your Dad's name, to something he would have wanted to support. That would work out nicely.

-ERD50
__________________
ERD50 is offline   Reply With Quote
Old 05-24-2014, 09:30 PM   #4
Thinks s/he gets paid by the post
 
Join Date: Nov 2011
Posts: 2,365
You don't need a trust just to keep things separate. It's less expensive to simply open a new account.
__________________
GrayHare is online now   Reply With Quote
Old 05-24-2014, 09:40 PM   #5
Thinks s/he gets paid by the post
38Chevy454's Avatar
 
Join Date: Sep 2013
Location: Cincinnati, OH
Posts: 1,584
Quote:
Originally Posted by GrayHare View Post
You don't need a trust just to keep things separate. It's less expensive to simply open a new account.
X2, just open a separate account and you can see progress of that money. In your situation I see no advantage to making a separate trust for the amount of money you are talking about.
__________________
After Monday & Tuesday even the calendar says, W-T-F...

Semi-Retired 7/1/16: working part-time (60%) for now [4/24/16 changed to 80%]
Retired Aug 2, 2017; age 53
38Chevy454 is offline   Reply With Quote
Old 05-24-2014, 11:30 PM   #6
Thinks s/he gets paid by the post
gauss's Avatar
 
Join Date: Aug 2011
Posts: 1,712
Quote:
Originally Posted by GrayHare View Post
You don't need a trust just to keep things separate. It's less expensive to simply open a new account.
Thank you for the comments.

I already have a bunch of accounts in DW and/or my name. Adding a few more would just seem to further complicate things. Having a separate entity to hold the funds would provide more the separation that I was thinking of.

I haven't studied trusts for a number of years. Could you please briefly describe the costs? Are they one time or recurring? I would probably avoid using an attorney in that I am really a DIY type. If there are significant unavoidable costs then that may be a reason to rethink this.

-gauss
__________________
gauss is offline   Reply With Quote
Old 05-24-2014, 11:34 PM   #7
Thinks s/he gets paid by the post
gauss's Avatar
 
Join Date: Aug 2011
Posts: 1,712
Quote:
Originally Posted by ERD50 View Post
Basically, what you are doing is 'compartmentalizing' these funds. Often, that's not a good thing, as it makes people think they are somehow magically different, but money is fungible.
Ah yes, "Behavioral Economics 101".... To tame the beast, you must first know the beast. grin.
__________________
gauss is offline   Reply With Quote
Old 05-25-2014, 11:10 AM   #8
Recycles dryer sheets
 
Join Date: Apr 2013
Location: Beach and Mountain
Posts: 243
Step A - Set up trust using legal documents. You say your are a DIY. If so, you can find documents yourself. Please make it a simple trust which distributes income annually. Complex trust does not always distribute and therefore pays tax on income. Get EIN for trust.

Step B - Fund the dern thing and get it going. This is putting the money is an account in the name of the trust.

Step C - Do the annual IRS forms for trusts. I am sure TurboTax has a module for this.

Step D - Use the K-1 on your 1040.

BTW, trusts have been muchly discussed on this forum as a way to keep marital assets separate.
__________________
Z3Dreamer is offline   Reply With Quote
Old 05-25-2014, 11:20 AM   #9
Recycles dryer sheets
 
Join Date: Apr 2013
Location: Beach and Mountain
Posts: 243
FWIW, I have no license to practice anything. I have left out state filings as your state may not have any. But I think you wanted the highlights. If you are in real doubt as to how to do it, Google or Bing the question.
__________________
Z3Dreamer is offline   Reply With Quote
Old 05-25-2014, 11:40 AM   #10
Thinks s/he gets paid by the post
 
Join Date: Nov 2011
Posts: 2,365
Quote:
Originally Posted by gauss View Post
Thank you for the comments.
I already have a bunch of accounts in DW and/or my name. Adding a few more would just seem to further complicate things.
Putting the assets in a trust would not solve that: you'll still have to add another account (one for the trust). Plus, if your trust gets its own TIN you add the complexity of more tax filings.

A simple trust from an attorney will probably cost about $1000. Suze Orman sells an RLT kit online for much less though I have no idea if it is any good.
__________________
GrayHare is online now   Reply With Quote
Old 05-25-2014, 12:01 PM   #11
Thinks s/he gets paid by the post
 
Join Date: Jan 2006
Posts: 2,930
Seems easier to change your brain/thinking than to do the trust. If the trust is really its own entity, you'll have to file a separate trust tax return. Trusts have much smaller tax brackets so you'll reach higher brackets much faster so depending on your personal situation and the trust status, you might end up paying more in taxes.

Perhaps using a separate bank/broker might help your brain do the separation.
__________________
kaneohe is offline   Reply With Quote
Old 05-25-2014, 12:33 PM   #12
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Apr 2013
Posts: 5,584
Minimually put it in a different account. The trust can be done as you decide what's best.

I got the shock of my life when the state DF passed away in, froze my account because of their estate tax. Five months and counting.
MRG
__________________
MRG is online now   Reply With Quote
Old 05-25-2014, 12:34 PM   #13
Recycles dryer sheets
 
Join Date: May 2008
Location: Treasure Coast
Posts: 339
Quote:
Originally Posted by Z3Dreamer View Post
Step A - Set up trust using legal documents. You say your are a DIY. If so, you can find documents yourself. Please make it a simple trust which distributes income annually. Complex trust does not always distribute and therefore pays tax on income. Get EIN for trust.

Step B - Fund the dern thing and get it going. This is putting the money is an account in the name of the trust.

Step C - Do the annual IRS forms for trusts. I am sure TurboTax has a module for this.

Step D - Use the K-1 on your 1040.

BTW, trusts have been muchly discussed on this forum as a way to keep marital assets separate.
There is no need at all for simple revocable trusts to have a separate TIN and to file separate tax returns.

Having said that, there is also no need for a trust in this situation. Maybe a tad more "separate" than another account, but this will still be another account plus.

Depending upon where you open the account and the types of things you do with the money, doing it inside a trust is usually more complicated.

We have almost all our assets in various trusts for estate planning reasons and it is a little more complicated and getting more so as time goes on. For example, some financial institutions won't open trust accounts online, or they want to see the entire trust document, or they want a medallion signature guarantee, etc.
__________________
45th Birthday is offline   Reply With Quote
Old 05-25-2014, 02:02 PM   #14
Thinks s/he gets paid by the post
mpeirce's Avatar
 
Join Date: Feb 2012
Location: Columbus area
Posts: 1,590
This may or may not be the situation in some of the posts above, but there is a pretty big difference when talking about revocable and non-revocable trusts.

Revocable trusts, like a living trust, aren't usually very complex and don't have much of a tax foot print (before death at least).

Irrevocable trusts take on a life of their own in many ways having to file taxes and comply with more rules than revocable trusts. And, you know, they're irrevocable - that can be a big deal.

I now my DF runs the two together all the time. He's always telling me that one of his friends "set up a trust" and shouldn't he do the same? When I ask him a few questions about what kind of trust, that's never clear.
__________________
mpeirce is online now   Reply With Quote
Old 05-25-2014, 03:35 PM   #15
Full time employment: Posting here.
JakeBrake's Avatar
 
Join Date: Sep 2008
Location: Southeast USA
Posts: 548
When my mother died and I received my inheritance (mid five figure), DW and I gifted most of it equally to our adult children (my mother's grand children) ASAP after the next Christmas. No taxes due. We said nothing about it before then. I don't know what they have done with the money. I didn't ask and they didn't tell. They are very frugal.

I told them to not expect any more until DW and I die.
__________________

__________________
Matthew 6:34 (KJV)
Take therefore no thought for the morrow: for the morrow shall take thought for the things of itself. Sufficient unto the day is the evil thereof.
JakeBrake is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
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


Similar Threads
Thread Thread Starter Forum Replies Last Post
Setting up a Living Trust - Advice, anyone? Seeking Hobbes FIRE and Money 31 07-12-2011 04:11 PM
Setting Up a Trust Dancer373 FIRE and Money 18 03-06-2007 10:43 PM
MOVED: Setting up an offshore company - who can I trust? REWahoo Young Dreamers 0 02-07-2007 06:19 AM

 

 
All times are GMT -6. The time now is 04:02 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.