Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Time to Re-swizzle the Beneficiaries?
Old 08-13-2013, 07:36 PM   #1
Thinks s/he gets paid by the post
sengsational's Avatar
 
Join Date: Oct 2010
Posts: 3,844
Time to Re-swizzle the Beneficiaries?

This only applies in the rare case that DW and I meet our demise at the same time since we are each other's best friend (and primary beneficiary).

Right now, the secondaries are our fathers (both with the understanding the money would be to benefit our two kids), but our youngest just turned 18, so it seems like we could go in and put the kids on there as secondaries. Our fathers are trustworthy and have plenty of their own money, but they ain't as young as they used to be.

So what am I missing here? Any reasons why this would be a dumb idea? The older one is super in control (albeit still in college, but shows lots of responsibility). The young one? Well, lets just say I'm glad she listens to her older sister :-)

Actually, the chance of this ever making a difference is vanishingly small...the chance of us both cashing in at the same time is really tiny, but we might as well get it right.
__________________

__________________
sengsational 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 08-13-2013, 08:00 PM   #2
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jun 2005
Posts: 8,626
I thought that it was more typical that children would be the beneficiaries via a trust controlled by a trustee (usually a relative or two) until they reached a certain age such as 21, 25, 35, or whatever. And the trust could release assets at various ages, too, so that the kid doesn't get all the money at once.

As for trustees, they could be a relative or a pair of relatives AND if the children are minors, the guardians for the kids would NOT have to be the trustee.

Example from my will: Assets go into trusts for the kids. Guardians are my sister and trustee is my sister-in-law (they get along well). Kids gets control at age 25.
__________________

__________________
LOL! is offline   Reply With Quote
Old 08-13-2013, 10:08 PM   #3
Thinks s/he gets paid by the post
MooreBonds's Avatar
 
Join Date: Aug 2004
Location: St. Louis
Posts: 2,091
Quote:
Originally Posted by sengsational View Post
This only applies in the rare case that DW and I meet our demise at the same time since we are each other's best friend (and primary beneficiary).

Right now, the secondaries are our fathers (both with the understanding the money would be to benefit our two kids), but our youngest just turned 18, so it seems like we could go in and put the kids on there as secondaries. Our fathers are trustworthy and have plenty of their own money, but they ain't as young as they used to be.

So what am I missing here? Any reasons why this would be a dumb idea? The older one is super in control (albeit still in college, but shows lots of responsibility). The young one? Well, lets just say I'm glad she listens to her older sister :-)

Actually, the chance of this ever making a difference is vanishingly small...the chance of us both cashing in at the same time is really tiny, but we might as well get it right.
Worst-case scenario: you and DW pass on at the same time while both daughters are in college. Your fathers' inherit the money. How is college paid for? Is anything more than $13k/year from each grandfather considered a 'gift' to your daughter and subject to the gift tax? I suppose they could cut each of your daughters checks for $50k each year to pay for tuition and some living expenses, and just file gift tax returns to use up part of your fathers' estate tax exemptions.

But, as others have mentioned, I would expect it would be FAR better to have a simple revocable trust set up, with your and DW's fathers' set up as trustees, and have your daughters be the beneficiaries. That way, no messy potential gift tax issues on your fathers' distributing money to your daughters. Also, legally, it's cleaner to have a trust set up to own the assets and have daughters as beneficiaries (especially if your fathers' estates already are close to the $5M federal estate tax deduction, but also if they live in states that have a much lower state estate tax deduction limit).
__________________
Dryer sheets Schmyer sheets
MooreBonds is offline   Reply With Quote
Old 08-13-2013, 10:32 PM   #4
Thinks s/he gets paid by the post
 
Join Date: Nov 2011
Posts: 2,369
Note that if these are retirement assets (IRA, 401k) they cannot be put into a trust since the necessary retitling would invalidate their special tax treatment as retirement assets.
__________________
GrayHare is offline   Reply With Quote
Old 08-13-2013, 11:52 PM   #5
Thinks s/he gets paid by the post
MasterBlaster's Avatar
 
Join Date: Jun 2005
Posts: 4,359
Quote:
Originally Posted by GrayHare View Post
Note that if these are retirement assets (IRA, 401k) they cannot be put into a trust since the necessary retitling would invalidate their special tax treatment as retirement assets.
Qualified assets like IRA's and401k's pass directly to your desginated benificiaries outside of probate. No trust is needed or required for such. Their special tax status can, in mnay cases be maintained by the benificiary subject to IRS rules.
__________________
MasterBlaster is offline   Reply With Quote
Old 08-14-2013, 10:48 AM   #6
Thinks s/he gets paid by the post
sengsational's Avatar
 
Join Date: Oct 2010
Posts: 3,844
Thanks for the discussion so far, but it sort of seems the main question (if making the two daughters, now that they are both 18 or more, into secondary beneficiaries to replace the fathers) was lost in the shuffle.
__________________
sengsational is offline   Reply With Quote
Old 08-14-2013, 10:55 AM   #7
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jun 2005
Posts: 8,626
I discussed this with my 17 and 21 year-old at dinner last night. I told them I did not trust them with inheriting any money because they had not exhibited enough maturity in their own finances. So I told them they would have an aunt controlling the money until they were older. I asked them how old they thought they should be before they would get control.

What did you tell your daughters?

BTW, the kids have ALWAYS been secondary beneficiaries after my spouse. I think it is a bad idea to have one or more parent(s) the beneficiary unless one is childless and has no siblings.
__________________
LOL! is offline   Reply With Quote
Old 08-14-2013, 10:57 AM   #8
Thinks s/he gets paid by the post
 
Join Date: Nov 2011
Posts: 2,369
Well, posters have indicated it can be dumb to give a young person a heap of money before he or she has established his or her own earnings. Next, options were mentioned: a trust for non-retirement assets. Retirement accounts are problematic since they cannot be put in trust.
__________________
GrayHare is offline   Reply With Quote
Old 08-14-2013, 11:18 AM   #9
Thinks s/he gets paid by the post
sengsational's Avatar
 
Join Date: Oct 2010
Posts: 3,844
Quote:
Originally Posted by LOL! View Post
I discussed this with my 17 and 21 year-old at dinner last night. I told them I did not trust them with inheriting any money because they had not exhibited enough maturity in their own finances. So I told them they would have an aunt controlling the money until they were older. I asked them how old they thought they should be before they would get control.

What did you tell your daughters?

BTW, the kids have ALWAYS been secondary beneficiaries after my spouse. I think it is a bad idea to have one or more parent(s) the beneficiary unless one is childless and has no siblings.
I told my daughters that they would have to knock us both off at the same time and get away with it in order to get the money, hehe. Seriously, I told them (while their grandfather was there), that if DW and I went down in a plane together that my dad would have our savings for their benefit.

Quote:
Originally Posted by GrayHare View Post
Well, posters have indicated it can be dumb to give a young person a heap of money before he or she has established his or her own earnings. Next, options were mentioned: a trust for non-retirement assets. Retirement accounts are problematic since they cannot be put in trust.
I agree, but if they blow the money and I'm not around to see it, I'm ok with it

But I didn't think I could put a minor as a beneficiary! That was an implied starting point that maybe wasn't valid? The whole idea was ... now that they are both adults, I can skirt the whole bunch of complexity and gift tax issues by just cutting out the middle men (the grandfathers). Not sure I would have put the under aged kids as secondaries anyway, even if it was allowed. But are you sure that's allowed?
__________________
sengsational is offline   Reply With Quote
Old 08-14-2013, 12:13 PM   #10
Recycles dryer sheets
 
Join Date: Jan 2013
Posts: 144
I have a minor child as a beneficiary. Was told it was fine to do. She is beneficiary for several accounts at different institutions.
__________________
Sarah S is offline   Reply With Quote
Old 08-14-2013, 12:40 PM   #11
Thinks s/he gets paid by the post
 
Join Date: Jan 2006
Posts: 2,933
Quote:
Originally Posted by GrayHare View Post
Note that if these are retirement assets (IRA, 401k) they cannot be put into a trust since the necessary retitling would invalidate their special tax treatment as retirement assets.
Apparently there are special trusts that can continue to stretch IRAs (and I assume 401Ks, converted to IRA if necessary). They must be carefully written and must not contain non-persons (charities/estates) as potential beneficiaries). How to Stretch Out an IRA
__________________
kaneohe is offline   Reply With Quote
Old 08-14-2013, 12:44 PM   #12
Thinks s/he gets paid by the post
 
Join Date: Jan 2006
Posts: 2,933
I agree w/ those who suggest a trust for the beneficaries might be a better idea than bequests to parents , even if they are completely trustworthy. There is a risk that your plans might go awry if the parents pass away..............what do their wills/trusts say will happen w/ their assets............(your former assets)........maybe only a portion or maybe none might go to your kids. Or suppose they get into an accident and are liable for damages and have to declare bankruptcy?
__________________
kaneohe is offline   Reply With Quote
Old 08-14-2013, 12:48 PM   #13
Recycles dryer sheets
Hopeful's Avatar
 
Join Date: Aug 2013
Posts: 110
Quote:
Originally Posted by kaneohe View Post
I agree w/ those who suggest a trust for the beneficaries might be a better idea than bequests to parents , even if they are completely trustworthy. There is a risk that your plans might go awry if the parents pass away..............what do their wills/trusts say will happen w/ their assets............(your former assets)........maybe only a portion or maybe none might go to your kids. Or suppose they get into an accident and are liable for damages and have to declare bankruptcy?
+1 I agree
__________________
Hopeful is offline   Reply With Quote
Old 08-14-2013, 05:43 PM   #14
Recycles dryer sheets
 
Join Date: Apr 2010
Posts: 269
All my accounts go to a trust for the benefit of my minor children (if my wife pre-deceases). I have not looked into whether my kids will qualify for a stretch IRA treatment, and while it would be beneficial, its more important to me that they don't come into all the cash at 18. I wouldn't pay it up to my parents, as though they could be well intentioned, their potential nursing home admin may not be.
__________________
Sesq is offline   Reply With Quote
Old 08-14-2013, 05:58 PM   #15
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jun 2005
Posts: 8,626
Stretching an inherited IRA is rather trivial and a trust is not needed to do that. One just cannot screw up some things early on and must take RMDs every year if one did not inherit from a spouse.
__________________
LOL! is offline   Reply With Quote
Old 08-14-2013, 07:12 PM   #16
Thinks s/he gets paid by the post
 
Join Date: Jan 2006
Posts: 2,933
Probably the trust was suggested, not because it was necessary for the stretch, but to prevent the young adults from blowing their inheritance all at once.
__________________
kaneohe is offline   Reply With Quote
Old 08-15-2013, 11:10 AM   #17
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Apr 2013
Posts: 5,594
Whatever you do get you children on the will/trust. If you fear a child not being able to handle the money, then delaying/limited access might be the way to go.

No matter how the elders are today sometimes things change for elders. I know, my 95 year old father with severe dementia just disinherited my sister and myself, he can't even tell us why.

According to his attoury 'he had times of lucidity'.

Sound mind my a€€.

MRG
__________________

__________________
MRG is online now   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


 

 
All times are GMT -6. The time now is 07:01 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.