final wishes dilemma - willing assets to a 13 year old

[workburnout]

How much does a trustee bank (such as Fidelity or Bank of America, etc) charge, typically?
Is it an annual fee or is it paid upon opening the account, or upon death, or both?

The only assets I want to put in the trust are possibly my house (worth under $200k) and $400K of my Roth and non-IRA investments. I want to do this by designating the trust as beneficiary.

I don't want anything done to the trust unless I die which may not happen for 40 or more years.
If there is a large annual fee I'm wondering if it's worth doing.

I've been reading online seeing these huge yearly fees for trustees, and I don't know if that's right or not.

A lot charge a percentage of assets under management. However, if I change what I put in the trust from year to year, as my assets grow or I take some out of the trust, how will they know what to charge?
I often open new accounts to move money around - then want to designate the trust as beneficiary - so would I need to notify the trust each time I open a new account so they can add more fees?

Edit: The attorney said the trust would be a revocable spendthrift trust.

 

[SecondCor521]

^ I think the trustee fees are a percentage of assets, but the fees start when you die, not between now and then. Also, the fees would end when the trust is done, which would be whenever your last payout to your niece happens. If your last payout to your now-13-year-old niece is when she is 40, then if you live another 27 years or so your trust won't be in existence for more than a year or so.

 

[workburnout]

Thanks. If that's the case than it's worth it.

I am anxious to get this done properly.

Just wrote out instructions for the executor for my dogs, so they will know who to call who will take care of them. Several rescue folks I work with would, yet if my executor was not aware of that, they might end up going to the pound! They are trained therapy dogs (for visiting sick kids and hospitals - they are not the kind who are allowed on planes or supermarkets). There are several people who know and love them, who would love to have them. My mother and cousin have not seen them work (no extra visitors or photos are allowed dealing with patients on therapy visits), and are not aware how much they are loved by many other people, not just by me.

So much I need to write out, and my old will has some of it already - but I need to go over it all to be sure it's still correct.

I can't wait to meet with the bank, hopefully tomorrow, to discuss hiring them as a trustee - if fees are reasonable.

I really appreciate this forum, and huge response I've gotten.
It has helped immensely.

 

[CaliKid]

I'd get a living trust, prepared by an experienced estate attorney, name a few (in order) younger licensed professional fiduciaries as trustee, with a bank named last as a back-stop just in case it goes that far. An experienced attorney is key so the language in the trust is customized to make sure your sister, and thus her husband, don't get access.

 

[Katsmeow]

Don't find some form on the internet to create a trust or do your will. Consult with a competent attorney who does that kind of work on a regular basis. I am an attorney myself and I even took Wills and Estates when I was in law school. Even so, when I was getting my own will done I had it done by a lawyer who regularly does that kind of work (I do not) and relied on that advice.

If I was in your situation, I would probably find a bank trustee. There are many situations where I might not want to do that, but the situation you describe is one where a bank trustee would seem to be worth looking at.

That said -- the laws regarding wills and estates and trusts varies from state to state. A good wills and estates lawyer should be able to advise you on this and whether a bank trustee is your best option given your goals and situation. If that lawyer thinks a bank trustee is right for your situation, that lawyer may be able to suggest several bank trustees that he or she recommends. You could then look into each one. There may be other options as well. This is a situation to get right and where you should get advice from someone who actually has expertise in this area in your state.

 

[Elbata]

Yes, I agree, I am willing to pay an attorney if I know they'll do a good job.

Hopefully nothing will happen to me between now and the time I get the trust in place. Doubt it unless it were a freak accident.

I know I may change my mind later when niece is 18 or older, no way of knowing that of course now. Just as, when I did my will a few years ago (when I had fewer assets), I had no way of knowing I'd want to take my sister off the will. I don't hate my sister, I just think she's very misguided with a lot of things, and don't want her having my money.

After an incident last night with my sister at my niece's birthday dinner, it set off a panic in my mind that I must change this now. Several things have been going on over the past few years leading up to this, and I've tried to overlook/ignore many things, but last night was the straw that broke the camel's back. It made me realize how much control my sister has given up over her finances/well being to her husband over the years. I really don't know him well (I have tried to get to know him over the past 10 yrs, but he purposely stays away from most family events and travels often) nor do I trust him based on the little I know about him.

Not how she used to be/feel with her first few years of marriage or her last marriage (to my niece's father long ago), but she's changed. Her choice.

I am really glad this happened, sad and upsetting as it was, so at least I know to make changes, and no longer have my head in the sand about the reality that she should not be on the will or named as beneficiary anymore.

It's appears you're very leery of BIL. Leery enough that you're concerned for your safety when they find out sister is no longer executor or beneficiary?

Be careful, or perhaps I've watched too much "Forensic Files".

 

[brucethebroker]

I would not want any 18 YO to have control of so much money all at once...


I would put in a trust and let them live off of the income of the trust until they reach a certain age, say 30 and let them get half... then the rest after they turn 40.... this will give them some time to get smarter about money...

Years ago I knew an attorney whose parents died when he was 16. He received 1/3 of the estate at age 18. Blew it all. He was to receive another 1/3 upon graduation from college, so he went back to college. The final 1/3 was released at age 30. In his 40's, he said he had spent the early 2/3, but could point out each dollar received at age 30. All had been invested wisely due in part to his earlier poor judgement.

 

[Amethyst]

$1000 sounds like a bargain. We went with the best-known estate law office in our area (also recommended by people we know). We are paying a flat fee of $3600 for wills, MPOA's, DPOA's, detailed end-of-life instructions in accordance with MD law (each state does things a little differently), and multiple meetings with different partners in the firm (they want you to Get To Know Their Team, but of course it's also b/c the principal partner charges more, so they throw junior partners in the mix...fortunately, we've liked the junior partners).

We are going back soon for a 3rd meeting. Each meeting results in some updates/changes to the documents, as we continue reading and thinking through them - as Riane says, it's a thick stack. With hourly fees of $400, I am glad we went with the flat-fee option. I am sure we will be over 9 hours by the time everything is done.

Our living will spells out every thing. The details do not leave question to anything including our death wishes, beneficiaries, power of attorney, medical issues, on and on. It's a pretty thick book.

Word of mouth about the attorney to use was important to us. We asked a lot of people for references. The cost for ours was $1000, but we can rest assure our wishes will be carried out and if one of us is left behind, well that's what a living will is...for the living. Our trustees have copies and know where everything important is.

 

[Dash man]

Paying a bank trustee only occurs if you have them manage your trust, which typically doesn’t happen until you die, or you and a spouse die. It’s also not always wise to transfer your assets into a trust immediately. Get an attorney to help you with that. When we had a lower net worth we had our assets in a joint trust, but now that our assets have grown close to the estate tax threshold, she had us move all our assets to JWROS. Partly because of some law changes and court decisions. Our trust won’t be funded until the first of us dies. We also have a special trust for retirement accounts. You don’t want to intermingle the two. Get a good attorney in your state. Decide on the bank or trust company that will manage the trust after your death. Don’t sign over your assets for them to manage yet. Discuss all this with your lawyer. The trust bank will have some wording they’ll want to see in the trust, but listen to your lawyer first.

 

[45th Birthday]

How much does a trustee bank (such as Fidelity or Bank of America, etc) charge, typically?
Is it an annual fee or is it paid upon opening the account, or upon death, or both?

The only assets I want to put in the trust are possibly my house (worth under $200k) and $400K of my Roth and non-IRA investments. I want to do this by designating the trust as beneficiary.

I don't want anything done to the trust unless I die which may not happen for 40 or more years.
If there is a large annual fee I'm wondering if it's worth doing.

I've been reading online seeing these huge yearly fees for trustees, and I don't know if that's right or not.

A lot charge a percentage of assets under management. However, if I change what I put in the trust from year to year, as my assets grow or I take some out of the trust, how will they know what to charge?
I often open new accounts to move money around - then want to designate the trust as beneficiary - so would I need to notify the trust each time I open a new account so they can add more fees?

Edit: The attorney said the trust would be a revocable spendthrift trust.

As many people have said (self included), you really, really, really need to see an attorney who specializes in estate planning and not rely on SGOTI for this stuff.

 

[OldShooter]

As many people have said (self included), you really, really, really need to see an attorney who specializes in estate planning and not rely on SGOTI for this stuff.

Yes. Yes. Yes.

& do this before you take any action. What you probably want is a testamentary trust. SOGTI sometimes talks about rev trusts (aka "living trusts"), but the need for these is rare. Not as rare as the number of attorneys seeking revenue from selling them, however.

 

[brett]

As others have said, I really think that you need to consult a professional in this matter. Someone whose practice focus is wills and estates. Someone who understands how to satisfy your requirements/wishes within the framework of the applicable legislation where you reside.

As an aside, we do not have this issue. We just updated our wills. We do have an education fund for our grandchildren but we have also willed a large sum to each of them off the top of the estate that is to be used for post secondary education. We will review the number every five years or so given that edu costs are escalating at a faster rate than inflation.

 

[pb4uski]

I found a lawyer experienced who does them, through a referral. She said I need a spendthrift trust. Said I must have a trustee like a company or person. I am contacting Bank of America to see about getting them to be trustee.

I don't know if there are better trustees or what the difference in cost would be if I researched using different banks or credit unions.

If anyone has thoughts on this, let me know.

I think you are on the right track. Get a good lawyer to help with the plan and the documents... and be the executor... and find a good bank trust department to be the trustee when the time comes.

 

[meierlde]

I think you are on the right track. Get a good lawyer to help with the plan and the documents... and be the executor... and find a good bank trust department to be the trustee when the time comes.

If the lawyer is experienced in these matters they should know which local trust departments are best.

 

[pb4uski]

True... good point... I'm just not keen on the lawyer being the trustee.

 

[workburnout]

I've made progress on getting all this set up. I've decided to go ahead and have the trust done which will protect my non-roth assets, and a pourover will will ensure the balance of my estate goes to that trust.

However, I've hit a huge snag because the Roths are not able to name the revocable trust as beneficiary. Instead, I'd need to name the estate as beneficiary of the Roths. Then, per the pourover will, the estate would go to the trust. There is no way the Roth would be kept intact. This is not good because the "stretch" provision allowing my niece to benefit from growth of the Roth over many years would no be followed.

$300,000 of the money I have is in Roth IRAS. I converted my traditional Iras over time for the purpose of having earnings grow tax free.

I did some research on this. It says there are Trustee IRAs, which seem to be a bad idea for my situation, because as I understand, I would not be able to control the money while I'm still alive. Plus, Trustee IRAs generally make sense for IRAS with a lot more money I have due to the high fees to administer every year.

I would not want to set up an irrevocable trust while I'm living, even though there appears a way to do that type trust where I could designate the trust as beneficiary of a Roth, as that would mean I would lose control of the money.

I read about trust IRAS (different from trustee IRAS) but find conflicting information on what is allowed.

It seems that I would likely need two trusts, one for non-IRA assets, the other for IRA assets that need to be set up where the stretch provision can be followed through my niece's lifetime.

Since, the trust I am doing has a provision to give all assets to my niece in 3rds (1/3 at age 25, 33 and 40), it would only work for non-Roth assets (including Roths that had been turned into non-Roth assets).

Has anyone ever set up a revocable IRA trust, which a Roth IRA can name as beneficiary, and get the tax benefits of long term growth?

I asked my attorney and am waiting to hear back.

I thought about all kinds of options - naming my niece as direct beneficiary of the Roths will not work because if I were to die in the next few years, the money would not be managed well and then when my niece turned 18 she could spend what was left to her in one lump sum. I want the money to be stretched to use for many years. By the time she's 18 (she's 13 now) the Roths will be over $600,000 even sitting in index funds as most of it is. If she were in her late 20's or 30's I'd feel better about leaving her as beneficiary directly on the IRAs.

 

[OldShooter]

I've made progress on getting all this set up. I've decided to go ahead and have the trust done which will protect my non-roth assets, and a pourover will will ensure the balance of my estate goes to that trust.

However, I've hit a huge snag because the Roths are not able to name the revocable trust as beneficiary. ...

Sounds like you're making huge progress. Congratulations.

Re the Roths, here is something from the IRS: "A beneficiary can be any person or entity the owner chooses to receive the benefits of a retirement account or an IRA after he or she dies." (https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-beneficiary)

IANAL, but I am guessing that you may have run into a restriction that is home-made by your custodian. Maybe you can find a custodian who does not have this restriction.

Custodians often have home-made rules for one reason or another. I used to buy private placements with IRA $$ but it became increasingly difficult to find custodians that would take them. The last one I had at Schwab was the end of the line there as they changed their rules.

 

[workburnout]

My attorney emailed back and said she would be able to set up a 2nd trust for the Roths, however she did not think it was necessary because my main goal was already accomplished with the first trust.

The only negative I see about not doing the 2nd trust, is there is no way to keep the money in Roths using the first trust - since I want it set up as a "spendthrift" trust - it's set up to pay 3x during my niece's life. The Roth could not be put into that same trust as a Roth (would need to be made a regular brokerage account), since if kept a Roth it would need to be set up to pay equal installments over the beneficiary's lifespan.

As I understand it, a trust could not do both those things. Or even I'm wrong and if it could, it would be very complex and cost a lot more than getting two trusts. If I were going to do this, it'd make more sense to draw up two trusts.

I don't know, maybe I will just keep the one trust, knowing that if I died soon my Roth would be turned into a brokerage account.
The taxes I paid to get that much from my non-roths to my roths was a lot - and not worth it if I die soon since growth (and tax savings) is not as much as it would be over time.

I guess it's a gamble no matter what.
If I had not had the trust at all, the money would likely be mismanaged and spent either by my sister/her husband or niece in her 20's. If I get a ROTH trust I will have to find a custodian who will allow a transfer directly to it - and I like to move money around to get the bonus offers with different places now and then.

I don't know, I'd be interested to hear more comments if anyone has any ideas I didn't think about.

 

[Dash man]

I've made progress on getting all this set up. I've decided to go ahead and have the trust done which will protect my non-roth assets, and a pourover will will ensure the balance of my estate goes to that trust.

However, I've hit a huge snag because the Roths are not able to name the revocable trust as beneficiary. Instead, I'd need to name the estate as beneficiary of the Roths. Then, per the pourover will, the estate would go to the trust. There is no way the Roth would be kept intact. This is not good because the "stretch" provision allowing my niece to benefit from growth of the Roth over many years would no be followed.

$300,000 of the money I have is in Roth IRAS. I converted my traditional Iras over time for the purpose of having earnings grow tax free.

I did some research on this. It says there are Trustee IRAs, which seem to be a bad idea for my situation, because as I understand, I would not be able to control the money while I'm still alive. Plus, Trustee IRAs generally make sense for IRAS with a lot more money I have due to the high fees to administer every year.

I would not want to set up an irrevocable trust while I'm living, even though there appears a way to do that type trust where I could designate the trust as beneficiary of a Roth, as that would mean I would lose control of the money.

I read about trust IRAS (different from trustee IRAS) but find conflicting information on what is allowed.

It seems that I would likely need two trusts, one for non-IRA assets, the other for IRA assets that need to be set up where the stretch provision can be followed through my niece's lifetime.

Since, the trust I am doing has a provision to give all assets to my niece in 3rds (1/3 at age 25, 33 and 40), it would only work for non-Roth assets (including Roths that had been turned into non-Roth assets).

Has anyone ever set up a revocable IRA trust, which a Roth IRA can name as beneficiary, and get the tax benefits of long term growth?

I asked my attorney and am waiting to hear back.

I thought about all kinds of options - naming my niece as direct beneficiary of the Roths will not work because if I were to die in the next few years, the money would not be managed well and then when my niece turned 18 she could spend what was left to her in one lump sum. I want the money to be stretched to use for many years. By the time she's 18 (she's 13 now) the Roths will be over $600,000 even sitting in index funds as most of it is. If she were in her late 20's or 30's I'd feel better about leaving her as beneficiary directly on the IRAs.

Setting up an IRA Trust will allow the assets to be protected from creditors and any potential future divorce settlement. You need to keep your retirement assets separate from your other assets. They can’t be intermingled in the same Trust. The IRA Trust can be used as a contingent beneficiary, unless your financial institution has some reason to not allow it. A good reason to move the funds. We’ve done it with USAA and Fidelity.

 

[workburnout]

Setting up an IRA Trust will allow the assets to be protected from creditors and any potential future divorce settlement. You need to keep your retirement assets separate from your other assets. They can’t be intermingled in the same Trust. The IRA Trust can be used as a contingent beneficiary, unless your financial institution has some reason to not allow it. A good reason to move the funds. We’ve done it with USAA and Fidelity.

That's good to know, that IRA and non-IRA must be in a separate trust.
My lawyer had made it seem that was the case, but I was not sure if maybe it could still be done somehow in one trust.

If I thought I had a good chance of dying in the next 15-20 years or sooner, I would defiantly get the 2nd trust for the IRA, but to pay to have that done I'm not sure -with the small risk I'll die in that timeframe - if it's worth it.

I'm in good health in my 40's and my family members tend to live a long time. A lot of my family members get Alzheimer's in their 70's or 80's so I may get that, but I plan to revoke the trust and leave everything outright to my niece, so long as she's responsible, when I'm in my late 50's or early 60's.

Doing a 2nd trust for the IRA to stay intact would be kind of like buying more extra insurance, that I'm unlikely to use.

I'll think about it, maybe will decide it's worth it especially as my Roth assets grow in a few years. Then who knows, my sister may not even be with the same husband, so at that point I would not worry about her/her husband trying to use part of her daughter's inheritance to do a house project or buy extra real estate her husband would want. My sister on her own would not take her daughter's inheritance (or talk her daughter into giving her some of it), unless it were due to influence by her husband saying to her that her daughter would eventually get it anyway - which he could if my sister happened to die before he did.

Then he'd have money I earned which would be wrong, my niece would have to ask him for it and he may give her some but I doubt he'd give all to her.

I'm leaning towards thinking about it and not setting the Roth trust up for now. If something happened where I got sick knowing I'd maybe die soon, then I'd defiantly set the 2nd trust up.

 

[Dash man]

That's good to know, that IRA and non-IRA must be in a separate trust.

My lawyer had made it seem that was the case, but I was not sure if maybe it could still be done somehow in one trust.



If I thought I had a good chance of dying in the next 15-20 years or sooner, I would defiantly get the 2nd trust for the IRA, but to pay to have that done I'm not sure -with the small risk I'll die in that timeframe - if it's worth it.



I'm in good health in my 40's and my family members tend to live a long time. A lot of my family members get Alzheimer's in their 70's or 80's so I may get that, but I plan to revoke the trust and leave everything outright to my niece, so long as she's responsible, when I'm in my late 50's or early 60's.



Doing a 2nd trust for the IRA to stay intact would be kind of like buying more extra insurance, that I'm unlikely to use.



I'll think about it, maybe will decide it's worth it especially as my Roth assets grow in a few years. Then who knows, my sister may not even be with the same husband, so at that point I would not worry about her/her husband trying to use part of her daughter's inheritance to do a house project or buy extra real estate her husband would want. My sister on her own would not take her daughter's inheritance (or talk her daughter into giving her some of it), unless it were due to influence by her husband saying to her that her daughter would eventually get it anyway - which he could if my sister happened to die before he did.



Then he'd have money I earned which would be wrong, my niece would have to ask him for it and he may give her some but I doubt he'd give all to her.



I'm leaning towards thinking about it and not setting the Roth trust up for now. If something happened where I got sick knowing I'd maybe die soon, then I'd defiantly set the 2nd trust up.

Did you ask your attorney how much an IRA Trust would cost to set up? We had three trusts set up as a package including Durable POAs, Pour over Wills and Medical Directives for $3500. None of the trusts will be funded until the first of us dies.

 

[workburnout]

Did you ask your attorney how much an IRA Trust would cost to set up? We had three trusts set up as a package including Durable POAs, Pour over Wills and Medical Directives for $3500. None of the trusts will be funded until the first of us dies.

It's $750 more for an IRA trust in addition to the trust I'm doing already. However, the fees Fidelity will charge to be trustee for the 2nd trust (if I die) will be a factor due to the relatively low amount in the amount in IRAs.

I decided to leave $100K of the IRA money to a friend because without him I would not have been able to do as well in my career - way back when he helped me with some serious work issues. I would have far less money than I do now had it not been for his help dealing with some political and legal issues at work in the niche industry I'm in- very long story.

He is a good person and involved in worthy charities and I know he'd do good with the money. However, I am very likely to outlive him due to age. I did not tell him I'm leaving him this much if I were to die before him - I told him I was doing some planning and redoing my will, and that I'd leave him a little something if I were to die before him but I did not go into detail.

So if I were to die soon by some accident, I would have $200K in IRAs that would go into the trust. Fidelity charges a min. of $3500 per year per trust or about 1.2 percent or less depending on dollar amount. Plus fees to file taxes on the trust, and some other fees.

It is defiantly worth it to have the one trust, in my situation.

I guess what I'll do is leave things how they are with the one trust - but in a few years as that IRA balance grows, maybe reconsider setting up the IRA trust. If my older friend who I'm leaving $100K to passes away, that would be another reason to reconsider, as it would increase the IRA amount I have to $300,000 plus any growth.

As my niece gets older - say 22 or 23 depending on her maturity level- I plan to change the beneficiary of a portion of the IRA money currently left to the estate to her - maybe $50,000 or so - then when she's say 26 or so (depending on what I think is best at the time - if she's responsible or not) change it to $100K. After she's 30 or so, maybe change the IRA beneficiaries all directly to her.

Of course if for some reason she turns out bad/irresponsible I may rethink all this - but as of now at age 13 she's so far turned out very well. Especially considering her family environment which is not horrible, but not the best.

I do have notes (guidelines/recommendations to follow for funeral, where to find my financial info, contact info for people to care for my dogs, etc for the executor) attached to my will. After my niece is older - say 22 or 25 or so- after I change the beneficiary on some of the IRA money directly to her, I will put in those notes that she should consider keeping the IRA in a separate account using the stretch provision, and I will print charts out to show the growth she'd have gained - or lost if she didn't do that. So she can make an informed decision. She could do her own research of course, but it would not hurt for me to put it in the notes. It will be up to her if she wants to stretch it out, or spend the money all at once. At least my written advice will give her something to think about.

As of now I think since it's only $200,000, I'll leave it to the trust I have now even though it will lose the stretch provision since it will be cashed out if I were to die soon, and put into the trust to be given to her in 1/3s at 3 ages ending at age 40.

At least it's now a lot better than it was - because I had my will giving my sister everything and some would have gone to my niece - some would have gone to her husband - they would have blown so much of it as it was set up.

 

[Dash man]

So if I were to die soon by some accident, I would have $200K in IRAs that would go into the trust. Fidelity charges a min. of $3500 per year per trust or about 1.2 percent or less depending on dollar amount. Plus fees to file taxes on the trust, and some other fees.

FYI, you can avoid the fees on filing taxes and the high Trust tax rates simply by instructing all income be paid out of the trust as it is earned. They then just pay ordinary taxes on the income.

(Edit) of course an IRA Trust is tax deferred just like any IRA is. Taxes paid only when paid out at ordinary rates unless a Roth.

 

[omni550]

I do have notes (guidelines/recommendations to follow for funeral, where to find my financial info, contact info for people to care for my dogs, etc for the executor) attached to my will.

You may wish to have your wishes for your funeral, dogs, etc. entrusted to someone(s) who can take action promptly as those matters (esp. funeral/burial) need to be handled quickly upon your passing...whereas a will is sometimes (often?) handled at a more leisurely pace (in spite of what you may have seen in the movies. LOL)

omni

 

[Dash man]

You may wish to have your wishes for your funeral, dogs, etc. entrusted to someone(s) who can take action promptly as those matters (esp. funeral/burial) need to be handled quickly upon your passing...whereas a will is sometimes (often?) handled at a more leisurely pace (in spite of what you may have seen in the movies. LOL)

omni

Agreed. We preplanned and paid for our funeral expenses and keep the contact information in our trust book, along with cards in our wallet. We just need to write some personal letters to our family members.