final wishes dilemma - willing assets to a 13 year old

[workburnout]

Sorry this is a little long and I'd greatly appreciate any helpful advice.

I'm never married, no kids, have $600,000 assets (mostly investment accounts, both IRA and non-IRA) including house almost paid off. I live frugally and am earning and saving a lot, so those assets are quickly increasing. I'm in my 40's, do not wish to marry or have kids, and likely to live to be in my 80's or older, though there's no guarantee of course.

Currently, I have a will leaving almost everything to my sister, a little to my niece (in care of my sister who is her mother), and a small amount to charity. My sister is named executor.

Now, I need to change the will, to leave around 95% of of my assets to my niece who is only 13 years old at this time. I will leave around 5% to a local charity I volunteer with. I am in GA.

Ignore next 2 paragraphs if you want the shorter version -

I want to make sure my niece's mother (my sister) does not get my assets, because that would mean her husband would get them and squander them. My sister and I used to get along ok, until she started allowing her current husband to take more control and be disrespectful to me. It's nothing I did. He likes her to go along with whatever he wants, and has gotten more controlling of her the past 10 years they've been married. It is very sad but her choice to be with him. I sure don't try to interfere - I never have interfered - as it is her business and her choice. Part of her problem is she relies on him for their lifestyle - she works but it's not enough to live the lifestyle they want (middle class with lots of travel) without his job and income. Long sad story, but it is not going to change anytime soon.

Although my sister would be likely to give anything I left to her daughter (once her daughter turns 18) per my wishes, her husband (not my niece's real father) would try to get his hands on it and my sister would acquiesce to his wishes. He'd talk to her, until she agreed with him, and she'd end up taking the money that was supposed to go to my niece (if not yet 18) then he'd get it and spend it. Even if she did not have her current husband, she is a bit of a sociopath, and I don't say that lightly. She really is, yet I understand why due to the way she grew up - and I was still going to leave her my assets until things changed with her husband becoming more controlling.

In order to ensure my money upon death is handled correctly, I can do one of 3 things:

1. Change the beneficiaries on my investments from my sister to 13 yr old niece on all my investment accounts, and keep the will, leaving almost everything to my sister, as it is now. That would mean my sister would get control of my assets if I die in the next 5 yrs, since my niece is not 18. Not what I want. Then, in 5 years (if I'm still here which I expect to be), when niece is 18, I could do a trust and make her the executor of her own trust. The trust could give niece a certain amount of money at certain ages (some at 18, some at 25, etc).

Option 2. Get a trust done now, and name niece in everything, other than small donation to charity. The problem with that is I do not know who I'd name the executor. I don't have much family I trust, and have friends but feel awkward asking them to do that. The one close friend I have probably will not live that long, and the other friends I have we never have been close enough to discuss things like this.

Option 3. Re-do the will when niece becomes 18, leaving everything to her other than small amounts to charity. Still put her name as beneficiary on all investment accounts now, and hope I live 'til she turns 18.

What other options do I have, to ensure my niece gets all my assets, preferably not all at once when she turns 18? Ideally I'd want to spread it out over her life until she's maybe 35 or so. Likely, I will live a while and keep investing, so it will be far more than what it is now.

I really don't think I'll die soon but things happen. I wish I had more close family I could trust but unfortunately I don't. My family is full of twisted selfish people - always has been ever since I remember- and the last thing I want is for most of them to get my hard -earned money after I die. In fact, if my niece turns out to grow up to have the same negative qualities many people in my family have, I am going to end up switching my will or trust to give it all to charity. But for now, I plan to give it all to her.

[GalaxyBoy]

Consult with an attorney who specializes in estates. DW and I did and it was well worth the cost.

Although my DB is our executor the attorney said they sometimes do it. Either way it’s customary to pay an executor a percentage of the estate even if it’s a family member. I am currently executing my DF’s estate and it’s a lot of work even in my case, which is fairly straightforward.

You’ll save the heirs a lot of hassle and money by making as many accounts transfer-on-death as possible.

[euro]

Quote:

Originally Posted by GalaxyBoy Consult with an attorney who specializes in estates. DW and I did and it was well worth the cost. Although my DB is our executor the attorney said they sometimes do it. Either way it’s customary to pay an executor a percentage of the estate even if it’s a family member. I am currently executing my DF’s estate and it’s a lot of work even in my case, which is fairly straightforward. You’ll save the heirs a lot of hassle and money by making as many accounts transfer-on-death as possible.

As GalaxyBoy says, you can have an attorney or someone even a bank put as trustee. It's not normally considered the first choice, but in your situation, it may well the the best path. My SIL and her husband set things up that way (they picked Bank of America, but there are many other choices) for their daughter (for reasons not relevant here) and it looks like it worked out well for the daughter (parents, sadly, both died before daughter was 18).

[gayl]

Quote:

Originally Posted by GalaxyBoy Consult with an attorney who specializes in estates.

+1

[Bamaman]

There are many life events where new wills are in order. The main thing is that you call all the shots according to your wishes. A trust is certainly in order, and they can be complicated processes. See an attorney.

My 29 year old daughter is very unreliable. Her half brother and sister are getting 100% of IRA rollovers. A Special Needs Trust will pay only her basic needs until it is liquidated and split between her kids. Our daughter has already spent her inheritance.

As your 13 year old niece gets closer to adulthood, you may need to change your will and/or trust fund. Hopefully she will be a responsible adult and a good steward of what's been provided.

[SecondCor521]

At least where I live, you can have a testamentary trust, which is just a trust that is established through the mechanism of a will.

So what you can do is write your will as follows:

1. Your net estate is the total of all your investments minus your liabilities, including any final expenses (burial, taxes).
2. 5% of your net estate bequeathed to charity X.
3. The remainder into a testamentary trust for the benefit of Niece. Trust to be administered by bank Y. Payouts from trust for education and medical expenses to be reimbursed to Niece until age 25. 1/3 of remainder to be paid out at 30. 1/2 of remainder to be paid out at 35. Balance to be paid out at 40.

I do not know for certain what happens if you list your niece as a direct beneficiary on an account and you die before she gets to age 18. I *think* that the courts will automatically put it into a trust, but I don't know how a trustee would be chosen for that asset. You could put a statement in your will to indicate that you want such assets (like your IRA) to be managed by the same trustee as your other assets, but I don't know if that's binding on anything.

[workburnout]

It had not occurred to me that I could hire an attorney who could be the executor. I thought it had to be a close friend or family member.

That is what I will do. I must find one first - I know some attorneys I hired for work purposes in the past - however they don't specialize in estate planning. I will ask one for a referral, and I guess I'll search online if I can't get a good referral from anyone I know.

I want to find an attorney who does estates often, not just now and then. It will be worth paying for, for peace of mind.

I'm hoping my 13 yr old niece will turn out to be a good person, and stable. As of now she seems to be, but who knows until she gets older if that will last. We have a lot of mental illness in our family, and some very dysfunctional family units. It's been that way for generations and I really think genetics plays a huge part. That's a big part of why I decided not to have kids, not wanting to pass that "craziness", causing a lot of mental anguish, along with my genes. My sister felt the same way I did, she was never having kids. She got pregnant by accidentally forgetting her birth control - 13 yrs ago - or she'd never have had one. My sister has been a good mom, overall, despite it all. I am happy my niece is around as I'd love to give her my inheritance. Otherwise I don't know what I'd do - maybe give all to charity.

If she is not responsible as she gets older, I will change the plan. As of now leaving it to her is the best option and I'm comfortable with it.

I have saved from my 20's from a time when I had nothing and was in debt. It is a lot of work earning and investing so I want it to go towards doing some good in the world after I'm gone. Not all be wasted.

[workburnout]

Quote:

Originally Posted by SecondCor521 At least where I live, you can have a testamentary trust, which is just a trust that is established through the mechanism of a will. So what you can do is write your will as follows: 1. Your net estate is the total of all your investments minus your liabilities, including any final expenses (burial, taxes). 2. 5% of your net estate bequeathed to charity X. 3. The remainder into a testamentary trust for the benefit of Niece. Trust to be administered by bank Y. Payouts from trust for education and medical expenses to be reimbursed to Niece until age 25. 1/3 of remainder to be paid out at 30. 1/2 of remainder to be paid out at 35. Balance to be paid out at 40. I do not know for certain what happens if you list your niece as a direct beneficiary on an account and you die before she gets to age 18. I *think* that the courts will automatically put it into a trust, but I don't know how a trustee would be chosen for that asset. You could put a statement in your will to indicate that you want such assets (like your IRA) to be managed by the same trustee as your other assets, but I don't know if that's binding on anything.

I had not heard of that - putting a trust in a will. Seems like a good idea.

I was under the impression if a minor inherited an IRA, a parent would be in charge. That could mean her mother (my sister) or her father (who she is in touch with regularly) who seems responsible now though he was jailed several years ago for distribution of narcotics. I think he's a lot more responsible now but honestly I don't know him that well - I see him a few times a year at family events and he seems ok.

I could see my sister having good intentions, but then her husband talking her into wasting the money for my niece's supposed benefit. Or, it could turn out bad if they divorced (which I can see happening one day - though not anytime soon) and he'd gotten the money in a joint account. Too many unknowns leaving it up to chance.

I will feel so much better if I have this taken care of. Ideally I'd find an attorney I could use long term, maybe every few years make a few changes to the trust as needed, for the rest of my life - even if that's 40-50 years or more.

[GalaxyBoy]

The attorney we consulted does nothing but estates. They even told me they review the obituaries every day looking for clients’ deaths. I’m sure you should find one in your area.

[meierlde]

Putting a trust in a will used to happen in the case of spouses before the federal tax exemption was allowed to be shared, to enable the use of the full exemption instead of passing everything to the surviving spouse, and loosing the exemption. Essentailly up to the limit of the tax exemption was put into a trust for the spouse to go to a third party eventually, so that a second estate tax bite was not put on it.

[Texas Proud]

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...

The lawyer will add language that would allow them to get principal if need for health etc. if you want.... or you can add some language that would pay some amount for college... but neither are required...

[donheff]

Quote:

Originally Posted by SecondCor521 At least where I live, you can have a testamentary trust, which is just a trust that is established through the mechanism of a will. So what you can do is write your will as follows: 1. Your net estate is the total of all your investments minus your liabilities, including any final expenses (burial, taxes). 2. 5% of your net estate bequeathed to charity X. 3. The remainder into a testamentary trust for the benefit of Niece. Trust to be administered by bank Y. Payouts from trust for education and medical expenses to be reimbursed to Niece until age 25. 1/3 of remainder to be paid out at 30. 1/2 of remainder to be paid out at 35. Balance to be paid out at 40. I do not know for certain what happens if you list your niece as a direct beneficiary on an account and you die before she gets to age 18. I *think* that the courts will automatically put it into a trust, but I don't know how a trustee would be chosen for that asset. You could put a statement in your will to indicate that you want such assets (like your IRA) to be managed by the same trustee as your other assets, but I don't know if that's binding on anything.

Never heard of this precise approach but I was going to recommend a trust that implements the principles outlined in 2ndCor's #3. That is basically what DW and I did with respect to our own kids when they were young (although with a trusted family member as executor and some more flexibility for them). I wanted to protect the kids from others until they were of age and from themselves for a while afterwords. We still use trusts now but the kids (42 and 31) get full access.

[45th Birthday]

Quote:

Originally Posted by workburnout It had not occurred to me that I could hire an attorney who could be the executor. I thought it had to be a close friend or family member. That is what I will do. I must find one first - I know some attorneys I hired for work purposes in the past - however they don't specialize in estate planning. I will ask one for a referral, and I guess I'll search online if I can't get a good referral from anyone I know.

I would be careful about using an attorney as trustee of the trust you create. I have heard horror stories about the high fees and dubious/questionable practices of some. I would look into something like Fidelity Personal Trust Services. Lower cost, and competent professional management.

Definitely find an estate planning attorney to help you set it up though.

[JustCurious]

I want to point out something about which most people do not understand...the designated beneficiaries on your accounts (IRAs, investment accounts, bank accounts, etc) will control who gets those accounts when you die regardless of whether you have a will, and regardless of what you will says even if you have a will. I point this out because it seems to me that many people do not understand this and it has caused issues.

[Senator]

You can buy a college scholarship in her name. Only she can get at the money, and only if she goes to college.

You can let her know what you are giving her. She will press her mom to get it.

You can set up a Trust that distributes the money, and have your sister, or a lawyer (Fidelity), do the distributing.

Anything not named in a beneficiary or in a will, i.e. personal things, will go to the States default will. Cars, boats, firearms, etc. there are a lot of things that some people will want. Be sure to list everything, or have a default clause.

Put vehicles in her name.

[OldShooter]

@workburnout, lots of good advice here. I'll just add a few comments:

1) From your posts, I think you may be confusing the roles of executor and trustee. The executor gathers your assets after death and disposes of them according to the wishes expressed in your will. It is a realtively short-term role. A trustee is someone different who has a long term role in managing and distributing assets that are placed in a trust. It would be unusual for the executor and the trustee to be the same person.

2) @SecondCor521's post is excellent. We also have trusts for our two sons and they are somewhat similar. You should understand, though, that the trust can be authorized to do/pay for pretty much anything you want. For example, you could authorize the trustee to pay for painting your niece's house only if she painted in a black and white checkerboard pattern. Obviously rediculous, but the point is that you can be as ceative as you like.

One standard trust instruction is call the "HEMS standard." The trustee is authorized to disburse funds for the beneficiary's Health, Education, Maintenance, and Support. This approach gives the trustee great flexibility in deciding what is appropriate as situations change. Generally, flexibility is a good idea. For example, if your niece becomes disabled and is getting government support, simply giving her money on a schedule will be exactly like giving it to the government.

3) As @JustCurious points out, IRAs are special animals. Your expert trusts & estates attorney can tell you how to designate the beneficiary to accomplish your goals. There are tax issues, too. IIRC when our IRAs are used to fund our kids' trusts, the entire payout is taxed immediately. This is a big negative for us, but not as big as the thought of giving them uncontrolled access to large sums of money.

4) Your point about hiring an attorney who will be around when you want to make changes, updates, etc. is excellent. We have taken it one step further and hired an attorney who is much younger, increasing the odds that she will be around to help implement our wishes when the time comes.

[workburnout]

Thanks everyone for all the great comments and ideas. I spoke with a close friend/coworker today, who mentioned some attorneys at a smaller firm we dealt with many times for work purposes in the past. They are trustworthy. They would be fair with fees and handling the estate. One of the attorneys is in her 40's probably a little younger than me so she could outlive me. I am going to ask them if they can be the executor and trustee and see what they say.

Having grown up with attorneys in my family, I'm well aware a lot of attorneys are dishonest and to be careful when dealing with them.

I'll ask them if I can use an online trust form, fill it out, and name them as trustee/executor, then take it to their office and have it notarized and a copy kept on file there. Or, they may have a trust form they prefer to use.

All I want to do is name the trust as a beneficiary in all my accounts (IRA and non-IRA). I move money around every couple years to get the bonus (example, Merrill Lynch offers $600 for moving money to them, must hold it for a certain timeframe such as a year to keep the bonus). Each time I do that, I put the beneficiary. Has been my sister but now will be the trust.

That way, I won't need to change the trust very often. All I'll have to do is change the beneficiary to the trust, on all my brokerage (IRA and non-IRA) accounts. My house, car, and property- outside Roth and other brokerage accounts - are not worth $200,000.

I want to put in the trust that my niece gets portions of the money at different ages - 25, 35 and 40 for example, if I were to die before then. She already has a 529 plan I have set up for her she will get at 18. Combined with that, she has grandparents on both sides who will help her pay for college - she's the only grandchild - her college will be paid for.

I want to put that the local charity I work with gets a certain dollar amount.
Also instructions for my 2 dogs, who to call (I work closely with rescues and therapy groups who would take them and find them a good home if they outlived me), and an amount of money to give the caregivers.

That way my sister won't have her hands on my money if I don't outlive her.

I'd rather deal with an attorney I know is trustworthy, based on my dealings with him for work off and on the past 15 years - even if he does not deal primarily in estate law - than one I don't know who may turn out to be dishonest.

What I'm doing is not extremely complex so I think this smaller firm can handle it.
If I had an estate worth several million dollars I might want to hire an estate attorney.

[SecondCor521]

One additional comment: I think you might encounter a conflict of interest if the attorney you use to set up your will and trust is the same attorney who serves as trustee. The attorney could, if they were a Bad Person, influence you to, say, put language in there paying the trustee 10 percent of all gains in the trust every year. They will probably bring that up the moment you suggest the idea, so you'll want to keep that in mind. You may end up having attorney A write up the documents for you and attorney B serve as the trustee. They might even have to work at separate law firms.

If you trust the one attorney you've known for 15 years, you could ask him for a referral to someone he trusts.

[OldShooter]

Quote:

Originally Posted by workburnout ... I'll ask them if I can use an online trust form, fill it out, and name them as trustee/executor, then take it to their office and have it notarized and a copy kept on file there. ...

I'm a lifelong cheapskate and I have sometimes learned the hard way that taking a cheapskate approach was really a bad idea.

My wife was an SVP in Trusts & Estates for a major bank and she frequently came home grouchy about situations where documents were badly drafted, even by supposed experts, and the wishes of the grantor could not be carried out or the documents caused tax or other problems for the beneficiary. As you say, you have worked hard for your money. Please don't jeopardize it by trying to get by too much on the cheap for your estate plan.

Quote:

Originally Posted by workburnout ... I'd rather deal with an attorney I know is trustworthy, based on my dealings with him for work off and on the past 15 years - even if he does not deal primarily in estate law - than one I don't know who may turn out to be dishonest. ...

Err ... Not to insult but this sounds a little like saying you have a dermatologist you trust, so you are going to have him do your brain surgery.

IMO most attorneys are honest, but also IMO finding experts is best done via referrals. I'd suggest talking to these attorneys that you know and trust, asking them to recommend a good trusts & estates or elder law attorney. Ideally, interview two or three to find the one you "click" with the best.

[workburnout]

I am going to see what the attorneys I know and trust say, when they reply to my email request to them for a referral. Maybe they will recommend an estate planning attorney. I'd feel comfortable with that.

Going to a stranger found on the internet, not through a referral, seems risky because a lot of attorneys, even successful ones, do not always put their clients best interests first. I know this based on what I saw growing up having several attorneys in my family. Some will appear honest to clients, then behind closed doors laugh all the way to the bank, not doing what is best for their clients.

Now I'm wondering, lets say I have several stocks in a self-directed account held by a firm (Merrill Lynch or Fidelity for example), and the trustee is named beneficiary. Can the trustee buy and sell the stocks within that brokerage, until the time they are to go to my niece? Or would the stocks stay as they are, until turned over to her? What if I had an index fund, such as Vanguard S&P 500, and the trustee decided to sell it and turn it into cash, low or non-interest bearing, within the brokerage account, until my niece got it?

Should I put something in the trust about keeping it in an index fund, and putting other stocks I have into the index fund too? I would not want it turned to cash or a low interest bearing account, where it'd sit for many years until my niece reached the ages where she'd get it.