Single and about to sign lots of "end of life" directives - and I hate it

[tenant13]

I hit 60 last year and decided to take care of all the estate, and EOL paperwork. I found a lawyer that I like but know nothing about besides what I learned during a few meetings and from internet reviews. I put together a list of things that I want or don't want and now the time came to go over the paperwork I'm about to sign....

The problem is I am a single dude with no family so the whole thing involves the attorney and my friends who may or may not be able to deal with my affairs - we are the same age. I have no problem with living will: just cut me off. No problem with the last will and testament - as long as I can direct whatever is left away from the state, I'm good. Plus I'll be dead so while I might care now, I won't then.

But I am not really comfortable with creating revocable trust and particularly signing the durable power of attorney. With the trust, my financial affairs instantly become more complicated - to the point of likely having to hire a CPA and/or a financial advisor. Not crazy about either.

Durable Power of Attorney is the thing that troubles me the most. I would be giving my attorney a complete control over absolutely everything. The way it's written means she would have all the rights to do whatever she wants with me or my property and if she's unable to then one of my friends takes over, and if he's unable to then another friend steps in. This is done for the not-unlikely case I develop dementia (**** genes) or become incapacitated otherwise but am not yet ready to be disposed of as per living will.

1. Has any of you signed something similar? This is mostly directed to people with no family - I assume most of you have children involved with these kind of documents

2. Is it possible to limit the durable power of attorney in such a way that some major decisions would have to be approved by my friends before the lawyer executes them? For example: when they decide to sell property or stock, or if they decide to place me in assisted care... Once I am in such a place, I can see how the lawyer would be enough to take over for smaller decisions (say I want a mini fridge, a tablet or some designer underwear - no need to bother all my friends, just buy it)

3, In terms of revocable trust: can I just create one now but postpone funding it until I'm dead? Basically, put in the directive in my will that everything I own goes into the trust when I die. Which will have to be the case with my trad IRA anyway - if I move it to the trust it would mean full re-distribution and huge taxes.

If you can think of any other issues I should keep in mind, let me know

 

[GrayHare]

With marriage and childbirth rates declining, yours will become a more common situation. That suggests there may be some forward looking charitable groups ready to help even now, perhaps a religious organization? You probably can put limits in a durable power of attorney, but I suspect wording to anticipate future needs would be difficult. For example, what you consider a "major" decision might not be to someone else. You could create a list of sample decisions you consider major, but when something not on your list comes up, let's say "care by artificial intelligence robot in year 2050", is it automatically minor? Handling all those possibilities makes for longer text, which itself creates confusion. If you can manage your assets, you can manage a revocable trust. The only difference prior to your death is the titling of your assets. You will need to contact banks, brokerages, etc. to make that change, but it's a one-time thing per account. While you are alive, taxable income stays associated with your SS #, so you continue to file individual income taxes as before. Be aware that naming a trust as tIRA beneficiary can force the trust to withdraw all funds from the tIRA within five years, leading to a high rate of taxation. You might consider naming your helpful friends as tIRA beneficiaries instead. Apologies for the block of text, this board removes my paragraph breaks.

 

[cathy63]

... With the trust, my financial affairs instantly become more complicated - to the point of likely having to hire a CPA and/or a financial advisor...

Why do you believe this? A revocable living trust is a passthrough instrument. Everything paid into the trust is reported on your own tax return just as if you didn't have the trust. You have full control of all the accounts in the trust and can redirect investments any time, just as you do now.

... In terms of revocable trust: can I just create one now but postpone funding it until I'm dead? Basically, put in the directive in my will that everything I own goes into the trust when I die. Which will have to be the case with my trad IRA anyway - if I move it to the trust it would mean full re-distribution and huge taxes...

If you fund it through your will or by naming it as a beneficiary on accounts, then it would be an irrevocable trust at that point. A revocable trust becomes irrevocable after the grantor dies. Yes, you can do it this way if you want, but I think your estate would have to go through probate assuming it's larger than the threshold in your state.

If you did want to move your investment accounts into the trust while you are alive, typically that does not involve liquidating anything or paying any taxes. You just tell the broker you want to retitle the account ownership to your trust. They'll ask for a copy of the docs and then change the account holder's name to something like "tenant13 trust, tenant13 TTEE, U/A DTD 01/04/2024". Your SSN is still on the account and you still receive the 1099s at the same address and report them on your tax return, same as always.

But IRAs are typically better left out of a trust. If you name your friends (or a charity) as the beneficiary, then they get a longer period to empty the IRA.

My main question is what are you trying to accomplish by having a trust? Are you trying to avoid probate? Trying to consolidate things to make it easier for your executor? Doing it because the attorney advised it?

 

[tenant13]

My main question is what are you trying to accomplish by having a trust? Are you trying to avoid probate? Trying to consolidate things to make it easier for your executor? Doing it because the attorney advised it?

Yes, to all of the above. If I don't do it and the probate kicks in, my executor would likely have to hire someone anyway to deal with the probate which means double fees: for the executor AND whoever he hires. It's not going to be just one bank account going to one person - for that I wouldn't need all this paperwork.

A question for you: you wrote that "A revocable living trust is a passthrough instrument. Everything paid into the trust is reported on your own tax return just as if you didn't have the trust. You have full control of all the accounts in the trust and can redirect investments any time, just as you do now." - ok, that makes sense. And upon my death the trust become irrevocable, right? In that case can i make the trust the beneficiary of my Trad IRA? So it flows right into the trust for the non-probate estate distribution?

 

[cathy63]

.... And upon my death the trust become irrevocable, right? In that case can i make the trust the beneficiary of my Trad IRA? So it flows right into the trust for the non-probate estate distribution?

Yes, the trust becomes irrevocable when you die.

You can make the trust the beneficiary of your tIRA if you want and that would not go through probate. I believe in that case, the trust would have to empty the IRA and pay all taxes due within 5 years, whereas if you named individuals as beneficiaries then the IRA would be divided into multiple accounts and they'd each have 10 years to empty it. There's less for the executor to deal with if the IRA is distributed directly to the beneficiaries, but if there's a lot of complexity over who predeceases whom and which person's descendents do or don't get part of what's left, then leaving it to the trust could make sense.

 

[GrayHare]

Retirement accounts are not subject to probate if you name an eligible beneficiary to the custodian of the account.