Think of your heirs!

[OldShooter]

Re the discussions of choosing trustees, multiple trustees, etc. there is another option that has not been mentioned: "Trust Protector." Here is a reference: https://en.wikipedia.org/wiki/Protector_(trust)

In our case, we create testamentary trusts for our two boys with Schwab as trustee. We have a younger family friend named as trust protector. Among other things, she can name a new trustee in the event Schwab resigns. She can also fire Schwab if she so chooses. This is not a burdensome job; she just sits on the sidelines and keeps an eye on things.

IMO and in the opinion of our attorney, the trust protector role mitigates or eliminates many of the "what-ifs" concerning the future of the trusts and their trustees.

 

[OddGuy]

My parents have been very transparent about their finances for nearly the past decade, following DF's heart surgery. Realizing at that time that they had scattered information, they engaged me to come to their place and notate and tabulate bank accounts, investment accounts, locations of deed and titles, passwords, etc.

Using my fact-finding mission as a base, they engaged a fiduciary about 7 years back to consolidate and handle their finances, and appointed my DS a I co-executors.

DS and I are also co-trustees on the 1/3 share that will be split between our departed DB's two children.

Since then, DF has been incapacitated by encroaching dementia, and removed to monitored care at the assisted living center they bought into a decade back, while DM maintains the independent apartment at the facility.

DM has had to learn the basics of household financial management, leaving the larger financial management issue to the fiduciary, with whom she consults on a regular basis. The fiduciary distributes quarterly statements to DS and me of their four primary Vanguard accounts, which amount to the low 8 figures.

DM continues to takes steps to make things easier...clarifying issues such as who wants the vacation house, etc.

I'm incredibly appreciative of the steps DM and DF have taken to simplify these matters, and will strive to model them for the sake of DW's and my kids.

 

[gwraigty]

Yes, the small insurance policies I mentioned were with Prudential, and their 4 pages of forms were about 3.5 pages of how to open an account there, and deposit the life insurance proceeds into the account. Simply getting them to send you a check was an option that you had to write in (no check box).

And about that much of the accompanying instructions dealt with that account that we didn't want. It made the whole form filling out process look 10x harder than it was. They were making it difficult for you to just get a check, and DW looked at all these instructions, looked at me and . She figured it out, but also figured she was wrong, what was all this about an account? Took me a while to wade through it and understand - just ignore those 3.5 pages, and write "Lump Sum Check" on this line.

That's a terrible way to treat a customer, especially as some of these people will be having trouble coping at this stage, and may also really need that money to tide them over. Once we get our check cashed, I might just call someone at Prudential and get that off my chest. I can understand they want you to keep your money with them, that's business. But don't do it in such an underhanded way, and with such vulnerable people.

-ERD50

Bolding mine - I heartily agree! It seems to fly in the face of what life insurance is typically intended for, especially if needed ASAP to pay near term expenses. IIRC, I kept an open mind and pondered just keeping the money in the account set up by the insurance company. It only took a couple of minutes for me to make the decision to close the account. There would have been a few $ in a monthly fee to move the money from the no-fee side (that earned practically no interest), over to the investment side, which had limited options that were inferior to what I can get in my regular brokerage accounts.

 

[skipro33]

Have you thought about what would happen if you and your wife both died at roughly the same time, perhaps due to illness, perhaps due to a vehicle crash?

There may not necessarily be enough time to gather the family together, or consult with a lawyer. And you may not be in a mental condition where a lawyer would agree to update the will.

If your current plans don't allow for the possibility that you will both go at about the same time, you should consider updating the plans.

I agree. I can confirm that you do not want emotionally distraught people, a spouse for example, making decisions while under this sort of stress. The time to do these things is while every one is healthy and relaxed, able to discuss the whats, whys and wherefores .

 

[karen1972]

I often told my dad this and he did make some attempts to clean things up but its almost 2 years and mom is still fighting to resolve things with my dads estate.

to keep it short
1. Property deeded jointly to my dad and uncle which is now a nightmare that my cousin inherited it and won't work with us, won't buy it, won't sell it and keeps doing things that devalue the property and enriches himself.

2. Dad's business that he left no details about and we had to "trust" his partners even after tax records showed a magic $500k accounting error several years ago which happened to go in the favor of his partners. Don't think dad knew about it and no way we can prove a thing now that he is gone.

3. Mystery paper stock my mom was holding in the safe. As far as I can tell it was converted to digital stock many years ago but not sure why she still has them and didn't have to hand them in.


The worst part of #1/2 has taken years to sell/find buyers and #1 still isn't even close to being resolved. You want to resolve an estate to be timely so people can move on and focus on grieving.



btw, given our family dynamics, very glad my mom has only 1 person as executor, too many opinions means more drama than we can handle. The oldest is in charge of the medical part and the second oldest in charge of the financial part. We all can assist as needed but we are too different not to fight as it is, much less throw in money and grief.

 

[kgtest]

There have been a few helpful threads like the one running now:

http://www.early-retirement.org/forums/f28/the-in-case-of-death-plan-96695.html#post2203818

And since I'm presently helping DW in closing out her Mother's estate, a few other related things come to mind. Specifically, I'd like to make settling my/our estate as easy as possible for my heirs. Along with the big ones (like in the above thread, documenting our accounts, locations and worth/story behind valuables, etc) there are a lot of little things we can do. Nothing earth shaking, but why not make things easy for your heirs? They may be at a stage of their life where they are very busy, and every little thing takes time. Every little thing adds up. The basic premise is, as Thoreau would say "Simplify, simplify!".


Some of these may have cons I have not thought of, so please jump in if you see downsides.

A) Executor/Trustee - How about naming just one, with named successors in place in case that one cannot/will not serve? Co-trustees sounds good in theory, with an odd number for tie-breaking, but in practice, it makes things difficult. In our case, one of the co-trustees is out-of-state, and travels a lot. So getting signatures, mail, etc, and just organizing things in general becomes much more difficult.

Maybe even have a form already filled out when you get your will/trust done, so that each trustee could sign away their rights to the next in line, and just get that signed/notarized. That would save the heirs a trip to a lawyer to get that done.

Maybe it seems risky to put it on one, but we are thinking of this, making it clear to our kids that they are expected to work together, but this means only one signature/visit required for handing paperwork. Who knows if your selected trustee will be out of state when you pass? Being out of state does complicate things.

And in that “Death Letter”, it would also be helpful to spell out some of the details I had to go learn - like exactly when/how to file the Will in your State/County residence, How to obtain the EIN, etc. plus the current sources for this info, in case it changes.


B) Leave Grandchildren out of your will/trust? Fortunately for us, all the grandchildren (of DW's Mother) are past minor age, but still, the fewer beneficiaries you need to deal with the simpler. Let the parents deal with it. This would have been even more involved if her IRA had named the trust as a beneficiary - we would have had to get each grandchild to set up an Inherited IRA?


C) Consolidate! When FIL passed, they had accounts all over the place. You need to visit each bank, submit the paperwork showing you have authority, then they usually say “come back after our legal department reviews this, etc....”, make another appointment, etc. It would have been so much simpler to consolidate these when convenient and while he was still around and of sound mind. Fortunately, we did get this done before MIL passed. Except for her local bank checking account (with my DW as joint/wros, everything was at Fidelity. Still, many little things to follow up on.

As an example, DW is one of three beneficiaries on her Mother's IRA, and must now take RMDs (in 2020, the 2019 RMD was already completed) based on the inherited table and her (DW's) age. After being split among the other heirs, this isn't a large amount. I'm planning on taking as large an RMD as we can w/o getting to a higher tax bracket, just so we can zero it out so there is one less account for our heirs to deal with.


E)IRAs - As mentioned in B, if you do include a larger number of beneficiaries in your will/trust, consider naming only primary beneficiaries for your IRAs. This avoids needing to set up Inherited IRAs for all.


F) Insurance policies - If you still have life insurance, consider just cashing it in, especially if it is a small amount. That will be just one less thing for the heirs to have to call in, obtain the forms, figure out how to fill them out (they manage to make it fuzzier than it should be - just exactly what do you want for entry xyz?), mail in with certified copy of Death Certificate, etc. Wait for checks to come in, deposit checks in the named beneficiary account, then distribute as needed. MIL had two small policies ($2,000 and $5,000 face), taken out in 1970's 1980's. Why such a small amount? Really makes no sense, this wasn't “bury me” money for them.


G) As you consolidate or cash out things, mark any old paperwork you wish to hold onto as “OLD - transferred this Bank ABC account to Bank XYZ account # in 2012”. Otherwise, someone going through this old paperwork may think there is an active account they didn;t know about.


H) While I really appreciate that Vanguard forced other companies into providing low cost index funds, when it comes to some of this, having access to a local Brick & Mortar office can be helpful. You may need medallion signatures for some of this otherwise.

It could also make things smoother if each of the heirs already had accounts at the same financial institution your main accounts are at. That can make managing the transfers to heirs easier, and they won't be dealing with setting these accounts up at the same time they are dealing with everything else.

Anything to add/change?

-ERD50

YES to All really, I particularly like B, C and E...not sure what happened to D.

I think/hope by the time I have to execute the trusts I am trustee and co-trustee receptively that I do not have to go anywhere to settle it. Hoping it is that simple. I sold my house when I lived 2200 miles away on a remote island 4 years ago, so I am guessing I could settle estate remote but do recognize sometimes physical presence is required in some situations.

Simple is better...but don't be too simple and forego the estate plan altogether.

 

[gwraigty]

Two things I want to add. Maybe they were already covered. If so, sorry for the repeat.
1. Make sure your insurance policies are payable to a real person and not, "to the estate of... (fill in the deceased here)". My father's 2nd wife left several life insurance policies that we could not redeem because of that language. In order to pay out, the insurance companies insisted that a probate be opened. None were of much value, a few thousand each, and not worth the cost to hire someone to help my dad collect.

Can I add: And make sure all the named beneficiaries are still alive!

There was a small life insurance policy taken out on my father when he was a child. He either forgot about it or didn't know about it. My grandparents were the beneficiaries. Mail about the policy had been going to my aunt's house, as my grandmother lived with her for awhile after my grandfather had died. The beneficiaries were never updated.

I had to provide copies of my grandparents death certificates to prove the named beneficiaries were dead. That allowed them to only make payment to the estate. At the time, that was an issue because his estate was insolvent and it didn't seem worth it to try and collect. Later, another issue came up and I was able to file for a release from administration to collect on that issue. The lawyer involved kindly handled the matter of the life insurance that I thought I'd never see.

 

[Dash man]

We have two trustees, USAA and a family member. USAA will take care of all the business/legal/financial stuff, and our family member will deal with our things and distribution to those who might want them.

We also have a Trust Protector, our attorney, who can fire a trustee if they are not doing their job properly.
We do cite our grandkids in the trust as successor beneficiaries, because otherwise, if one of our boys passed before us, the spouse may get the funds. If she remarried, a stranger may get the money. We want our grandkids cared for, so they will be beneficiaries if their father is gone. The mother, our daughter in laws, will get a set amount to care for them.
Ensure you have a pour over will into the trust for any items that may have been missed.
Update your trust every 3-4 years.

ETA: We added a provision explicitly removing anyone from our trust or will who challenges our wishes.

 

[FREE866]

Cash out of any stocks and distribute cash. Trying to split up shares between beneficiaries is a pain...

Question. Myself , brother and sister are beneficiaries on my mothers IRA and personal account. She is still alive. Given we are 33.3% each beneficiaries will the brokerage firm (Schwab) just split the shares up evenly and open accounts for us? OR do the shares need to be liquidated and if so who authrorizes that liquidation? thx

 

[RunningBum]

Question. Myself , brother and sister are beneficiaries on my mothers IRA and personal account. She is still alive. Given we are 33.3% each beneficiaries will the brokerage firm (Schwab) just split the shares up evenly and open accounts for us? OR do the shares need to be liquidated and if so who authrorizes that liquidation? thx

I have a TOD with VG and my understanding is that they will open an account for each person named, and will transfer the appropriate # of shares. With mutual fund shares going to thousandths that doesn't seem like a problem. I expect to not touch the biggest gainers and want my heirs to get the advantage of step up basis.

 

[FREE866]

I have a TOD with VG and my understanding is that they will open an account for each person named, and will transfer the appropriate # of shares. With mutual fund shares going to thousandths that doesn't seem like a problem. I expect to not touch the biggest gainers and want my heirs to get the advantage of step up basis.

Thats my understanding as well.....both her accounts are all major market index ETFs and the fixed income portion is treasury bills and CD's so should be pretty straightforward

I recently read that even if the beneficiaries are under 70 at the time of death we will have RMD requirements each year for IRA account securities we inherit......anyone confirm that? thx

 

[gwraigty]

I recently read that even if the beneficiaries are under 70 at the time of death we will have RMD requirements each year for IRA account securities we inherit......anyone confirm that? thx

I had to take RMDs as a non-spouse beneficiary from a TSP I inherited in 2008, after it was rolled over into an inherited IRA. Regretfully, I chose the 5 year option instead of my own life expectancy, which pushed us into a higher tax bracket for those 5 years. A good example of making wrong decisions while grief-stricken.

Here is some current info:

https://www.fidelity.com/viewpoints/retirement/non-spouse-IRA

 

[aja8888]

I had to take RMDs as a non-spouse beneficiary from a TSP I inherited in 2008, after it was rolled over into an inherited IRA. Regretfully, I chose the 5 year option instead of my own life expectancy, which pushed us into a higher tax bracket for those 5 years. A good example of making wrong decisions while grief-stricken.

Here is some current info:

https://www.fidelity.com/viewpoints/retirement/non-spouse-IRA

Excellent information. Thank you! Note the last point about the lack of bankruptcy protection for non-spouse inherited IRA's:

Nonspouse beneficiaries do not have bankruptcy protection with inherited IRAs. Also, note that the Supreme Court ruled that an inherited IRA held by a nonspouse beneficiary is not exempt from attachment by creditors under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.

 

[FREE866]

I had to take RMDs as a non-spouse beneficiary from a TSP I inherited in 2008, after it was rolled over into an inherited IRA. Regretfully, I chose the 5 year option instead of my own life expectancy, which pushed us into a higher tax bracket for those 5 years. A good example of making wrong decisions while grief-stricken.

Here is some current info:

https://www.fidelity.com/viewpoints/retirement/non-spouse-IRA

Thank you!

 

[gwraigty]

Excellent information. Thank you! Note the last point about the lack of bankruptcy protection for non-spouse inherited IRA's:

You're welcome. As usual, bankruptcy protection and creditor protection may have different provisions under state law.

 

[target2019]

Question. Myself , brother and sister are beneficiaries on my mothers IRA and personal account. She is still alive. Given we are 33.3% each beneficiaries will the brokerage firm (Schwab) just split the shares up evenly and open accounts for us? OR do the shares need to be liquidated and if so who authrorizes that liquidation? thx

That is exactly what happens. Executor sends death cert and whatever else Schwab requests. Shares are split and assigned to accounts. There could be some odd investment that has to be sold, and goes to sweep cash. Each state can be different though. Someone from Schwab will contact you, and let you know what's happening.

 

[target2019]

Thats my understanding as well.....both her accounts are all major market index ETFs and the fixed income portion is treasury bills and CD's so should be pretty straightforward

I recently read that even if the beneficiaries are under 70 at the time of death we will have RMD requirements each year for IRA account securities we inherit......anyone confirm that? thx

For argument's sake, if there is a $100K CD, how does that get split? I don't know for sure, but I'd think it has to be redeemed by the investment company so it can be split by 3.

The RMD part of the discussion is either understood, or not, by who you speak with, usually on phone. In a situation with 3 beneficiaries, you all follow the same path, but each person speaks with a rep. I mention this, as you may develop conflicting information.

When we had to deal with an investment company (it wasn't Schwab) recently, it was not smooth. Different support personnel gave different answers. Eventually we found that RMDs were partially taken by the decedent, but the company dropped the ball on RMD from her spousal inherited IRA. So we had to take RMDs from two IRAs at the end of 2018 to satisfy the decedent's RMD responsibility. Going forward, the calculation of RMDs is according to single life expectancy of my spouse.

Our situation was divide by 4. When your divide by 3 challenge arises, it is a good idea to get advice, confirm it, and perhaps discuss what you decide for your plan. Other 2 may benefit from it.

 

[kcowan]

Three things from my experience:
1) My brother and I were joint executors for Dad. We lived 2500 miles apart. But we got along famously. I took over the cottage and he the family home. Each paying utilities to make settlement easier.
2) MIL had disinherited her estranged son by name in the will. Local law said that anyone in the will had to be contacted. We hired a "skip tracer" to track him down. This delayed settlement by several months.
3) Make sure your bank will allow Estate Accounts. Many online only banks do not.

 

[gwraigty]

That is exactly what happens. Executor sends death cert and whatever else Schwab requests. Shares are split and assigned to accounts. There could be some odd investment that has to be sold, and goes to sweep cash. Each state can be different though. Someone from Schwab will contact you, and let you know what's happening.

Bolding mine. I've been through this process as an heir, though not with Schwab. The executor could notify Schwab, but I'm not certain has an obligation to, since those accounts aren't part of the estate. The beneficiary can notify Schwab. Once Schwab learns of the death, they will send all appropriate forms to each beneficiary at their addresses of record.

In my case, I inherited a TSP in 2008. I had to open an inherited IRA with another brokerage firm first, then fill in my inherited IRA account information on the TSP claim form so they could electronically transfer the funds. There was no option to have an inherited retirement account with TSP.

It probably goes more smoothly and quickly, keeping the inherited funds with the same firm, at least at first. Then, if you have another firm you'd prefer, you could transfer the accounts to another firm later, when the dust settles.

 

[ziggy29]

Question. Myself , brother and sister are beneficiaries on my mothers IRA and personal account. She is still alive. Given we are 33.3% each beneficiaries will the brokerage firm (Schwab) just split the shares up evenly and open accounts for us? OR do the shares need to be liquidated and if so who authrorizes that liquidation? thx

I was the successor trustee for my mom's estate. Most of her assets were held by the trust, including the home, her bank accounts and her taxable accounts at Vanguard. Her Vanguard IRA listed four children as beneficiaries, each receiving 25% (this because a trust can not own or inherit an IRA). When she passed, I filled out some paperwork to Vanguard including the death certificate, and then sent my siblings the details on what forms to fill out and send back to Vanguard to set up their own inherited IRAs.

It was actually pretty painless. But I was very fortunate in that (a) my parents dotted all the i's and crossed all the t's with their lawyer in setting up the trust correctly, and (b) my sibs and I all get along well and there were no arguments or contentions over who gets what -- and they all trusted me to get it done correctly and equitably. I recognize not all are so fortunate.

Bolding mine. I've been through this process as an heir, though not with Schwab. The executor could notify Schwab, but I'm not certain has an obligation to, since those accounts aren't part of the estate. The beneficiary can notify Schwab. Once Schwab learns of the death, they will send all appropriate forms to each beneficiary at their addresses of record.

Perhaps so. But at least with Vanguard, they didn't need four copies of the same death certificate, and they didn't have addresses of record for beneficiaries (just full name and DOB, so all had to send a copy of their ID as proof of ownership). Once Vanguard received one death cert, they could process the paperwork for the other three. So I did mine first (including the certified copy of the death certificate) and sent my siblings the paperwork they would need a few days later. They would send the same things, except for that certificate which Vanguard already had on file. It probably didn't have to be that way, but I figured if I did some of the legwork first it would cut down on the number of questions I'd have to answer about it all.

 

[FREE866]

I was the successor trustee for my mom's estate. Most of her assets were held by the trust, including the home, her bank accounts and her taxable accounts at Vanguard. Her Vanguard IRA listed four children as beneficiaries, each receiving 25%. When she passed, I filled out some paperwork to Vanguard including the death certificate, and then sent my siblings the details on what forms to fill out and send back to Vanguard to set up their own inherited IRAs.

It was actually pretty painless. But I was very fortunate in that (a) my parents dotted all the i's and crossed all the t's with their lawyer in setting up the trust correctly, and (b) my sibs and I all get along well and there were no arguments or contentions over who gets what -- and they all trusted me to get it done correctly and equitably. I recognize not all are so fortunate.

Our situation is actually very simple....all of her assets are at schwab...she has that and a joint checking account at Chase with my brother which is fine for him to have when she dies...

The way I undertstand it that as long as she has beneficiaries stipulated for her schwab accounts her will and her trust ( which only had her house and now that is sold) are meaningless. Please let me know if my assumption is incorrect. thx

 

[ziggy29]

The way I undertstand it that as long as she has beneficiaries stipulated for her schwab accounts her will and her trust ( which only had her house and now that is sold) are meaningless. Please let me know if my assumption is incorrect. thx

I believe that is correct. In an asset with beneficiaries such as an IRA, annuity or insurance policy, the beneficiaries assigned to those assets override anything otherwise listed in a will, since those are assets not subject to probate and separate from the estate (since an estate or trust can not "inherit" these things). There are sometimes spousal exceptions to this (unless a spouse has given written consent to allowing someone else to be the beneficiary).

 

[target2019]

Bolding mine. I've been through this process as an heir, though not with Schwab. The executor could notify Schwab, but I'm not certain has an obligation to, since those accounts aren't part of the estate. The beneficiary can notify Schwab. Once Schwab learns of the death, they will send all appropriate forms to each beneficiary at their addresses of record.

In my case, I inherited a TSP in 2008. I had to open an inherited IRA with another brokerage firm first, then fill in my inherited IRA account information on the TSP claim form so they could electronically transfer the funds. There was no option to have an inherited retirement account with TSP.

It probably goes more smoothly and quickly, keeping the inherited funds with the same firm, at least at first. Then, if you have another firm you'd prefer, you could transfer the accounts to another firm later, when the dust settles.

I mentioned executor, as in our case the executor had the death certificates. She notified the company, and provided death certificate, although I see your point. We could have acted independently and gotten the ball moving. It does not have to be an executor, as the accounts have named beneficiaries. But I'm sure you'll have to provide death cert and probably a form or two.

For the time being, we are staying with the original institution. The dust is settling in a month or two. Before the end of year the brokerage is going to Schwab for several reasons.

 

[gwraigty]

I mentioned executor, as in our case the executor had the death certificates. She notified the company, and provided death certificate, although I see your point. We could have acted independently and gotten the ball moving. It does not have to be an executor, as the accounts have named beneficiaries. But I'm sure you'll have to provide death cert and probably a form or two.

For the time being, we are staying with the original institution. The dust is settling in a month or two. Before the end of year the brokerage is going to Schwab for several reasons.

Absolutely. I got several certified copies of death certificates from the county. No problem at all. TSP sent me a claim form. I believe there was a place on the form to specify the account I wanted the funds to go to. I had to open an inherited IRA first to get an account number to put on the TSP form. Then I was able to send in the completed TSP claim form with a certified copy of the death certificate.

I'd guess that the process for an inherited brokerage/bank account would be simpler (not having to open a special account first), if the beneficiary already has a brokerage/bank account that could receive the funds.

Even with a willing executor, it's probably something I'd seek to handle myself, if I knew I was a beneficiary. The executor would have other pressing legalities to deal with. Helping beneficiaries collect their funds wouldn't be a priority.

 

[target2019]

Even with a willing executor, it's probably something I'd seek to handle myself, if I knew I was a beneficiary. The executor would have other pressing legalities to deal with. Helping beneficiaries collect their funds wouldn't be a priority.

In the case I speak of, the executor was one of the beneficiaries, so nothing pressing except wait for the certs (ordered by the funeral home), and notify investment company. As I recall, we heard from the investment company within 2 weeks, received forms, discussed on phone, etc.