trusts

[Martha]

In yesterday's WSJ there was an article about people setting up trusts to recieve inheritances from their parents. The children would then have to talk to their parents and ask them to amend their will to leave their assets to the trust, instead of directly to the child. Awkward and maybe presumptuous.

However, if you are doing estate planning and looking at leaving assets to your children, it may make sense to leave them the assets in a trust, especially if your children are young or you are concerned about the children's creditors, spouses, etc. The trust would be a spend thrift trust which under most states laws would bar your children's creditors from taking the trust assets.

 

[Mr._johngalt]

In yesterday's WSJ there was an article about people setting up trusts to recieve inheritances from their parents.  The children would then have to talk to their parents and ask them to amend their will to leave their assets to the trust, instead of directly to the child.  Awkward and maybe presumptuous.

However, if you are doing estate planning and looking at leaving assets to your children, it may make sense to leave them the assets in a trust, especially if your children are young or you  are concerned about the children's creditors, spouses, etc.  The trust would be a spend thrift trust which under most states laws would bar your children's creditors from taking the trust assets. 

Thanks for the info Martha. I can't discuss any of this stuff with my folks
but maybe someone can use it. BTW, my "will" appointment is
still on for tomorrow. Still thinking about cancelling.
Stay tuned

JG

 

[gayl]

My parents set up an AB trust while my Dad was still alive. It made everything so much easier for Mom .... and it will simplify it for us when she goes [she's 83 and slowing down to only a 2 mile walk at a time]. Now she has fun playing the stock market with 10% .... I laddered the rest into individual bonds to guarantee a set additional income to the air force pension & SSA. Less for her to worry about

 

[BUM]

In yesterday's WSJ there was an article about people setting up trusts to recieve inheritances from their parents. The children would then have to talk to their parents and ask them to amend their will to leave their assets to the trust, instead of directly to the child. Awkward and maybe presumptuous.

However, if you are doing estate planning and looking at leaving assets to your children, it may make sense to leave them the assets in a trust, especially if your children are young or you are concerned about the children's creditors, spouses, etc. The trust would be a spend thrift trust which under most states laws would bar your children's creditors from taking the trust assets.

Hi Martha,
For the type of trust you describe, who typically are the trustee's?

BUM

 

[Martha]

Hi Martha,
For the type of trust you describe, who typically are the trustee's?

BUM

Financial institutions. Of course, the downside is the fees. Shop around.

 

[LEX]

Wouldn't a "pour over trust" clause in a will funded at probate do the same, especially for minors, or would that trigger a taxable event?

 

[Martha]

Lex, that was what I was thinking with having a trust. Your assets wouldn't go into the trust until you died. No additional tax triggered. Of course, still subject to estate taxes.

 

[Mr._johngalt]

Lex, that was what I was thinking with having a trust. Your assets wouldn't go into the trust until you died.  No additional tax triggered.  Of course, still subject to estate taxes.

Hi Martha! Obviously we don't have to worry about estate taxes, and yesterday we did not discuss trusts at all. I think I am going to leave my corporation to my kids and then provide for DW with personal assets
and codicils. Make it easy for her and let my kids deal with running the corp. They are all young and get along pretty well. Let them work it out
after I'm gone. You can't cover every possible detail anyway.
Let them do some of the work after I am pushing up dandylions.
That's where I ended up.

JG

 

[Mr._johngalt]

Hi Martha!  Obviously we don't have to worry about estate taxes, and yesterday we did not discuss trusts at all.  I think I am going to leave my corporation to my kids and then provide for DW with personal assets
and codicils.  Make it easy for her and let my kids deal with running the corp.  They are all young and get along pretty well.  Let them work it out
after I'm gone.   You can't cover every possible detail anyway.
Let them do some of the work after I am pushing up dandylions.
That's where I ended up.

JG

BTW, for those of you unfamilar with my situation, who may be asking
"He's retired. What's he mean 'running the corp'?" I have a small
holding company which takes me no more than say........40 hours
a YEAR tops to manage. Now, if someone else had to step in
that would be a horse of a different color.

JG

 

[smooch]

Last year my brothers took my mother (all live 500 miles away from me) to an attorney to set up a trust. Our understanding at that time was that after 5 years, all of her assets in the trust would be sheltered from Medicaid. Now the lawyer says that, if my brothers notify her as soon as my mother knows she has to go to a nursing home, she might be able to shelter about half of her assets. Does this sound logical to anyone? I don't know what information I'm missing.

 

[BUM]

Smooch,

Ask your brothers for a copy of the trust document. The trustees will have multiple copies. If you don't understand it get a lawyer to explain it to you. If they dont want to give you a copy ask why?


BUM

 

[unclemick]

Yep

If the lawyer knows what he is doing. It varies mainly due to the state medicaid factor applied against the estate. Net worth, single/married, the trust, - all figure in.

Arkansas - $1700, Long Island $ 9296 in June 2004. You need the lawyer to walk you thru the calculation enough times so you can properly execute the plan without triggering disqualification.

Squishy stuff - house, personal property - which can have disagreement over value is especially tricky.

Finding a home which allows payment and then switching to Medicaid is also fun. Both sides are placing bets.

My Mom is adament about dieing at home - but if push comes to shove - she has been gifting for the last 11 years - yet another calculation since there are look back provisions for that.

Yeck!

 

[smooch]

My question is more if our understanding that assets in a trust can be sheltered from Medicaid is incorrect. Is there no way to shelter assets? My mother is in assisted living (self pay), so she has already sold the house and invested the proceeds.

 

[LEX]

Martha:

"Pour over" trusts, at least in the handful of pro bono adminstrations I've done for family (Texas Rules of probate) should work then.  The issue of estate taxes was not at issue due to Texas having no state levy and the res of the trust was lower than the federal threshold.  

But never forget that it can be simple.  I had an uncle who kept his estate distribution very simple. This is family lore, so I can not verify if this is true, but knowing my uncle, I take its as being factual.  He was raised in the depression and lived in the days when a promise was a promise, and if you gave your word, you kept it as a matter of personal honor.  Anyway he had his son and daughter come by for dinner (he was a great cook), and after a nice sit down meal with the kids, gave the combination to the hidden floor safe in his rather large home to them with a short note on his final funeral instructions, including the church and the funeral home information (only had his two kids, my aunt had already passed after a tough and painful battle with cancer) and he personally supervised as they cut the proceeds between them, all three of them at the kitchen table,  several years before he died. He had his primary wealth in cash, and in that floor safe. He was in good health, and it was, in my view, a very noble way to pass on ones legacy to ones children.   No probate, no strangers, only family.  He had already named his son and daughter as joint owners with right of survivorship on the house title, and all the bank accounts had them as beneficiaries POD.  No infighting, no hassles, just parent-child dignity and respect. Sometimes simple works.  

 

[Mr._johngalt]

Martha:

"Pour over" trusts, at least in the handful of pro bono adminstrations I've done for family (Texas Rules of probate) should work then.  The issue of estate taxes was not at issue due to Texas having no state levy and the res of the trust was lower than the federal threshold.  

But never forget that it can be simple.  I had an uncle who kept his estate distribution very simple. This is family lore, so I can not verify if this is true, but knowing my uncle, I take its as being factual.  He was raised in the depression and lived in the days when a promise was a promise, and if you gave your word, you kept it as a matter of personal honor.  Anyway he had his son and daughter come by for dinner (he was a great cook), and after a nice sit down meal with the kids, gave the combination to the hidden floor safe in his rather large home to them with a short note on his final funeral instructions, including the church and the funeral home information (only had his two kids, my aunt had already passed after a tough and painful battle with cancer) and he personally supervised as they cut the proceeds between them, all three of them at the kitchen table,  several years before he died. He had his primary wealth in cash, and in that floor safe. He was in good health, and it was, in my view, a very noble way to pass on ones legacy to ones children.   No probate, no strangers, only family.  He had already named his son and daughter as joint owners with right of survivorship on the house title, and all the bank accounts had them as beneficiaries POD.  No infighting, no hassles, just parent-child dignity and respect. Sometimes simple works.  

Great story. Wish "simple" worked more often.

JG

 

[unclemick]

BTY -most states now have estate recovery units - so if you took 'medicaid money' before you croaked - guess who shows up ahead of anything you put in your will - I believe they are still second behind the IRS - but they don't have deductibles.

Heh, heh, heh

 

[Martha]

I am with Lex that simple often is just fine. I am thinking of trusts where the children are young, the children might be financially inprudent, or if there is a potental divorce by a child that gives you concern.

On the medicaid issue, government works constantly at trying to be sure as many assets as possible are used to pay for care and medicaid planning is considered a danger area for lawyers. I would check this with your lawyer, but I believe that currently transfers to and from a trust are subject to a five year look back. Also, for self settled trusts (trusts you make yourself), to the extent principal may be paid to the "grantor" of a self-settled trust, it is considered an available resource of the grantor. To the extent discretionary payments are allowed or made to or for the benefit of the grantor from a self-settled trust, they are considered available income. A transfer into an irrevocable grantor trust that prohibits payment of principal to the grantor is subject to the 60 month look back period and will create a penalty period of ineligibility for institutional Medicaid.

So, Smooch, most likely to the extent assets in the trust are available to your mother, they must be used for medical care. Talk to the lawyer about it. And remember, this is an area where the rules and their interpretation change all the time.

 

[youbet]

Smooch.......

Think about what you're saying in public. You're hoping to have us taxpayers pay for Mom's medical and/or long term care so her personal assets can pass to you upon her death. Hmmmmm......... I wish good fortune but, hey, is that your hand in my pocket?

Youbet

 

[Mr._johngalt]

Smooch.......

Think about what you're saying in public.  You're hoping to have us taxpayers pay for Mom's medical and/or long term care so her personal assets can pass to you upon her death.  Hmmmmm.........  I wish good fortune but, hey, is that your hand in my pocket?

Youbet

Hello youbet! I believe if you look closely you will find quite a
number of hands "in your pocket". As a friend used to say
"Everyone is trying to get in your knickers!" I'm with Smooch.
Wouldn't you rather have your money used to take care of his mom
than pored down a rathole congress created somewhere? I'd prefer to help
Smooch as long as I'm paying anyway.

JG