Five Questions to Consider When Naming A Trustee
The responsibilities of a trustee are often complex and time consuming. Managing trust assets often entails
familiarity with tax law, real estate markets, security markets, and financial planning. Often it is the oldest or
most responsible heir who is given this duty. Here are some things you should consider before deciding on a
trustee.
1. Do you trust this individual? The trustee will need to put your wishes and vision of fairness above any of
their own. You must have absolute trust in their integrity.
2. Is the person willing? You should be sure they have the time to devote to all the many details that can and
surely will arise in performing the duties of trustee. If it would be a burden on their family or career let them
know it is okay to decline.
3. Would you let them handle your affairs today? If they are lacking in the knowledge and expertise now, it is
doubtful they will be a suitable choice in the future.
4. Will this choice create ill will among the surviving beneficiaries? The trustee must be able to work through
disagreements with and among other beneficiaries. Sometimes family dynamics can make it nearly impossible
for the trustee to effectively discharge their duties. Don't make a choice that could lead to ill will among family
members.
5. Is this person willing to accept the legal ramifications of serving as trustee? Most states have laws requiring
high standards of performance by trustees. You should discuss the potential liability with any prospective
trustee.
If you have a suitable relative or heir you should talk about your choice with your other heirs and beneficiaries.
Let them know why and how you made your choice. This could alert you to unforeseen problems and also
make sure that everyone is working from the same page.
It could be that after asking yourself these questions you may determine that a corporate trustee would be
better for all. The most common reason for not naming a corporate trustee is expenses, but don't be penny
wise and pound foolish. The reason you went to the trouble of setting up a trust is to protect your loved ones;
a poor choice of trustee could make it all a waste.
Your Ethical Will
When you first think about estate planning it is often only about dollars and cents. Who gets what, how to
minimize taxes, how to avoid probate. We often forget that the people we love will be facing one of the most
emotionally trying times of their life. Yes you need to take care of the financial aspects of your estate but you
should also try to incorporate the emotional needs of your loved ones.
Something you should consider is writing an "ethical will". An ethical will is not a legal document, it is like a final
chance to communicate with you loved ones. Ethical wills are a way of sharing some of the wisdom you have
accumulated over your lifetime. It can be a short letter to your heirs or a long document that includes things
like your family history, a statement of your beliefs, and stories about your life that shaped the way you lived.
You can include things like where the money your leaving came from, what it meant to you, and how you would
like to see it used. If your children or grandchildren are very young, writing an ethical will can provide a link
that can reach through the years.
The hardest part is always where to begin. Some ideas that can get you going might be:
* I am most grateful for..
* The most important gift I ever received..
* My parents taught me..
* From my grandparents I learned..
* What mattered the most in my life..
Look at an ethical will as an opportunity to connect your life with future generations, it can be a satisfying
experience.
Letter of Instruction
In this months issue of Money Magazine, Jean Chatzky has a good article about writing a letter of instruction to
your heirs to help them sort through your affairs should you die. Jean makes the point that often heirs are
unaware of where to look to find important documents or whom to contact to find information on your estate.
While a letter of instruction is not a legal document, it can help your children or other heirs during a very
troubling time. Some of the items Jean suggests for inclusion are:
* The location of estate planning documents (wills,trusts.etc.)
* The location of financial documents (tax returns,deeds,bank statements)
* The location of Safe deposit boxes and their keys
* Life insurance policies LTC policies
* Investment accounts and contact information
* Phone numbers for accountants, attorneys, financial and insurance advisors
* Funeral home information if you have made arrangements
Some other items that come to mind:
* Information and passwords for email accounts
* Information and passwords on home security systems
* Information and contacts for pensions
While planning for our own deaths is never something we wish to dwell on, making life easier for our heirs is
probably a common goal. Maybe looking at it in this light will make this wonderful idea easier to implement.
Medicaid Rules and Gifts
With nursing homes care running north of $40,000 per year many families who have a "comfortable
retirement" could find themselves facing the prospect of spending down a large chunk of their savings and
investments should the need for nursing home care arise. Without long term care insurance some will find
their only option may be to apply for Medicaid assistance.
While Medicaid rules vary from state to state, typically a person needing long term care benefits must spend
down their assets to $2,000. If there is a surviving spouse they can usually keep the family home (but states
can consider home equity in excess of $500,000) , a prepaid burial plan, and between $50,000 and $100,000
in resources.
Medicare rules are separate from and independent of tax rules. You may know that you can gift $12,000 per
year to anyone you choose through the tax code, but did you know that a gift you made to your children within
a five year period are considered assets that could disqualify you or your spouse for medicaid benefits?
If you or a family member are facing the prospect of nursing home care, and you do not have long term care
insurance, you should quickly consult with an Elder care attorney, to help guide you through the complex set
of rules for your state Medicaid system. But as they say an ounce of prevention is worth a pound of cure, so
the prudent approach is to plan ahead time.
Why bother with a will?
While going through some files this past weekend I came across this letter written tongue in cheek to
someones heirs. It seems worthy of sharing.
Dear loved Ones,
While I understand that I have the right to determine who gets my property when I die, I have decided to let
the fair, just and impartial court system make that decision for me. I have decided this, even though it might
mean that people I never knew or liked could wind up as my heirs. I also understand that there are perfectly
legal and legitimate ways of minimizing the estate taxes that you will have to pay. However, because of our
governments kindness and generosity to me over the years, I have decided to let our beloved Uncle Sam take
the biggest share of my assets that he can.
In addition, rather than decide who should take care of my children, I think that I would rather have my family
fight about it publicly, and then let the courts go ahead and appoint anyone they like, not necessarily one of
you. I would also like you to know that I think lawyers, as a group, are hugely underpaid and under loved, and
so they should have a large share of my assets.
Finally, I want all the private details of my financial affairs to become part of the public record, so that anyone
who is even remotely interested, for any reason, can simply look it up.
Good luck and much love.
Naming A Trust As An IRA Beneficiary
Sometimes there are good reasons to name a trust rather than an individual as a beneficiary of your IRA.
Maybe you have a child who you fear will spend the money they inherit wastefully, or maybe you have a
special needs heir and a direct inheritance would affect their qualifications for aid, maybe there is a second
spouse you wish to provide for but children from a first marriage you want to protect also.
All of these goals can be achieved and the "stretch out" provisions of IRA rules preserved if you do some
careful planning.
IRS rules only allow individuals to inherit IRAs without triggering immediate taxation. However if you structure a
trust as a "see through" trust you can exert some control without losing the tax benefits of a "stretch IRA". To
qualify as "see through" the trust must:
* The trust must be valid under state law;
* The trust must be irrevocable or become irrevocable at the death of the grantor;
* The trust beneficiaries must be identifiable individuals
* Documentation must be provided to the custodian of the IRA by Oct. 31 of the year after the owner dies
The trust must pay out the IRA's required minimum distributions to the beneficiaries or be subject to taxes at
the trust level which reach the maximum tax rate (35%) with only $10,000 of income. The trust must base the
RMD on the age of the oldest beneficiary so if there is a large difference in the ages of your desired
beneficiaries you may want to consider splitting the IRA to allow a lower RMD for younger beneficiaries.
Having a trust as the beneficiary of your IRA can provide many benefits, but the price of making a mistake is
high, so be sure to consult with a qualified legal and tax advisor before choosing this option.
The responsibilities of a trustee are often complex and time consuming. Managing trust assets often entails
familiarity with tax law, real estate markets, security markets, and financial planning. Often it is the oldest or
most responsible heir who is given this duty. Here are some things you should consider before deciding on a
trustee.
1. Do you trust this individual? The trustee will need to put your wishes and vision of fairness above any of
their own. You must have absolute trust in their integrity.
2. Is the person willing? You should be sure they have the time to devote to all the many details that can and
surely will arise in performing the duties of trustee. If it would be a burden on their family or career let them
know it is okay to decline.
3. Would you let them handle your affairs today? If they are lacking in the knowledge and expertise now, it is
doubtful they will be a suitable choice in the future.
4. Will this choice create ill will among the surviving beneficiaries? The trustee must be able to work through
disagreements with and among other beneficiaries. Sometimes family dynamics can make it nearly impossible
for the trustee to effectively discharge their duties. Don't make a choice that could lead to ill will among family
members.
5. Is this person willing to accept the legal ramifications of serving as trustee? Most states have laws requiring
high standards of performance by trustees. You should discuss the potential liability with any prospective
trustee.
If you have a suitable relative or heir you should talk about your choice with your other heirs and beneficiaries.
Let them know why and how you made your choice. This could alert you to unforeseen problems and also
make sure that everyone is working from the same page.
It could be that after asking yourself these questions you may determine that a corporate trustee would be
better for all. The most common reason for not naming a corporate trustee is expenses, but don't be penny
wise and pound foolish. The reason you went to the trouble of setting up a trust is to protect your loved ones;
a poor choice of trustee could make it all a waste.
Your Ethical Will
When you first think about estate planning it is often only about dollars and cents. Who gets what, how to
minimize taxes, how to avoid probate. We often forget that the people we love will be facing one of the most
emotionally trying times of their life. Yes you need to take care of the financial aspects of your estate but you
should also try to incorporate the emotional needs of your loved ones.
Something you should consider is writing an "ethical will". An ethical will is not a legal document, it is like a final
chance to communicate with you loved ones. Ethical wills are a way of sharing some of the wisdom you have
accumulated over your lifetime. It can be a short letter to your heirs or a long document that includes things
like your family history, a statement of your beliefs, and stories about your life that shaped the way you lived.
You can include things like where the money your leaving came from, what it meant to you, and how you would
like to see it used. If your children or grandchildren are very young, writing an ethical will can provide a link
that can reach through the years.
The hardest part is always where to begin. Some ideas that can get you going might be:
* I am most grateful for..
* The most important gift I ever received..
* My parents taught me..
* From my grandparents I learned..
* What mattered the most in my life..
Look at an ethical will as an opportunity to connect your life with future generations, it can be a satisfying
experience.
Letter of Instruction
In this months issue of Money Magazine, Jean Chatzky has a good article about writing a letter of instruction to
your heirs to help them sort through your affairs should you die. Jean makes the point that often heirs are
unaware of where to look to find important documents or whom to contact to find information on your estate.
While a letter of instruction is not a legal document, it can help your children or other heirs during a very
troubling time. Some of the items Jean suggests for inclusion are:
* The location of estate planning documents (wills,trusts.etc.)
* The location of financial documents (tax returns,deeds,bank statements)
* The location of Safe deposit boxes and their keys
* Life insurance policies LTC policies
* Investment accounts and contact information
* Phone numbers for accountants, attorneys, financial and insurance advisors
* Funeral home information if you have made arrangements
Some other items that come to mind:
* Information and passwords for email accounts
* Information and passwords on home security systems
* Information and contacts for pensions
While planning for our own deaths is never something we wish to dwell on, making life easier for our heirs is
probably a common goal. Maybe looking at it in this light will make this wonderful idea easier to implement.
Medicaid Rules and Gifts
With nursing homes care running north of $40,000 per year many families who have a "comfortable
retirement" could find themselves facing the prospect of spending down a large chunk of their savings and
investments should the need for nursing home care arise. Without long term care insurance some will find
their only option may be to apply for Medicaid assistance.
While Medicaid rules vary from state to state, typically a person needing long term care benefits must spend
down their assets to $2,000. If there is a surviving spouse they can usually keep the family home (but states
can consider home equity in excess of $500,000) , a prepaid burial plan, and between $50,000 and $100,000
in resources.
Medicare rules are separate from and independent of tax rules. You may know that you can gift $12,000 per
year to anyone you choose through the tax code, but did you know that a gift you made to your children within
a five year period are considered assets that could disqualify you or your spouse for medicaid benefits?
If you or a family member are facing the prospect of nursing home care, and you do not have long term care
insurance, you should quickly consult with an Elder care attorney, to help guide you through the complex set
of rules for your state Medicaid system. But as they say an ounce of prevention is worth a pound of cure, so
the prudent approach is to plan ahead time.
Why bother with a will?
While going through some files this past weekend I came across this letter written tongue in cheek to
someones heirs. It seems worthy of sharing.
Dear loved Ones,
While I understand that I have the right to determine who gets my property when I die, I have decided to let
the fair, just and impartial court system make that decision for me. I have decided this, even though it might
mean that people I never knew or liked could wind up as my heirs. I also understand that there are perfectly
legal and legitimate ways of minimizing the estate taxes that you will have to pay. However, because of our
governments kindness and generosity to me over the years, I have decided to let our beloved Uncle Sam take
the biggest share of my assets that he can.
In addition, rather than decide who should take care of my children, I think that I would rather have my family
fight about it publicly, and then let the courts go ahead and appoint anyone they like, not necessarily one of
you. I would also like you to know that I think lawyers, as a group, are hugely underpaid and under loved, and
so they should have a large share of my assets.
Finally, I want all the private details of my financial affairs to become part of the public record, so that anyone
who is even remotely interested, for any reason, can simply look it up.
Good luck and much love.
Naming A Trust As An IRA Beneficiary
Sometimes there are good reasons to name a trust rather than an individual as a beneficiary of your IRA.
Maybe you have a child who you fear will spend the money they inherit wastefully, or maybe you have a
special needs heir and a direct inheritance would affect their qualifications for aid, maybe there is a second
spouse you wish to provide for but children from a first marriage you want to protect also.
All of these goals can be achieved and the "stretch out" provisions of IRA rules preserved if you do some
careful planning.
IRS rules only allow individuals to inherit IRAs without triggering immediate taxation. However if you structure a
trust as a "see through" trust you can exert some control without losing the tax benefits of a "stretch IRA". To
qualify as "see through" the trust must:
* The trust must be valid under state law;
* The trust must be irrevocable or become irrevocable at the death of the grantor;
* The trust beneficiaries must be identifiable individuals
* Documentation must be provided to the custodian of the IRA by Oct. 31 of the year after the owner dies
The trust must pay out the IRA's required minimum distributions to the beneficiaries or be subject to taxes at
the trust level which reach the maximum tax rate (35%) with only $10,000 of income. The trust must base the
RMD on the age of the oldest beneficiary so if there is a large difference in the ages of your desired
beneficiaries you may want to consider splitting the IRA to allow a lower RMD for younger beneficiaries.
Having a trust as the beneficiary of your IRA can provide many benefits, but the price of making a mistake is
high, so be sure to consult with a qualified legal and tax advisor before choosing this option.
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