you got a hot white chick pregnant?
also consider the flexibility a trust can provide. Ours specify not only beneficiaries but what the funds are to be used for, ages for distributions, etc. If you want more control than just directing the money/assets then consider getting the work done.
If you live in an estate tax state you should really consider this, as some states (eg-MN) tax at a value over $1m, so even though you are under the federal minimum you still have to deal/plan for that.
I dont worry about frequent meetings/review, just keep an eye on big changes in your life and headlines in the WSJ…adjust as needed and not pay along the way for nothing.
^ geo & greenie, I think you might be talking apples and oranges here.
To my knowledge, if you have a term life policy and pay the premiums and name somebody else, say krazykanuck, as the beneficiary, I get the money tax free.
I think things go all haywire when you start having a whole life policy, or something with a surrender value.
oops. never mind, I think. I forgot about the inclusion in gross estate. Is there any difference here between term and whole life policies?
If you have assets that are not TOD(Transfer On Death), states have different laws on TODs, you need a revocable trust whether you have ten thousand, or 10 miliion or more. TODs actually supersede everything, wills, trust, probate. You REALLY want your estate to avoid probate. I know of no state that allows TODs for real estate, therefore, if you own real estate, create a living trust and put your house in it. You do NOT need to pay a lawyer for a simple estate. There are many will and trust kits for sale for less than $40. If you can read, you can set your own up and pay an attorney $300 if you so wish to review. Not really necessary. Many of the boilerplate trusts have been tested in court many times where you never know if the one your attorney is using has. Selfish not to have a Living Trust in my opinion. Creates a lot of hassle for your family if you do not have a trust. Assuming they cared about you, they really would like it be as simple as possible after you pass. Texas might not have estate tax but they do have probate fees which are essentially a tax. Florida same thing. The ignorant and/or lazy get dinged. Sad really.
Remember–the life insurance proceeds are excluded from income tax. They are still subject to estate tax. That’s why, if you have an estate that will exceed the exemption amount, you need to get it out of your estate.
Its funny that America, of all countries, has an estate tax, while us socialist pigs allow us to provide huge legacies to whoever we please.
Although I have not yet practiced what I’m about to preach, anyone with 2 nickles to rub together should really consider setting up a revocable living trust.
Recovable limits the tax benefit, doesn’t it? 401(k)'s can have beneficiaries right? What about Roths? So trusts are really just in excess of that. I’m actually struggling with why I’d do a trust at all in Canada without an estate tax. I understand what you’re doing down there.
In America, Irrevocable, in addition to a revocable, would be a consideration if you are over estate tax exemption limits. EVERYONE could benefit from having a revocable and hence avoid probate. I know nothing about Canada. IRA and 401k are “TOD” accounts, and will avoid probate, and the need to be in a trust, as long as the beneficiary forms are completed.
^There’s lots of reasons to do a trust. EG, the QTIP trust. Stands for Qualified Terminal Interest Plan.
So that Geo is married to Gea. and they have Geo Jr. and Gietta. Geo works his whole life and finally, upon his deathbed, has accumulated the exorbitant sum of $100. He dies intestate (without a will), and the next day, Gea marries JDV.
Only a week after Gea and JDV get married, Gea dies a tragic and unfortunate death. So the $100 transferred on Geo’s death to Gea, then transferred again to JDV–and Geo’s kids get zero. Nada. Nothing. Zilch.
If the money were in a QTIP trust, then the wife gets the benefit of the money while she’s alive, and the kids get the corpus when she dies. This ensures that some unscrupulous fellow can’t get his hands on your hard-earned money, leaving your kids high and dry.
This is just one example of how and why trusts are formed. They’re useful, but the administration and tax fees can be high, so you need to ensure that you’re getting some benefit out of it.
Do tell.
My understanding is that in Canada assets are deemed sold at death and assets in trust are deemed sold every 21 years. This creates a disincentive towards locking assets up in a trust and, as somebody who knows some wealthy heirs, one of the quickest ways to spread the wealth is to have a person own it outright.
The interesting thing about estate (death, whatever) tax is that unlike sales tax or income tax it does not take from the person that earned it. It takes from the person that is getting something for nothing. I definitely don’t like taxes, but of all the forms of taxes I find estate tax to be more favorable than most. It doesn’t tax the person who worked to earn the wealth and it prevents the rise of aristocracy that we’re seeing lately. I find it interesting that people hate the “death tax” so much.
But, don’t get me wrong. Rich people buy a lot of investments, so the concentration of wealth may be good for my career.
I agree with this wholeheartedly. Of all the taxes that I hate, I hate this tax the least. Why should Alice and Christy Walton be worth a collective $50 billion simply because they chose Daddy wisely?
But like Brain, I’m in the business of reducing my clients’ taxes, including estate taxes. So as long as they’re there, I’ll keep trying to find ways around them.
This is the problem with the estate tax. Anyone with money will easily avoid it.
FTFY
Generally the ones who get hooped by the estate tax are people with illiquid family assets or businesses that are worth surprising amounts. Farms, closely held businesses, etc.
Daddy gets to choose if Christy gets the money. Christy doesn’t get to pick her daddy. I’m working to give christy x dollars. That is my desire. Why should the feds get more of it if i give it to christy than if i blow it on weed. I find the estate tax particularly reprehensible. Profitting on the deaths of citizens bothers me. Balance the budget. Kill the bbillionaires. Also punishes families with short life spans. Higher turn over. I’ll just marry my friend’s daughter and he’ll marry mine and we won’t have to worry. The feds get nothing.
There are a few big reasons:
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You avoid probate, and the associated fees - the assets immediately tranfer to the benficiary upon your death and there is no public disclosure of the assets.
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You maintain control of the assets and add or remove them as you desire (the downside to this is that there is no creditor protection, which is why a combination of revocable and irrevocable trusts can be beneficial under certain circumstances).
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Assuming you named yourself as the trustee, your co-trustee gains immediate control of the assets in the event that you become mentally disabled. This could also be accomplished via a durable power of attorney, but the co-trustee structure is far more efficient in the event that assets need to be disposed of prior to your death.
Everything is not perfect though:
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You need to re-title any assets you move into the trust to show the trust as the owner, not you.
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Your estate will still pay the death tax.
Because that is what daddy wanted. He could have given the company to you. He chose not to. His company, he gets to decide. Why should the government get a portion of his company at death of all times?
For those who are “okay” with estate taxes, would you be equally okay if you were a business owner and once you hit 65 the government came in and made themselves a 40% owner?