These taxes work quite a bit differently
and are subject to different exemptions and exclusions and who pays the tax, the dead or the living, is different, too. Some basics:
Ignorance is never bliss when it comes to financial matters. 
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That’s an important point. Trusts that are shielded from paying estate tax don’t get step up in basis. Depending on the appreciation, one may be better off to pay the death tax and get the step up than not.
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IRAs, trusts, and taxes.
I’m stuck on this point. We redid our wills and trust twice in the four months before my husband died. At the time, I wanted the IRAs to go into a trust so that the RMD income could be paid out on schedule to the heirs. (My husband’s inheritance from his parents, and the funds which our kids received were 1/4 and 1/9 portions of various funds — and it just seemed like too many “small” funds were generated).
In the few months that have passed, following DH’s death, I now think my thinking was not good. They have proven themselves to be quite capable — and I they could reasonably handle the money.
We/I had intended that that they would receive the money in big chunks based on the age of the younger. (And she’s super competent).
Now I am thinking that I should change the IRA beneficiaries with Fidelity — and those funds would not be included in the trust. That should lessen the tax bite.
What’s the thinking of others on this? Is anyone else having a trust hold the IRAs?
Not counting the house, assets are currently 50-50 between retirement and non-retirement accounts. (We also have a direct allocation for grandchildren — and that would be less direct money for each if only the non-retirement funds go into the trust).
Now I am also starting to be concerned with Pennsylvania’s inheritance tax — it’s 4.5%. I’m considering a move there and one D lives there. If I head that direction, I’ll meet with a lawyer first.
I have never thought so much about trusts as I have in the past six weeks. My son’s MIL is dealing with a couple of them, and using me as her sounding board. They seem like nothing but trouble for her. I always thought trusts were the way to go – I mean, it’s in the word 
what’s better than trust? – but if they are written too restrictively, it’s a problem. If written too vaguely it’s a problem. And she’s dealing with one of each. I was considering one but am now totally gun-shy.
ETA: Will be following this discussion closely.
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By putting your H’s IRA into the Trust, you missed out on the Spousal payout. (essentially, you inherit his but use your payout rules)
Putting retirement accounts into a Trust can work well when the heirs are young, or if special needs and will require life-long care.
But with IRA’s, there are a lot of working parts and different rules.
Personally, our IRA’s are Spouse is primary beneficiary, and kids are Secondary per STIRPES. PoD/ToD works extremely well for simple estates.
Revocable family Trusts are popular in CA where probating a will can take months, just to get a hearing. Trusts are also popular in states with high probate fees.
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I agree. IRA’s are better off kept out of trust in most cases. We also have IRA going to spouses 100%.
Probates can be simple in some states, maybe in most states. I heard in CA, NY and FL(?), probate is complicated. Trusts may not be quite as useful in other states. If you own properties in more than one state, it could also help.
@Mom22039 It’s 4.5% if it goes to your children. Otherwise, the tax is higher, except for the spouse.
I’m in my Fidelity Account as I type here.
The non-retirement accounts are titled to the trust.
The retirement accounts from DH are now titled to me (spousal).
The next beneficiary is listed as the Trust. And, that’s something I can change.
I’ll keep reading!
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So much to think about. Maybe I should move to Delaware, not PA!
Only way I know of to reduced taxes on RMDs is QCDs. Nice option if you are charitably inclined.
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PA doesn’t tax retirement income…so they get it when you are gone!
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@Iglooo, it depends upon what kinds of services you require, but a typical FP would charge 1% of assets for a small asset value and it would decline a little bit as things got larger. This could be lower if a) they were just managing a portfolio of fixed income investments; b) you have lots of assets. I am finding an investment manager and possibly an FP for someone with to manage $6 MM and talked to a few FPs. He first said his firm charged 1% of assets. My guess is many people say yes to this. When I explained that this account would not need a financial plan or lots of service, just competent tax-efficient money management, he told me that his firm would charge 1% for the first $3 MM, which is essentially 0.5%.
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DAF question - Can you donate shares of appreciated stock to your adult child’s Donor Advised Fund?
Good question. It would seem sensible that this would be allowable. And, I think I may have done something like that – with a friend/business colleague who preferred a payment directly to his DAF than to him. But, I would check with your tax person.
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1%! We withdraw about 2% a year. If we hire a FP, we’d have to withdraw 3% a year making the fee the single biggest expenditure in our budget. Even if they halve the fee, it’d still be the biggest item forcing us to withdraw substantially more.
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Our advisor isn’t that aggressive. But he does try to give us a reality check and point out the difficulty so many people have in switching from saving mode to spending mode. It’s a hard transition, especially when there is no date certain on which you “graduate.”
Our advisor points out that his clients like us who are worrying about having enough for various contingencies are not the ones he is worried about. It’s the ones who retire without a second thought, confident it will all work out.
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This is how our IRA beneficiaries are listed, too.
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Here’s an interesting article in WSJ today partly relevant to our discussion here.
https://www.wsj.com/personal-finance/money-habits-parents-financial-literacy-117c8e50?st=0shlo16a0xdm549&reflink=desktopwebshare_permalink
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Yes, many FP will charge less after a substantial amount of managed money - ours after $1M has a ‘sliding scale’ with charging.
Beyond our somewhat well-oiled financial plan - cash flow and investment; we have yet to get into some of the other things to have the overall ‘plan’. Now that we know we will stay more years in our current state and area, we can go forward with formalizing more things.
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The easiest way to reduce the taxes from RMDs is to stop having other taxable income.
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For us, our taxable income will be social security, a small pension which I get, and interest/dividends on non-retirement accounts. These 3 income sources are not things we want to make smaller. They are what they are.
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