I thought about this for a few days and came back to comment. Even one Trustee owes a fiduciary duty to the beneficiaries. As a contrast, does the Executor of a will owe a fiduciary duty to the dying party or to the other heirs? I only have a few examples on which to base my opinion: my grandparents, my uncle, my dad and myself. Thanks @bluebayou for making me think through this issue, and how I plan to discuss this issue with my kids.
3 Likes
both. (not a lawyer).
Iās my understanding that the roles of Trustee/Exector/Personal Representative is the same: implement the wishes of teh deceased as laid out in the Trust doc(s) and/or Will. (someone with a Trust shoudl also have a Will with a pour-over clause).
And yes, that is a fiduciary role for the beneficiaries named in those docs. If they are not named, or referenced ('all of my children" ā really bad drafting, btw) they are not heirs.
fwiw: I was sole Trustee of my folksā family trust, and as fiduciary, I sent out (bimonthly) a spreadsheet listing every $ in and every dime I spent to all of the beneficiaries. We all had moved away and were several hundred miles away from the family home. If folks had had a co-Trustee, every document would have required multiple signatures. Perhaps nbd if the co-Reps live close by, but its an Admin hassle even if both Co-Reps agree on everything.
3 Likes
I had a pleasant realization yesterday. Our mortgage bill came and I glanced at the remaining balance (now under $10,000). And then the maturity date - May 2030. Wait, I thought, that doesnāt calculate. Weāll be done sometime next year. My sad brain remembered that when I paid down $50K of the balance several years back, we chose earlier maturity instead of smaller payment. But the statement shows the original 15 year mortgage maturity date.
So turns out we will finish paying our mortgage next summer - hooray! Thatās a nice expense to eliminate. Extra money staying in our accounts that isnāt taxable income - hooray again! We have nothing against the RMDās that started last year but boo on those taxes. Weāre using the tips from these boards of withholding from the IRAās in the final month to cover safe harbor, and using QCDās to help take down some taxable income.
13 Likes
Trust vs. POD/TOD:
We recently interviewed 2 attorneys to update our will. Both suggested trusts with children as their own trustee. I still donāt understand the value of a trust if a child is named as their own trustee. If you name an independent 3rd party trustee to oversee timing or use (for whatever reasons), there is independent oversight. But an independent trustee (assume corporate, bank, etc.) can be VERY expensive if administered over time. If children are named as their own trustee, donāt they have total control over funds? Who would monitor timing or use? If so, then why bother with a trust at all, and instead make assets POD/TOD? POD/TOD also avoids probate in most cases, maintains privacy, and eases distribution.
3 Likes
Weāre also in the initial phase of this process so I will follow closely to responses you receive.
When FIL passed in 2024, he did not have a will or trust for a sizable assets. He was quite frugal all his life, so paying professional fees was not his MO. He did TOD for properties and beneficiaries for Vanguard brokerage accounts. To our surprise, all of it went very smoothly. H said Vanguardās process was very smooth. When I mentioned this to a neighbor who is a retired estate planning attorney, he said the one downside is if one of the (sons) passed away before FIL, the sonsā spouse/children would not have been eligible for the TOD of properties.
2 Likes
We are (so far) in similar views about trusts because our investements are all set up with co-owner (or beneficiary) as spouseā¦. then alternate beneficiary kids 50/50 split. (There would be benefit with house in a trust, but itās unlikely weāll still own it down the road when only one leftā¦ plus probate pretty straightforward in our state.).
I could certainly envision situations in other families where there are many kids/grandkids, and defining the splits (perhaps with addendums over time) within a Trust could be more efficient.
2 Likes
the attorneys are correct. A responsible child can easily serve as Trustee.
In some states, a Will will do the exact same job as a Trust.
The reason for a Trust is to avoid state Probate.
-
For the rich and famous ā think Hollywood A-listers ā a Trust gives their heirs privacy on the deceased assets. (Probates are public ā remember Micheal Jackson?).
-
Probate in some states can be expensive.
-
Probate in some states can take a long time. (CA, for example, is not expensive but can take months to get a simple hearing ā just slow. In contrast, Iāve read that the court clerks in NJ are extremely helpful and will help you complete the probate forms.)
For simple estates, PoD/ToD could work well. But note, not all states allows ToD for real property (aka your home).
Beyond that, another reason for a Trust is to ensure that your assets go only to your heirs and their decendents and not their spouse, unless your child wants to share. For example, you have a Trust and you leave your assets into a separate Trust for your kid. That way, if your kid gets divorced, those ā your former ā assets can be separate. Or, if kidās spouse gets into a dependency ā drug, alcohol, gambling ā your former assets are protected for your grandkids. If your kid dies unexpectedly, your former assets go to your grandkids, not kidās former spouse who might remarry. Then, of course, there is qualifying for Medicaid if a spouse needs LTC. (Yes, rare events, but life happens, and a proper Trust will take these into account.)
5 Likes
Not sure how it works but we are the John and Jane Doe Living Trust with John and Jane Doe, trustees
Iām not sure if this link will work, but Taylor is one of the āoriginalā Bogleheads, I believe, and his thread made me think of this thread
3 Likes
Taylor is still alive at 102 and giving great advice!
6 Likes
Template -
For Immediate Action:I would like my remains to be donated to the University of Miami Medical School to advance medical science and to save everyone trouble and expense. Donor forms enclosed. No funeral.
Documents you will find in my blue binder marked āFinal Instructionsā:
Living Will
Health Care Declaration/health surrogate
Consider a āDo Not Resuscitateā form.
Authorization for Release of Protected Health Information
Last Will and Testament
Names of physician, attorney, accountant, banker and advisors
Birth Certificate
U.S. Army Discharge
Real estate and Auto Titles
Social Security card and #
Drivers license and #
Life Insurance companies & policy #
Other insurance companies & policy #
Health Insurance card and #
Civil Service records and card #
Credit card and #
Mortgage company and #
Bank account statements
Safe Deposit Box
Mutual fund statements and contact person.
Annuity companies to be notified and #
Passport and #
Real estate owned
Receivable and payables.
Passwords
Old tax-returns & information for preparing last tax return
Name and address of relatives and friends to be notifiedThank you for your love and kindness.
Thatās a good list he wrote!
With āreceivable and payablesā these days, I would also be sure to spell out all the things that are on auto-pay, whether thatās via a credit card or a bank account.
7 Likes
And heās living in a VERY nice assisted living facility! He saved for it, and heās enjoying it.
3 Likes
Had our 2nd meeting with a new estate attorney to update our trust. Itās been an interesting experience and a realization that itās the little details that matter. One off the top of my head is a provision to add that if one of our kids passes before us their share goes to their children with age restrictions and also a provision that if necessary a special needs trust set up if any child needs this. This protects the childās ability to get services. We might have a GS who might need such a trust. I only mentioned his special needs in conversation to the attorney and he said that is valuable information for him to know in helping us prepare our trust.
A couple of ideas that came up- anyone have experience setting up an IDGT for investment properties? Specifically with the promissory note feature?
4 Likes
Ditto to Bluebayouās post about trusts and adult children. Very similar to our attorneyās explanations.
2 Likes
Interesting. I have an Intentionally Defective Trust that is Beneficiary, which was established by someone else. This serves both to take assets out of the estate but to provide substantial asset protection if set up carefully (one of the reasons it was established by someone else). One of our investment properties was owned by the trust (until we sold it).
Google Gemini gave me a quick explanation of why one might use an Intentionally Defective Grantor Trust (IDGT). This accomplishes an estate freeze ā any growth in the value of the assets placed in the IDGT are exempt from estate taxes ā but because the Trust has to pay you as the Grantor market value for the property, todayās asset value is still part of the estate. The Trust can pay for it with a promissory note, but I donāt think it removes todayās asset value from the estate. If properly structured, it should provide some asset protection. One other advantage: You as grantor pay the taxes rather than the trust so you are transferring additional wealth to the trustās beneficiaries.
Keeping the growth out of your estate only has value if your combined estate will be greater thand $30 MM, although there might be some lumpiness if the growth in the value of the asset or a different asset made it hard to transfer divide the estate into bundles of less than $15 MM each.
One the downside, the heirs lose the value of the automatic step-up in basis on your death. So, I think there is a tradeoff.
Is there a trust structure that you could use that does not lose the value of the automatic step-up in basis and keeps the asset out of probate?
2 Likes
Iām still in the learning and knowledge gathering stage. What I understood is that the asset is no longer part of your estate for estate tax purposes. Would consider it as a tool to pass an asset on to the next generation while still being able to use the income generated by the asset. The income being the payment on the promissory note. Whatever part of the note not paid upon the grantorās death returns to the estate and is subject to taxation.
1 Like
Some famlies create Trusts for tax reasons. But with the federal estate tax exemption at $13.99 million, few need to worry there. Some states do have other considerations at lower cutoff, but still not relevant for most families - https://taxfoundation.org/data/all/state/estate-inheritance-taxes/
2 Likes
My understanding is whenever the asset is no longer part of your estate for estate purposes, you lose the step-up benefit. Simple logic; if you donāt pay estate tax, you donāt get estate tax exemption benefits, roughly put. If you are the type who holds assets for a long time and let it appreciate, losing the step-up may more than offset any benefit of employing fancy trusts to avoid estate tax. With most living trusts, you donāt save estate taxes by setting up a trust. You pay the same tax with or without.
1 Like
Iām clear in understanding that setting up a living trust doesnāt avoid taxes. It does avoid probate.
As for the other issue Iām trying to learn more which is why I asked here. It doesnāt look like something Iāll use but was interested in getting educated.
2 Likes
If anybody has Allstate Umbrella policy, keep an eye on your premium costs. We do all of our Allstate (home, auto, umbrella) through the same agency. Everything online/autopay so we did not notice the 68% jump until looking at the checking account.
For our $2M policy (overkill, but it used to be more affordable )
2021: $373
2022: ā
2023. $483
2024: $598
2025: $1006
We have had no claims, and the Allstate agent says this has nothing to do with our riskā¦ just everybody is seeing higher rates due to recent payout history etc. They also offer policies from RLI, though a quick google search makes it seem better for rental home owners(?)
The reason we have this policy is peace of mind. Also deterrent against attempts frivolous litigation if we have Allstate lawyers. But this increase seems crazy.
8 Likes