How Much Do You think You Need to Retire? What Age Will You/Spouse Retire? Investment and General Retirement Issues (Part 3)

Parent Cafe
2421

Our executors are our kids. However, the trustee of our trust is the same age as ShawWife (and I think she is the trustee on ShawSon’s trust). There is also a protector who can remove the trustee. He is my age. We do need to find a successor trustee and a successor protector from our kids’ generation.

Our financial planners and our accountant are younger. The estate planning attorney left the firm that we use. I need to find someone else and this causes me to think I should be looking for someone younger.

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2422

We are looking for a new estate attorney now as current wills are dated. Age and succession are part of our criteria. The same issue can arise with a young sole practitioner.

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2423

Same here except D is our executor. The kids are the trustees of their own trusts. They are free to do whatever they want with the money after I am gone. They are adults and responsible for their own decisions.

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2424

We had an analogous situation with my mom and her medical care. She was devoted to the small, understaffed, 3rd rate local hospital that was completely unable to deal with her condition. It was the hospital she had used all 90+ years of her life.

The best thing was when we convinced her to travel a total of 20 minutes (!) to the university hospital in the state capital. They had state of the art methods, equipment, lots of specialists, etc. Her quality of care jumped exponentially.

People just stick with what they’re used to, be it lawyers, hospitals, etc. Change can be hard.

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2425

It is not just change - it is placing trust in MDs or care based on prior experiences, even when things change and perhaps not listening to the tiny voice. I made a few health care decisions with one MD and it almost cost me my life - I went from stage I to stage IIIa aggressive cancer because of his arrogance/ignorance and not moving my mammogram up 10 weeks because ‘it is a harmless cyst’. I probably had a 50-50 survival chance, dropping from almost 100%.

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2426

Yes! Also, younger professionals have a higher chance of moving to a different location or even pivoting in their professional field of work. I’m bummed that a great lawyer I’ve used left private practice altogether and is now employed by a local organization. Ditto some MDs leaving practice for work in biotech.

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2427

We met with an estate attorney after moving to California to update our will (Illinois will had been done when son was still a minor). She recommended a family trust for the house (to avoid probate). We updated all financial accounts to TOD etc. The process was very thorough and we have a big binder with numerous sections covering health stuff, end of life stuff, etc.

A couple of years or so ago I was checking her contact info and discovered online that she had been appointed as a judge and a former junior partner now had her practice. Then earlier this year I couldn’t find that practice. Turns out that guy had opened his own practice a block away.

I was able to contact him and establish that he did have our account and all records. But you would think someone would have let us know of these changes.

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2428

Using a fee-only advisor in retirement is certainly not the right answer for every couple. But for those who are considering it, I’ll mention that Mercer has good emphasis on estate planning. Will and Trust services are available without extra charge - “In fact, we’re such firm believers in the importance of having an estate plan that estate planning is included as part of our investment advisory fee.”

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2429

@busdriver11 you’ve mentioned your experience with a Delaware Statutory Trust. Can you elaborate more on the cons. I don’t think it’s for us but it’s been suggested as a way to get out of the rental business. Anyone else have experience with a DST?

2430

Yes, and we are still stuck with that dang DST, don’t do it! Anyone! I’m busy right now and forgot my glasses so I can barely see, but I’ll expand on the reasons why not later on today.

2431

That’s interesting, we have decided to sell our rental properties and the plan is to roll the proceeds into DSTs to defer the taxes.

For both my house and one of my kids’ house, the insurance company flew a drone over the roof, and insisted that the tiny amounts of moss on the roof be cleaned off or they would not renew the insurance.

My neighbor’s insurance company required them to power wash their house. How would a dirty house affect a claim? Insurance companies are out of control. :roll_eyes:

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2432

I know a lot of people like RIAs because they’re “fiduciaries" and dont sell commission based products.

People should do the math. Are you better off paying commissions once on a $100k or paying a 1% fee every single year and if your account grows to $1 million you’re continuing to pay the 1%.

Do you know what type of fee structure advisors prefer? A fee based model where they can continue to charge 1% every year because odds are they’ll make a hell of a lot more money over the long run.

And if you do have a large amount of assets, you may want to negotiate the 1% to a lower amount. Financial services fee structure is heavily compressed.

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2433

Vanguard, Fidelity and Schwab are really driving down fees which has a ripple effect in the industry. And that’s good for the consumer.

I’ll also say that a lot of RIAs think they’re better advisors. I dont believe that. Some are and some aren’t.

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2434

I totally get wanting to get out of the rental market. We were tired of dealing with water leaks and tenants. We didn’t like raising the rent, so we rarely did, but costs kept moving up. We were lured in by the tax deferral of the DST, and diversified income from real estate without having to be landlords, so we 1031’d into a DST. We are with a very large, reputable company, so I imagine their DST’s are as good as it gets. However, here’s what we didn’t realize until it was too late. We might have figured out some of this if we’d checked into it more closely.

Going into the DST, there was a 4% fee on the amount invested (and apparently 4% is better than most). There is a 2% fee when you get out of it. So…..we’re paying 6% in fees to defer paying 20% in taxes, which, by the way, we’re going to have to pay anyways when the DST goes full cycle and we get our money? Lovely!

The DST that we’re in generally goes full cycle in 4-6 years, and we’ve been in it for 5 years with no end in sight. From the investors meetings, the information we have is that they have no idea (or they’re not telling us) when they are planning our DST’s to go full cycle, and they say per the documents that they can keep our money for up to ten years. They only have to give us 60 days notice of going full cycle, so we have absolutely no idea for tax planning purposes when this money is going to be available. I can take a bunch of money out of our 401K’s one day because we want to do a large purchase, and the next day they could notify us they’re going full cycle, and we took the money out and are paying taxes for nothing. No idea when we’re going to get this big chunk of money, and they’re started some short term (two year) DST’s, which we think they’re using to go full cycle and putting them in front of our DST, delaying the process. Didn’t plan for that one.

Another thing, even though we’re getting about 5.79% annual return on our DST, which is not bad (taxed as ordinary income), at the investors call someone asked a question about how much our DST’s were appreciating. The response was that our funds were barely appreciating, if at all. Enough to cover the 2% fee to get out of the fund, but that’s about it. So they can hold our money for up to TEN years, with low to no investment return.

The only way I could see going into a DST is going into one of their two year DST’s, and at the end of it you can choose to 721 exchange that money into a REIT, which has a much higher return. I would only do this with money you don’t want for a very long time, and I’d closely check the fine print. Otherwise, if I wanted to get out of rentals, I’d just sell them and pay the tax. It is very frustrating to have all this money that you would like to use but can’t access (when we put the money in, we had no idea we were going to do major land purchases and didn’t think we’d need the money). Very frustrating to realize this money is not appreciating and we have no idea when we’ll get it.

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2435

Okay, I finally responded about the DST cons on the previous post. If I had known all this, I never would have done it. We got totally sucked in hearing the benefits but not the negatives.

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2436

another negative is on your heirs. What happens if they don’t want to be landlords or RE investors? Isn’t it hard for them to get out of it too?

As an aside, this discussion reminds me on a thread on Bogleheads where a parent has spend countless hours with his special RE trust investments, which are extremely illiquid. He wants to call a meeting with his heirs (kids) to lay it all out. Figured it woudl take hours over a weekend, and lo, no kid wants to attend. (they have young children, playing soccer, etc.)

He’s miffed that he spent decades building this tax-deferred beauty, and the kids just want to know how easy it will be for them to sell it and cash out. He’s taking it personal.

btw: bus driver, ever run a portfolio backtest to see how the RE performed over the past few decades vs the S&P500 or something similar (or even BRK if you want no dividends)?

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2437

One of our FAs brings in estate planners if you ask. Because I was concerned with asset protection, a big part of the plan is already in place. But, early next year if not sooner, I plan to find someone to look at the whole plan.

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2438

No, I haven’t done an accurate backtest, but over the timeframe that we had the rentals, they they went up about 350% which is similar to the S&P 500. Then we’d have to figure out how much our positive cashflow was over that time, which is way too much effort. We likely came out behind on the rentals, however, if we had held on to them for 2-4 more years and didn’t even rent them out, they would have made far more money. Timing is everything. Yes, we had diversified income, but at waaaaaay too much effort.

I can see what that parent on Bogleheads would be annoyed. All that effort, and the kids have no interest in learning about what could save them a ton of money. It’s too bad that just one of the kids doesn’t have an interest, and could learn about it for everyone’s benefit. Problem is, if your assets are too complex and nobody understands, there could be a lot of money left on the table.

As far as heirs not wanting to be landlords, generally they will at least have the option to sell properties, though maybe not at an opportune time. If they’re in a DST, pretty sure they’re stuck with it until the DST decides to go full cycle and give people their money back.

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2439

Thanks for that write-up, bus driver.

My problem is that DW wants to sell it all, and we’d be looking at a HUGE tax bill if we don’t do something like DSTs.

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2440

Have you considered selling things a little at a time to get rid of it? Like selling something now to get it in the 2025 tax bill, then some in 2026 and the rest in 2027?

Or doing something like some people we know did. They had a large profit from rental property in California. They 1031 exchanged it into a property in Washington, held it as a rental for two years, then moved in, making it their primary residence. I think you can do the same thing with a vacation home. Then after the allotted five year total (I think it is), you can sell and only pay tax on the gains of the real estate you purchased.

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