We have one set up. It doesn’t go into effect until one of us would need skilled nursing care.
My in laws have the same elder attorney and the same kind of trust.
It will protect assets, depending on the size of the estate, my mil was told that they needed to exhaust around 1/2 of theirs and then they could enact the trust. Excludes the house. Just their investment accounts.
My H went with her to meet with the attorney. I don’t understand the entirely of the nuts and bolts. It gives me peace of mind that we have something in place if one of us would need it.
Most of my friends have ladybird deeds, our elder attorney doesn’t recommend this.
Not sure if this is helpful at all, except that I know we set up this trust a couple of years ago.
This is correct. It’s one of the reasons we are doing annual Roth conversions up to the top of our tax bracket. We want to minimize the tax impact of RMDs in the future, especially if/when one of us dies.
I look at 529’s differently than estate and general gift distributions. For college educational purposes, I would treat each grandchild as a separate unit. We treat each child as her/his unit and gift equally in annual gifts and estate treatment. We look at 529’s as an investment in the future. Graduating college debt free opens all life/career possibilities. Gifts are gifts. The timing may vary based on need, e.g. we helped S with his down payment on his NYC apartment but D knows an equal amount is coming to her when she and her husband settle. As an aside, we kept our kids 529 plans alive and are contributing to those for future grandchildren purposes. If they have different number of kids, we’ll make an adjustment.
We don’t have wills or trusts either, and I know we should. We even went to one of those free seminars last year to learn about them. I do have all beneficiaries associated with all of my liquid financial assets. So in my case it would be the house and cars/other misc stuff that could be problematic. I admit part of the reason I haven’t done more is the issues I listed up-thread a little. BUT, I know something is better than nothing, and I should do something!
IMHO 100% to go with paying the taxes now with Roth IRAs. Not only keeping the gains over all the years ‘free and clear’ as they are after tax gains, but also you are not constrained with spending down with RMDs when that time comes.
Also, yes a place like CA is high tax state - but also the income/job has brought or retained people living in CA.
The freedom with ‘free and clear’ on the gains - not being taxed when spent in retirement (or after age 59 1/2) and also not in the RMD formula.
Also if there is a long time horizon for the money to grow to a substantial amount, Roth’s will not be subject to RMD’s and trigger higher IRMMA thresholds, giving the beneficiary more options to minimize taxes/IRMAA once distributions start being taken.
The House can be a biggie. Depending on your state, Probate could take months and months. Meanwhile, the House sits empty, attractive to squatters and/or vandalism.
Thanks. I think some of these issues are simply too state-specific for general discussion here. This is probably one of those. And the different terms used make it convoluted as well. Florida has Ladybird deeds. Arkansas does not.
My further reading leads me to believe that a MAPT is too restrictive for us and results in a loss of flexibility. Arkansas Medicaid is much more restrictive on required spend down than Florida which allows for spousal refusal which can preserve assets.
I am a husband and have no problem with this. I do all the long-term planning in our family. I’m always thinking two years ahead for my clients and 10 years ahead for me and my family.
Regarding Roth vs initially tax free retirement assets - I believe mathematically, it’s possible there would be little difference at the end of the day between the two approaches, but of course that depends on all of the variables that “nobody knows.” I once talked to a highly regarded tax accountant and a financial advisor at the same time, and neither would “advise” me to do a big Roth conversion, because none of us really knows what the future will bring. That’s part of the reason I’ve never done it. BUT honestly, it’s more just laziness and ease of leaving things as they are. (And I should have gotten rid of my advisor quite some time ago).
Another interesting question about gifting to kids. Do you count spouses as individuals, or only count “you” kids in doing your math? For example, if one kid is married does each of them get the same “monetary gift” or whatever each year?
We haven’t done large financial gift giving yet, but at this point I would consider only our kids in the math. If one wasn’t married, I wouldn’t gift that kid half as much as the married pair. I don’t know what I would do re my estranged kid. We obviously don’t take him on nice family vacations, and we don’t give him an equal amount of money.
Let’s say you are correct and mathematically there’s not a difference if everything remains the same for you/dh. We are doing them for tax-free gifting to the kids, who already are both in higher tax brackets than we are, and because of the widow/widower tax if one of us dies. That would make a big difference.
If I was in a similar situation, I would consider the estranged child to be making a conscious decision to forgo the money you spend on your other children for current expenses (vacations, holidays). However, if I were gifting large sums of money while alive, I would gift equally among the children. If the estranged child chooses not to accept the gift, I would not increase their portion of an eventual inheritance accordingly. I would split the eventual inheritance equally, though … and I would write into the will/trust that should the estranged child choose not to receive their portion, the remaining children will split that share equally.
We gift based on household. No grandkids involved yet.
I told the story on here years ago about my bff whose mother wanted everything to be soooo fair that she gave each living “heir” an eighth of her money. The son got half of the estate because he was married with two kids (each of those people got an eighth). One dd got a fourth, as it went to her and her dh. The two single daughters, including my bff who did most of the heavy lifting in terms of her mother’s care, got one eighth. I always thought that was unfair and seemed to weight giving to certain life choices – marriage and children.
Gifts for bdays and Xmas - GFs got roughly 50% of the value of the S’s. Once they became engaged, they got the same.
A gift like an inheritance gift, I would do it by household.
Grandkids gifts/529s - if I have any, they would all be treated individually and the same amount
Estranged? My parents are leaving their estate equally in thirds. I could see my brother not wanting his, but maybe not. For bdays and Xmas, my mom sends the same value check. I know he used to leave them uncashed, but that might changed as they have been having a bit more contact in recent years. But I do know my mom never stopped sending them.
Right now we are working on lessening our estate, so we give as much as we can in annual gifting which will not go against our estate assets for tax purposes which means it is not equal since only one kid has a child.
I was playing around with some ‘what ifs’ this morning. DW & I would like to retire at 62 or 63. DW would start drawing a pension immediately upon retirement. With the pension and using post tax funds we probably could live on those until 71-73. We would start drawing SS at 67 or 68. Our income would be quite low during that time compared to current. We would have long term capital gains but I think we could get into the 0% tax rate on those gains given that plenty of the funds would be principal.
Then when the post tax funds run out just bite the bullet and pay the taxes on pre-tax funds. We also would stay out of IRMMA surcharge for sure for a decent period of time.
Lastly depending on where the ACA is at we might be able keep the health insurance costs down before medicare time.