My estate planning lawyer said something interesting before I decided to hire her. “People who aren't rich might need estate planning more than rich people because they might not be able to afford to pay probate fees in the case of an untimely death.“
Leave it to the US court system to make the distribution of your assets upon death, cumbersome and costly. Without a will or a Revocable Living Trust, beneficiaries will pay anywhere from 3% – 8% of the assets in fees in probate and could take potentially a year or longer for all assets to be properly distributed.
Probate fees include: personal representative fees, court fees, attorney's fees, accounting fees, appraisal and business evaluation fees, bond fees, and other miscellaneous fees.
There is going to be a massive generational wealth transfer of $50+ million over the coming decade. As a result, it's imperative for Millennials and other generations to prepare and get educated as much as possible about estates, taxes, and wealth. Those who do not prepare will lose out.
Revocable Living Trust Is Cheaper
In comparison, settling a Revocable Living Trust on average “only” costs between 1% – 3% of assets. But in addition to a clear directive of where your assets are to go, another benefit of a Revocable Living Trust is privacy. As a Stealth Wealth practitioner, the last thing you want is everybody to see what you had and what you're giving.
Think about the type of infighting that may happen amongst your beneficiaries if they deem your gifts unfair. Think about all the scrutiny your child might get if people find out she gets a large sum of money before adulthood. She just lost a parent or two for goodness sake. As a parent, the last thing you want is for your children to be judged by others.
Related: Tips for Giving Kids An Inheritance While Still Keeping Them Motivated
Estate Planning Lawyer Takeaways
Once you have a child, creating a clear will, an advanced health care directive, and setting up a revocable living trust is the responsible thing to do. Privacy, clarity, cost savings and succession planning are all important benefits. You should visit an estate planning lawyer to help you complete these important steps.
Here are three other realizations that came out of my estate planning session all of you should probably follow. I already paid the lawyer thousands of dollars in fees, so you might as well take advantage of my feedback.
1) You must forecast your death with estate planning.
Time is our greatest asset. This truth is no more apparent than when you're talking to a lawyer about death. In my 20s and 30s, I thought that if I could live a healthy life until 60, I'd die a satisfied man.
Leaving the workforce at age 34 was my way of maximizing the probability of living life with as little regret as possible. I kept thinking how horrible it would be to work at a job I no longer loved until 60 and then dying soon thereafter.
Now that I'm a father, I wish to prolong my mortality until at least 75. My new goal is to live long enough to see my kids become wonderful, independent adults each with a life partner.
Leaving this world knowing someone loves them as much as we do will let us die in peace. As a result, my wife and I are taking more action to live healthier lives.
The average life expectancy for those born in 2018 in the US is 76 for males and 81 for females. Although we are living longer, life is not nearly as long as you want it to be. At my age, I'll be damned if I waste a single day doing something I don't absolutely want to do.
Protect Your Loved Ones With Life Insurance
Check out Policygenius, the best online marketplace for life insurance where you can get customized quotes all in one place competing for your business. My wife recently doubled her life insurance amount for less money with Policygenius. All these years, she thought she was getting a good deal, but wasn't.
Now that both of us have matching 20-year term life insurance policies, we feel a tremendous amount of relief. Our $750,000 individual death benefits will ensure our kids are taken care of until age 22 and 24, respectively. The value of feeling relief is much more than the cost of our health insurance premiums!
Related: The Importance Of Having A Death File
2) You must forecast your wealth and estate tax laws.
Time is also our greatest asset for creating wealth due to the power of compounding. You will be pleasantly surprised by how much you can accumulate over an extended period of time through diligent savings and reasonable returns.
Once you've made your best assumptions on how much wealth you will have accumulated by the time you die, you must then forecast the lifetime gift tax exemption and the death tax rate at the time of your passing.
For example, in 2025 the estate tax exemption is $13,990,000 per person. The top marginal estate tax rate remains at 40%. If you die single in 2025 with $23,990,000 in wealth to pass on, your estate tax bill will be about $4 million dollars! It would have been much better to give some of that away.
On the other hand, if you die in 2030 with $23,990,000 and the lifetime gift tax exemption declines to $5,000,000 and the death tax rate has risen to 50%, then your inheritor's tax bill will be roughly $9.495 million! ($23.99M – $5M = $18.99M X 50%) That is a shocking amount of taxes to pay on top of the taxes you already paid to accumulate such wealth.
Related reading: Historical Gift Tax Exclusion Amounts: Be A Rich, Strategic Giver
Pay Attention To Estate Tax Exemption Changes When Estate Planning
Based on history, you can see from the chart that currently, we are at the highest estate tax exemption with the lowest death tax rate since 1997. It may be logical to assume a continued increase in the estate tax exemption and a continued decrease in the estate tax rate given the 22-year trend.
However, the doubling from 2017 to 2018 is an outlier. Therefore, it is also reasonable to anticipate an estate tax exemption decline and/or estate tax rate increase after the Tax Cut And Jobs Act expires in 2025.
With Joe Biden wanting to increase taxes on households making more than $400,000, a lower estate tax exemption amount is a high certainty.
3) You must give and spend more while living.
In the first scenario above where your inheritor must pay a $4 million tax bill, unless your inheritors are already wealthy, they may have to sell some of your assets to pay for the tax liability. If part of your estate is your business that you want to continue long after you're gone, then you may have some problems.
Would you rather pay a $4 million tax bill to the government on assets you already paid taxes on or donate the same amount to charity while you're still alive and see how much good your gift will do?
Or would you rather pay a $4 million tax bill or spend more money on yourself and loved ones? If there is a high likelihood your estate will be worth more than the lifetime tax exemption amount, it seems obviously better to utilize your wealth while living, rather than after death.
I strongly recommend you figure out the ideal age to decumulate and execute your plan. Dying with millions of dollars is a waste of time and money. If you have the means, why not donate and spend on loved ones while you're still living?
Whatever you decide, make sure you have an updated Schedule of Assets on file as part of your estate plan. It's an important roadmap for your heirs to reference when unwinding your final estate.
Life Insurance To Cover Estate Taxes
One common strategy to utilize for estate tax liability is life insurance. You can even set up a life insurance revocable trust so it doesn't count toward your estate exemption amount. If a large part of your estate includes a business you don't want to sell to pay for estate taxes, then using life insurance or other liquid assets is a solution.
Think deeply about your retirement philosophy and what type of legacy you want to leave to your children and to other organizations after you pass. Personally, I've adopted the Legacy retirement philosophy. Therefore, my plan is to accumulate up to the estimate estate tax threshold when I die.
Estate Planning And Consumption Smoothing
People who have been saving and investing for so long often overestimate how much they'll need to feel comfortable. I firmly believe the vast majority of financially savvy people will die with too much. This lack of financial clarity is the reason why everyone needs to do a better job at forecasting their wealth so they can consume it more smoothly while still alive.
If the estate tax exemption amount decreases or the death tax rate increases or both, then there's even more reason to spend your money now while living. Unless you're incredibly stingy, hoarding much more than the estate tax exemption limit upon death makes zero sense.
My estate planning lawyer really opened my eyes to how overly frugal I am. From driving an economical car for 13 years to downsizing our home in 2014, our expenses are back to where they were in our 20s.
Yet, my net worth has more than quadrupled since I retired in 2012. Based on our forecasts, there is a high likelihood that we will have to pay estate taxes at our current rate.
Related: Your Umbrella Policy Likely Needs to Be Updated Thanks To a Bull Market
How To Spend More Efficiently Throughout Your Life
To figure out how much more we could spend today in order to avoid paying estate taxes, I simply logged onto Empower (the best free financial tool to track your wealth) and ran a Retirement Planning calculation after inputting some income and expense assumptions.
For illustrative purposes, the output shows that using a $1,225,000 investment portfolio, I have a 99% chance of reaching my planned monthly retirement spend of $12,500 starting at age 50. The portfolio has a projected spending ability of $18,416 a month based on its current asset allocation.
With almost a $6,000/month overage on how much I can spend starting at age 50 in retirement, I plan to up my spending by $1,500 a month starting next year, so long as the economy doesn't go into a recession.
If our wealth increases the following year, we'll up our spending even more, but still maintain a comfortable buffer based on what the retirement planner spits out.
Related: Estate Planning Terminology To Be Aware Of
Utilizing Technology Makes Estate Planning Easier
This additional spending budget may help us get over our reluctance to pay for private school tuition if our son doesn't win the SF public school lottery. Just doing this estate planning exercise makes me feel much better about spending more money overall. I'm confident that once you run your numbers, you'll be able to start spending more freely as well.
If you have dependents, please write out a will, create a revocable living trust, and have an advanced healthcare directive. Not only will you better protect your loved ones and make the transfer of assets simpler, you'll also learn a lot more about yourself in the process.
Another thing to consider to reduce estate taxes is deciding on where you want to die. I did a lot of research to understand the states that don't have inheritance or estate taxes. Given death should be many years away for most of us, we can plan our retirements and eventually areas of rest today.
Recommendation For Estate Planners
Life insurance should be an integral part of your estate planning process. A life insurance payout is usually tax-free and serves to financially support your loved ones after you are gone.
Check out Policygenius, the best online marketplace for life insurance. Get custom quotes all in one place. My wife recently doubled her life insurance amount for less money with Policygenius. All these years, she thought she was getting a good deal, but wasn't.
If there's one thing the pandemic has taught us, it's that tomorrow is not guaranteed. Once you get affordable life insurance set up for you and your spouse, you will feel a tremendous sigh of relief. If you don't want to listen to me, listen to your estate planning lawyer. They deal with life and death all the time!
My wife was able to double her coverage from $500,000 to $1 million and pay less in premiums thanks to PolicyGenius.
In the past, we had mismatched life insurance coverage amounts, which made no sense. I also got a new affordable 20-year term policy through 2041 thanks to Policygenius.
Three Things I Learned From My Estate Planning Lawyer Everyone Should Do is an FS original post.
A very interesting piece. Thanks for putting it together. I have perused a dozen or more articles this morning and find your work to be outstanding. Very happy to have stumbled across it!
You are working with and helping people in the middle of their busy lives, with the pressures of life coming at them from all directions. I sure wish there had been someone like you, and the internet, many years ago! It is a great thing that you are doing.
Permit me to contribute from the perspective of looking at this backwards, someone who has been down the road of estate planning, multiple times over life, and has probably signed their final estate plan, with perhaps the exception of an annual codicil to adjust residual charitable giving to maximize giving while minimizing taxes.
What unfolds is a boring program of spending and investing discipline, no big inheritances, lottery ticket wins, miracle stock investments, patented invention or sale of a private company. (We wish!). But at the end of the day a secure retirement and the ability to take care of ourselves, provide some legacy support to family, and support some charities that our family cares about.
We are in our mid seventies in good health and very active……(so far). We both came from military families, inherited zip, but benefited from the power of compounding on an early and uninterrupted stream of contributions to retirement. I graduated from Harvard, an MBA from Columbia, a JD from University of California, and started the practice of law on Wall Street. My wife graduated from Smith College, and has an MS from Harvard in Astrophysics. We both relocated to California in the seventies. All of that and $6 will get you a latte at Starbucks.
Honestly, at fifty years of age…we were not at all sure we could reach a position to be able to retire at 65, or even 72. We certainly couldn’t do it on what we had at fifty. But it is the continued retirement plan contributing and investment doubling between 51 and 58, then 58 and 65, and then from 65 to 72 that explodes to your benefit. Your $X portfolio at 51 becomes 8X at 72 at 10% per year, assuming you let it ride and don’t pilfer it. To benefit from one of the best stretches in the equity markets, even with a couple gut punches (2008-2009 subprime mortgage financial crisis) was luck as well.
Don’t be disillusioned or despair if at 35 or 45 you’re not sure you can make it. You CAN if you think, plan well, and pursue that plan with discipline. Like everyone that I know who has made it to their mid seventies, life has been blessed, and we have also been burdened with tragedies. How we bear those scars is outside the subject at hand. Enough to note, we all have them. Push through.
First, the mechanics of passing. Take care of them so others don’t have to. This is just being considerate to your family.
At the “back end” we have taken care of all arrangements, and funded them, securely. Including celebration of life gathering, with food/flowers/music/venue etc. Bought the burial plot, and have the headstones already in place…..just needs the “end date” engraved. Obituary written. Personal letter to be read to the attendees. Picked out the urn for the ashes. I took care of all that for my stepfather, my mother, and my first wife who died of cancer at a young age, when the children (one with autism) were 8/10/12/14/18, etc.
We don’t want the family having to deal with any of it. The children and grandchildren are scattered all over the country, have started families and careers. It’s just too much of a burden for any or all of them to deal with. So it is Done. Not an issue. They just have to show up for the event. They will have the money for plane tickets and hotel/meals/transportation. No excuses for not coming.
Second, have an estate plan and keep it current.
For all of our working lives we have had a “proper professional” estate plan. They were not expensive, please do it. As an equity partner in large law firms for over four decades, one of the “perks” in many such firms is to have the Trusts & Estates department prepare your wills/trusts either for free or at a steep discount. But ours were pretty simple. We didn’t have enough to get complex beyond reciprocal wills and a revocable intervivos trust. Pretty standard stuff. Until the last one.
Third, invest early, invest continuously, and keep an open mind towards opportunity. Keep learning and training and investing in yourself.
But after leaving the work for a big operation, and going solo….a number of wonderful options opened up that were not previously possible.
My wife had always been a solo software consultant, and I became a legal consultant for the eleven years following retirement from large law firm practice. Eighteen years ago we each had a sole owner/employee corporation and adopted Solo Defined Benefit Plans for each of them (I didn’t see any articles on this on your site, Sam, but that vehicle might work well for you and Sydney as well, if you are eligible!) Bottom line, we could each put away over $1.2M tax free over five years, then terminate the plan, and roll it over tax free to our respective IRA accounts a decade ago.
That, plus the lifetime savings in qualified retirement plans, has since doubled more than twice.
But about ten years ago we realized that what would happen upon the passing of the second of us, was not what we wanted. Not even close. What our estate would look like and how it would be cut up, and while “maximized” for taxation to be “minimized” it was still grossly inefficient. Giving the smallest number of millions of dollars to the government was not what we wanted to have happen.
The bottom line on every tax return should not be labeled “Tax Due”. It should say “How much did WE make from your efforts this year?”
Now, we have no problem with paying taxes that we owe. The CPA gets the data on the Tax Organizer form, tells us what we owe, we pay it. It’s what is done with the money the government gets that is concerning. The waste, the fraud, the corruption, the focus on politicized projects, influencing recipients of government support, and not just maximizing help to people in need. If there is going to be charity support, we prefer it be to causes that we support from the private sector, and especially the little ones that make such a difference for the local community that the tax money will never bother to help out. If we can take care of family, AND direct monies to charity directly, that is what we prefer. Others may prefer family only, or spend it all and leave the kids a list of all the fun they had spending it. That’s fine. Your money, your rules!
What really bothered us was the elimination of the “stretch” IRA after having built substantial IRA accounts from a lifetime of max contributions to 401k’s etc. to leave to the children, in reliance thereon. A lifetime of distributions, spreading it out 30+ years to the children was fine. Cramming it into ten years starting immediately, and forcing taxation of the benefit, in what is likely their highest income earning years, was government moving the cheese big time. One might call it a ‘betrayal’, but it is just government doing what it does. As Mark Twain famously noted: No man’s life, liberty, or property are safe while the legislature is in session.
So, I spent two years researching, thinking, reflecting, and designing:
a) asset transfers,
b) investment vehicles, and
c) tax minimization strategies, coupled with
d) estate planning to do things that we prioritized.
It is all plain vanilla and no fancy (questionable) strategies.
Those priorities were:
1) ensuring that we would be provided for adequately for life, no burden to the children,
2) our autism disabled adult son would be provided for, for life through a Special Needs Trust, no matter what happened to the government support he was entitled to (See “stretch IRA” above for proof you cannot ever rely on government support, state or federal to be what they tell you it will be). On funding, the SNT monies are out of the taxable estate, though you may direct payments for the beneficiary and investment for the trust account,
3) the four other adult children would through a Charitable Remainder Uni Trust receive a generous annual allowance for life (But not enough to quit work! No “trust funder” spoiled/ruined lives), with the trust principal on their deaths going to their family Donor Advised Fund. On our deaths the estate receives a charitable deduction based on the net present value of the amounts donated that are expected to be received by the Donor Advised Fund charity,
4) creating a “dynasty waterfall” from 529 Plans, from generation to generation of education expenses for the grandchildren and beyond, free from both income tax and estate tax, for each of our four “able” children’s family lines. On contribution, amounts given to the 529 Plan are outside of the taxable estate, although the donor controls investment and distribution decisions, and
5) creating four Donor Advised Funds (DAFs) for charitable giving, to be administered by each of our four able children, and their future generations, for local causes within fifty miles radius of their home. Upon donation to the DAF, the amounts are outside of the taxable estate although the donor/custodian does have the power to direct investment of the monies and to suggest donees as well as the amounts and times of donation to charities by the DAF.
It is not a plan to maximize every penny to the future generations. It incorporates charity to maximize distribution to family and causes and bring down the estate tax amount.
Simply put, If there is $100k subject to tax, the government gets $40k while each of the four children gets $15k. We prefer the government get zero, and each of the kids gets $25k more in their DAF to give to charities they and their children select. The entire plan was discussed with each child in detail, and they not only signed off but were enthusiastic. The “giving mission” for each DAF was customized with input of each of the adult children.
Once the design was complete, we started creating the vehicles and funding them, starting in 2017. When Republicans lost the election in 2020, we went into “overdrive” in the expectation that if the Republicans did not win the 2024 election, the estate tax exemption amount would expire at the end of 2025 (Because that is what Biden said he would do. This isn’t politics, it is estate tax planning), and we would have a potentially large estate tax liability on our passing. Handing over 40% of everything over the significantly reduced estate tax exemption amount, no matter who would be responsible for that outcome, was just not palatable. With the benefit of time we had begun in 2017 annually shifting family wealth into “super funded” 529 Plans (two for each of eight grandchildren, including four as yet unborn) and DAFs, among other vehicles. The plan takes YEARS to become effective in a significant way. To rush it can trigger high rates on income taxes, chew up the gift and estate tax exemption, etc.
Another tool was to draw directly from IRA accounts for current annual charitable giving. The QCD or “Qualified Charitable Distribution” allowance permits the account holder to make a contribution that goes directly from the IRA account to the charity. NO income tax to the account owner on the distribution, 100% of the donation retained by the charity.
The search for an estate lawyer that was willing to do what we wanted was a long one. Nobody we came across knew, or was willing to spend the time to learn, about the various tools. There was big gap in market awareness. Simply put, if you have $100 million then you fit right into the “Family Foundation” box. Easy peasy. But if you are in the $10-99 million box, meh. Nothing worth doing, and the legal/accounting fees to figure it out are gruesome.
We finally found a lawyer who was willing to make a deal. I would teach him how to do the “special tools parts” and not charge him for my teaching time, if he was willing to study it and not charge me for his learning time. Six months later, we had a completed plan. It took another nine months for us to move assets around to get everything we could out of the potentially taxable estate. Every year we do a quick review, calculate what our tax bill, if any will be, and adjust a specific final or residual priority bequest to charity (the DAFs) so that when the dust clears the government gets something, but as close to nothing as possible.
The lawyer is thrilled because he now has a “toolbox” of “modules” that he can advise are available for those clients wanting, or who would benefit from, a “next level” of planning and preparation. That’s anyone who might be exposed to the estate tax. This year could be a very busy year for people who want to be prepared “just in case”. It will still be a bunch of people in future years if Congress does extend the exemption amount. Asset inflation and compounding returns will get people there faster than they think.
There are:
1) four supplemental needs creditor protection trusts for CRUT distributions to the four children during their lifetimes,
2) four DAFs,
3) one additional testamentary special needs trust for our disabled son,
4) four Charitable Remainder Uni Trusts for the children (Those trusts grow tax free during their lives, but the distributions they receive are subject to income tax),
5) eight ‘dynasty’ 529 Plans for the grandchildren…etc. (There is a 529 Plan “Roth IRA Rollover” feature that allows one to draw money from the 529 Plan and put it into a Roth IRA, starting at about 15 years at age if you fund it for the grandchild at birth. That will grow to almost $1million by the time they reach retirement!)
DAFs are funded annually at the max level permitted by the 30% of AGI limit on contributions of securities. So if you have stock you’ve held for 20 years like Apple, Microsoft, Broadcom, JP Morgan etc (and if you are 50 today, that means something great you bought three to five years ago or three to five years from now) you have some holdings that are 10x, 20x or more multiples from when you bought it. So you donate the stock directly to the DAF. You paid $10k for it and now it is worth $100k. You have NO recognized gain and no income tax, and you get a $100k deduction, as long as your taxable income that year is $333k or more. IF it is less, you carry over the surplus for as many as five years to deduct. This is a super tax efficient way to fund your charities, whether you have a DAF or not.
Please note, none of this is advice on what to do. It is what we have done. Consult your own professionals before making any decisions for what you are going to do.
Depending on how long my wife and I live, and what happens to the portfolios in the markets, the model should work pretty well and perhaps double one more time before we pass. The power of compounding can impact that, given enough time and reasonable returns.
At this point everything we owned is transferred to the program. We kept enough to live modestly. My eight year old Toyota Tundra pickup is the last vehicle I am going to buy. My wife’s 7 year old Subaru Outback has 16,000 miles on it, so…………….yeah. A trust owns those. We live in a civilized area, but it is remote enough that we get cougar and moose in the neighborhood. Snow in winter.
Cut living expenses by 40% by leaving California almost 9 years ago for a low cost state.
It happens late in the program, and when it does it happens FAST! You get used to sweating bullets for five decades and then over a period of 12 years (because of the high yields…two back to back S&P500 index years of over 20%, the best results in a quarter century) you get two “doubles”. From “do you think we’re almost there?”……to “Gee whiz, we have a tax challenge!”
I think that Sam and Sydney (with her advice on schooling up our kids on financial literacy) are really on the right track for their readership. What is above is detailed…because it happened and is not theoretical. However, except for Solo Defined Benefit Plans and CRUTs, pretty much everything has been covered by them. (If I missed it being covered, my apologies!)
Right now we are working on “next level” financial literacy with our children, including small caps “rotation” investing, dividend stock investing, value stock investing, growth stock investing, and long term (think forty plus years) investing strategies. They are all in their thirties and forties, and with a home mortgage, a couple of kids……..they get it! It has been a two year program, completed December 31, 2024, with an average of three detailed teaching/learning missives a week.
Nobodies, leaving something to carry on for the future. No magic, no genius, no big splash. Friends to visit the tombstone for a few years. Family probably just once. Nobody after that.
Everybody can do something. A bit less, a bit more………maybe a lot more. Depends on life circumstances and how much luck we draw (or make) for ourselves.
Best wishes.
Pappy
Hi Sam,
What are your thoughts on setting up a revocable trust in a tax haven state like South Dakota? Would make for a great topic for an article with the pros and cons
It’s crazy that if you don’t have a will that the court will charge 3-8% of the assets in fees! My wife is pregnant at the moment so we decided we need to get some kind of will in place because we have a dependent now. Thank you so much for all the tips they have been really helpful in getting our estate plan set up!
Thanks for this article, Sam. Everyone needs to plan their estate, we don’t know what will happen tomorrow. And this tomorrow may be the reason why our families separated because we stay aside the important of estate planning. We always want the best for out family, of course. And I think this can secure their future once we’re gone.
It’s good to know that people who aren’t rich needs estate planning more than rich people due to the cost and messiness of probate court. This article was informative. Thank you for sharing.
Yeah. Damn right. Who’s got $20,000,000 to be making will arrangements. They talk about it as if this was an every day easy matter.
People with $20 million are likely making even more will and revocable living trust arrangements for estate planning purposes.
I used $20 million as an example for what may happen if you are over the estate tax threshold. Broaden your mind.
Related: $10 Million: The Ideal Net Worth Amount To Retire
Probate lawyers might be needed for preparation of legal documents like disclaimers or deeds, in case there is a business involved assets are mostly complex, thereby demanding guidance from a professional attorney. Probate attorney can ensure that correct legal documents are in place for either dissolving or transferring the ownership. If you are required to go in-front of the judge during estate proceedings then you will need a probate lawyer to guide you and defend you.
My parents want to set up their estate plan on how they are about to turn sixty. It is good to know to they they will want to think about death taxes and preparing for that. It seems like they should talk to an estate planning attorney.
I recently served as the executor of a sizeable estate in California. If you are in a situation where you are likely to be subject to estate tax, life insurance benefits are counted toward the value of the estate / lifetime gift allowance. The assertion at the bottom of the article is a bit misleading.
I want to create inter-generational wealth. I don’t want to give any of my wealth to charities. Instead I want my family to have my wealth and let it grow over time. I have not seen many articles on this topic. Any references or examples would be helpful.
Pay on Death (PoD) beneficiaries are another way to handle estate distributions that avoids probate and do not require a trust. They are not sufficient for real property, guardians, or other more complex issues. You can also use PoD in conjunction with a trust. The advantage is that you can often change the terms on line at any time without a lawyer. Thus they are easier to keep current as situations change.
Don’t forget that best laid plans can go askew…My mom and dad were married for 65 years and a sweetheart in his retirement apt chatted him up……Beneficiaries lost 300,000 instantly. He was 97 years old and she was about 70.
Think about talking to an attorney about having a trust that activates if an event happens…..called a springing trust and most often for kids that are wild, etc.
Men’s brains go back when they get dementia……sure I was hot when I was 30 years old and sure, I am the same today……Enter the sweetheart compliments and chat-up dates. Dad’s own doctor said “Do NOT let the significant other manage your money”…..well she did.
Be aware…….your assets could go to “her kids and leave yours out in the cold”
a lot of places have a law that says that marriage revokes a will, except a will made in contemplation of that marriage. This protects the new spouse against previous commitments, so generally a good rule EXCEPT when it is a mature-age marriage and the will benefits children of an earlier marriage. Be sure if you (or your parent) are getting married again, provision is made – if necessary by a new will – for the earlier beneficiaries, unless the person remarrying intends to cut them out.
You made a great point about forecasting death to make sure you can predict when you will need a certain level of wealth. My husband and I are looking for help getting our parent’s estate liquidated and we wanted to find tips on why it’s important. We will keep these tips in mind as we search for a professional that fits our needs best.
I liked what you said about making the most consideration for the result of the wealth you will be accumulating. This is something my godfather should consider so he can get his will done. With that set, I will recommend him hiring a lawyer to get the best out of his will.
Thanks for explaining how the average life expectancy of those in the United States is between 76 to 81 years. My wife and I just found out that we are going to be having a child, so our future has been in consideration quite a bit lately. I think speaking with an estate planning attorney would help us plan out our future better so we can be better prepared for when we reach our senior years.
It was helpful that you mentioned once you have a child it’s good to have a clear will. I had a daughter a few years ago and watching her grow has been a great experience. I would love to get in touch with an estate lawyer in the Biloxi MS area and get a will in order to help give her what she needs should I meet an untimely end.
That is a good point that time is your greatest asset when doing estate planning. Maybe it would be good to get some estate planning done and try to predict my timeline. It would be hard to forecast my death, but it would be necessary so I could get the planning done.
Your points about quality of life, and the policy of doing what pleases you and adds significantly to life goals are very important to hear.
Our family got swamped economically by large medical bills from our father’s many coronary events; and he died early with no reliable assets. Our mother worked hard at a relatively low-paying job; but had been well educated; and my father had a good education as well.
All the children had access to solid parenting; quality education; and were gifted with high expectations and a reasonable chance to attain them. Every one of them was successful in their respective career fields, and did just fine.
BUT, when talking about our relatively economic success and stability, our sister made a very pointed statement, “You’re still living like you’re poor Irish. Buy a ****ing new car, for **** sakes.”
It is really interesting they you put a lot of this in financial terms. I think think that it would be great to talk to an estate attorney in the term of life expectancy. I think that it is crazy the amount of taxes there is in estate law.
People without dependents need a will too! It is very important. If you are single and dies without a will and have siblings the probate process can become a nightmare. If you are single and have no siblings but do have relatives it is even worse.
EVERYBODY needs a will.
Sam – you make no mention of long term care planning. Did your estate planner not discuss this with you? Have you planned for this?
Long term care planning is part of it. Thanks.
Related: The Cost Of Long Term Care
Oh, I did also want to say that I totally agree with your point about consumption smoothing and increasing spending. I’ve consciously started to increase my spending in recent years as I’ve approached my FI number since I am still working and am starting to realize I’ll probably work and earn income a lot longer than I need to.
Also, individuals can give up to $15,000 per year to any other individuals without paying gift taxes or having to file a gift tax return. A married couple can give $30,000 per year to each of their kids, grandkids, siblings, or anybody at all. This can be a very valuable estate planning tool and can keep your estate within the estate tax limits, especially if you start the giving early enough or have enough heirs. My grandparents started giving to each of their kids and and also to their grandkids in the 1980s. They quit during the recession in 2009 then started back giving to their kids only a few years later. They are still going to owe estate taxes when they die as they’ll be about $1,000,000 over the limit. But if they hadn’t begun giving so long ago, many millions more would be taxed at a huge rate when they die – and they wouldn’t have gotten to see us use and appreciate those funds in our lives along the way.
Just wanted to chime in and point out that probate is not as big of an issue in many states as it is in California. In many states it is much cheaper and faster, and unless you’re really concerned about privacy issues there’s no reason to have a revocable living trust. As a financial planner I see rev trusts pitched and sold to many seniors who have very little if any need for them.
Also, there are perils to watch out for with revocable living trusts. Many people go to the cost and hassle of setting up a trust but then don’t retitle all their assets and actually move them into the trust. This is a giant waste of time and money. It’s also a bit more of a pain to operate your life within a trust. If you actually put your house, cars, bank accounts, investments, etc. in a trust there is an added layer of paperwork and hassle to most transactions.
What about testementary trusts? These don’t need the maintenance but need to go through the probate once it takes effect. Any downsides with it other than the probate?
Amen The lawyer who drew up my will agrees with you.
A hearse has no luggage rack. Spend it all while you are alive. my kids do fine on their own. Give greatly and die broke.
I did not see any mention of a Charitable Gift Annuity. My wife died 2 years ago. My daughter is sort of a spend thrift so I put 2 houses into a revocable trust to give her $1,000 per month plus an offer to pay for tuition and books at a college. I planned to donate to various charities after death so I opened charitable gift annuities with them and they pay 7% for single life at 82. When I die the charities get the remainder. Some of my bank accounts list an orphanage as beneficiary. Other banks, (in the same state , PA) will not list a charity as beneficiary. Are GCA a good idea?
This is the government doing its estate planning – by taking the people’s arbitrarily. Of course no politicians’ names are tied to the laws…like making sure you don’t leave any prints on the crime weapon. What thieves by trade they are.
Estates contain other “things” besides money. And these need to be addressed in legal documents, too. I have a literary executor I have already named, she agreed. But I still need to put it in writing. I also own artworks that some people have asked for; I need to address those as well. Then there are pets, if they outlive you. I realize your specialty is money, but then there is the rest of life.
I urge you to encourage people to be an organ donor. I’m an organ recipient and wouldn’t be here writing this if someone hadn’t made that decision – then informed their family members of it, and put it in writing. That is passing along life, far more valuable than any amount of cash, stocks, bonds or saved taxes. Thank you for providing all the advice you did.