9 Replies Latest reply on Aug 19, 2010 4:18 PM by JerryD

    Beneficiary on investments

    kath
      I think my investment beneficiary should be my trust, so $$ can be devided as the trust says, between my 3 kids. I was just told today that a non-taxed investment is more easily left with kids as beneficiaries-not the trust. Who knows for sure??
        • Re: Beneficiary on investments
          jkom51

          When one asks legal questions from anonymous others on a public forum, the advice is going to be worth precisely what you paid for it - which is....zero.

          Much is going to depend on what assets you have, what is the age of your heirs, whether you were taking taxable distributions at the time of your death, and most importantly, your state laws!

          I urge you to speak to an estate attorney, preferably one who drew up your trust! You might also wish to speak to a local certified financial advisor, such as a CFP or CPA with a PFS certification (Personal Financial Services), to determine the most optimal inheritance tax scenario to arrange. Right now with the estate tax laws having lapsed, Congress will eventually squabble and get something done that will be retroactive (proven to be legally valid, BTW).

          Some states changed their tax laws to match the now-expired federal estate laws but some did not. Therefore, it's important that you find someone who can explain to you all the various scenarios that might happen so you can choose to make any changes that will be appropriate for your personal financial situation. Good luck to you!

            • Re: Beneficiary on investments
              JerryD
              jkom51 said...

                   
                        

              When one asks legal questions from anonymous others on a public forum, the advice is going to be worth precisely what you paid for it - which is....zero.

              ...

              I urge you to speak to an estate attorney, preferably one who drew up your trust! You might also wish to speak to a local certified financial advisor, such as a CFP or CPA with a PFS certification (Personal Financial Services), to determine the most optimal inheritance tax scenario to arrange. Right now with the estate tax laws having lapsed, Congress will eventually squabble and get something done that will be retroactive (proven to be legally valid, BTW).

              ...

                   
                              

              Not sure that I agree that one can't get good advice from others. I do agree that you need to get specific advice or educate yourself according to your specific situation.

              Dealing with trust attorneys can be expensive. Last quote was $300/hour to change trust. When we set up our trust, we really didn't understand how complex estates with IRA's/Roth's that are a large part of the estate and percentage of trust charitable gifts can be. The tax consequences of the choices can boggle your mind, at least my mind.

              Rather than specific advise, can I ask if anybody has an excellent source of information that one can use to wade through this maze? I have already read Ed Slott's book, "The retirement Savings Time Bomb". I did have a TIAA-CREF lawyer suggest Chapter 7 of the expensive and not readily available at the library book entitled:

              Life and Death Planning for Retirement Benefits, 6th Edition
              Natalie Choate

              I and maybe others would appreciate other suggestions?
                • Re: Beneficiary on investments
                  jkom51

                  In order to separate the 'wheat from the chaff', it would be necessary to research all suggestions. I have read many a discussion forum where people make statements that are only true for their own situation in their specific state of domicile, completely unaware that for someone residing elsewhere, the statement is invalid.

                  So if you are going to have to do research to find out whose advice is worthwhile and whose advice is not....you might as well either resign yourself to spending a lot of time on the Net, or instead go straight to a reliable source of information such as a professional who specializes in the matter at hand.

                  I don't believe people should randomly ask for legal advice on a public forum, especially when it comes to estate planning, for the simple reason that state laws differ wildly. What is true for my situation and my trust, will not be true for anyone else. Period. Our trust is not a standard document; we spent over six hours with a good probate attorney going over precisely how to frame the trust to reflect all our wishes.

                  Especially when it comes down to the specifics of estate tax planning, there is NO WAY I would endorse using free advice from helpful but uncertified anonymous Net posters, versus talking first to a qualified tax advisor, my financial advisor, and THEN the probate attorney. With the estate tax laws in a state of flux, it would be extraordinarily dangerous to assume that free advice from someone unacquainted with the specifics of an estate and the current state of residence tax laws, would be helpful or reliable.

                  I don't mind giving advice on generalities. But although I know a great deal about my own situation and can speak to my own experiences, I would never presume that a few sentences from a Net post can give me enough specifics to advise someone on such an important issue as how their assets can  best be handled from a tax standpoint.

                  When a person has sufficient assets, you have a simple choice. You can pay for good professional advice - that means advisors who will bring up issues and problems you never would have thought of, so that when you die your legal documents will help things to go smoothly, with the least amount of uncertainty and debate.

                  Or you can be parsimonious and try to avoid paying for professional advice. Are you being penny-wise and pound-foolish? Who's going to know until after you're dead? Some people  honestly don't care, after all.

                  The OP seems to be confused about the passing of POD accounts versus taxable assets. But there is not enough information given to be certain. So if we don't know the question, don't know where the OP lives, don't know whether his estate may or may not be taxed by the Feds or his state of residence, and know nothing about the phrasing of his trust or what assets are in the trust - what good can even the most well-meaning advice from Net forums accomplish?

                    • Re: Beneficiary on investments
                      JerryD
                      jkom, not disagreeing that one needs to talk to the experts about their specific circumstances. And Internet and friendly answers to detailed questions can lead one astray if followed blindly without understanding the consequences. However, there are some generic areas where one could be pointed to good resources so one can become familiar with the terms and issues.

                      One of those areas is IRA's/Roth's/beneficiaries/charities. This is very complex and talking to experts can leave one cold if you don't understand the issues and concepts. At $300/hour, especially if one is not confident that the lawyer is an expert, I personally don't want to get a basic education from my lawyer. If I can reduce the billing from 6-8 hours to just a couple by being more focused, I want to do so. This attitude comes several years after the original trust was established when, through further thought and analysis, I began to question how the original terms could be implemented and what the estate AND income tax implications might be.

                      While the OP may have have asked a way to detailed question and will probably go astray for his/her situation by taking advice from the Internet, why not guide him/her to some reading that could help by getting a handle on the topic?

                      What would be wrong with sharing  your sources and direction instead of giving possibly inappropriate solutions? No harm if you throw in appropriate caveats.



                        • Re: Beneficiary on investments
                          jkom51

                          It is always difficult for a beginner to define precisely what the most helpful questions would be.

                          However, it seems reasonable to assume that if one has tax questions, one consults a tax advisor - NOT an attorney. An attorney's fiduciary responsibility is to arrange your wishes in a legally defensible document. A good tax advisor, especially with a PFS certification, should be able to guide a client to the best alternatives from a tax standpoint. The financial advisor sets this up according to the client's wishes. The attorney produces the legal documents to distribute the estate after death.

                          One can certainly access good basic legal 'how to' reading. The "Dummies" book series are surprisingly good, as is the information on the Nolo Press website, a longtime advocate of DIY legal forms.

                          But after basic education, there is no substitute for good professional advice. There are a lot of people who never get beyond the DIY stage, but think they're capable of creating a complex legal entity without paying hundreds of dollars to someone else.

                          Books are good. I'm a bookbuyer first and a web surfer second. But you can't ask questions of a book, and there is no book that can address all aspects of one's holistic estate and financial planning.

                  • Re: Beneficiary on investments
                    JerryD
                    kath said...

                         
                              I think my investment beneficiary should be my trust, so $$ can be devided as the trust says, between my 3 kids. I was just told today that a non-taxed investment is more easily left with kids as beneficiaries-not the trust. Who knows for sure??      
                                    

                    Kath, make sure you understand the tax and distribution implications of leaving assets to the trust. Not an expert, but I think that there is something in the tax code that says trust assets must be distributed within 5 years. If you intend on having the trust support the kids for longer, make sure you get a good understanding of how and if your approach will do it.

                    By the way, if any of those assets are controlled by beneficiary statements like life insurance, IRA's, Roth's, those beneficiary statements will most likely override anything that you say in a trust. Check it out.

                    If you are trying to wade through beneficiary statements then the 2 books I mentioned might be helpful. Slott is a cheap paperback and also has a web site where "experts" answer questions.