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It is currently Sat Aug 30, 2014 11:17 pm




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 Post subject: Setting up a trust for the baby
PostPosted: Wed Feb 13, 2013 6:53 pm 

Joined: Sat Dec 29, 2007 9:30 am
Posts: 577
now that we have a little one, it's time to set up a trust for his care should the worst happen. i don't have a particularly high confidence level in most of our relatives where money is concerned, so we have chosen the one trustworthy person in the family to administer our assets to provide for our son. we have decided on caregivers for this kind of situation as well. we're not exactly high net worth kind of people but we have some assets on paper and decent life insurance policies that we would intend to help provide for the baby as he grows up.

i've already scheduled an appointment with an attorney who specializes in estate planning. but i thought i'd ask for some what-to-expect advice here. anything i should specifically bring up or inquire about at the meeting?

they've ballparked a whole package (will, advanced directive, healthcare power of attorney, living trust) in the $3.5k range for us both. i suppose these are all good things to have if we're already looking into estate planning. is this an outrageous fee? i am not really excited to pay a zillion dollars- but i also don't want there to be any additional headaches if this trust becomes needed someday, so i'm not really into the whole legalzoom idea.

thoughts appreciated, legal things are well outside my area of specialization!


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 Post subject: Re: Setting up a trust for the baby
PostPosted: Wed Feb 13, 2013 7:09 pm 

Joined: Fri May 04, 2012 2:23 pm
Posts: 810
I've thought long and hard about this. And almost went the route of setting up a complex trust with various rules. At the end of the day, it was decided that we trust the people who would handle the well being of our posterity. And setting up a complicated will and trust could potentially leave the kiddos with some unintended consequences. Then it got to the point where I couldn't ever figure out when to end the nonsense. We instead have written what we would have done, our wishes & desires and will let those in charge use the discretion we trust they have to do the best thing for everyone. Perhaps our kids get the short end of the stick. But, just like raising your kids, eventually you have to relinquish control.

_________________
Bichon Frise

"If you only have 1 year to live, move to Penn...as it will seem like an eternity."


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 Post subject: Re: Setting up a trust for the baby
PostPosted: Thu Feb 14, 2013 4:03 am 

Joined: Mon Feb 07, 2011 6:33 pm
Posts: 1139
Location: Illinois
galactic wrote:
they've ballparked a whole package (will, advanced directive, healthcare power of attorney, living trust) in the $3.5k range for us both. i suppose these are all good things to have if we're already looking into estate planning. is this an outrageous fee? i am not really excited to pay a zillion dollars- but i also don't want there to be any additional headaches if this trust becomes needed someday, so i'm not really into the whole legalzoom idea.


While legal fees vary greatly region to region (with larger cities generally being much higher than small cities and rural areas), that seems extremely high.

For clients that don't require estate tax planning and are mostly concerned with taking care of their children should the worst happen, I generally charge about $750 for POAs and wills (which contain a trust for the children should you die before they reach a designated age). If they need a living trust as well (are you sure you need/want one), it is more, but not more than $1,500. The only exception would be if they wanted something extremely complex.


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 Post subject: Re: Setting up a trust for the baby
PostPosted: Thu Feb 14, 2013 10:49 am 

Joined: Fri Sep 12, 2008 12:29 pm
Posts: 1609
Location: Seattle, WA
Bichon Frise wrote:
I've thought long and hard about this. And almost went the route of setting up a complex trust with various rules. At the end of the day, it was decided that we trust the people who would handle the well being of our posterity. And setting up a complicated will and trust could potentially leave the kiddos with some unintended consequences. Then it got to the point where I couldn't ever figure out when to end the nonsense. We instead have written what we would have done, our wishes & desires and will let those in charge use the discretion we trust they have to do the best thing for everyone. Perhaps our kids get the short end of the stick. But, just like raising your kids, eventually you have to relinquish control.


Who are you leaving the assets to? Your offspring, or their caregiver(s)?

In the former case, leaving it to the child(ren): my (sadly quite limited) understanding is that they get placed into a trust anyways, but with a court appointed trustee. And then that trust automatically gets paid out in full when the child reaches age 18.

In the latter case, to the caregiver: it seems there could be problems getting any remainder to the child. Would they have a limit of 13k (26k for couples) per year given from caregiver to child?


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 Post subject: Re: Setting up a trust for the baby
PostPosted: Thu Feb 14, 2013 6:10 pm 

Joined: Mon Feb 07, 2011 6:33 pm
Posts: 1139
Location: Illinois
stannius wrote:
In the former case, leaving it to the child(ren): my (sadly quite limited) understanding is that they get placed into a trust anyways, but with a court appointed trustee. And then that trust automatically gets paid out in full when the child reaches age 18.

That's kind of how it works (in Illinois, but I believe most states are similar), but it is far from optimal. The Court appoints a guardian to manage the money and the minor children (sometimes different entities/people for each role) until they are 18, then they get the money with no strings whatsoever. Most people aren't comfortable with their kids potentially receiving a large windfall at 18 when they (often) aren't yet mature enough to handle it.

The guardianship process can be rather expensive as well. The court will also appoint a guardian ad litem for the children (usually an attorney) and his fees are paid from the kid's assets. The guardian will often also have an attorney (who is paid from the kid's assets) and will also be entitled to a fee for his services as guardian (also paid for by the kid's assets). Many expenditures have to have specific court approval, which tends to cost a significant amount of money to get.


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 Post subject: Re: Setting up a trust for the baby
PostPosted: Fri Feb 15, 2013 11:15 pm 

Joined: Fri Feb 15, 2013 8:52 pm
Posts: 2
Sumflow wrote:
Image

galactic wrote:
in the $3.5k range for us both.
That amount alone compounded out across the baby's life should take care of him.


You need to run a Monte Carlos sim. Market does not return a smooth 8%.


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 Post subject: Re: Setting up a trust for the baby
PostPosted: Sat Feb 16, 2013 3:13 pm 

Joined: Sat Dec 29, 2007 9:30 am
Posts: 577
thanks for all the feedback. to reply to some points directly:

- while we trust the folks who would raise our child in this situation, we do not trust them with money. which is the case for all but one or two of the relatives we have between us. (and the money-wise folks are just not into raising yet another baby, can i blame them? no.) so we are willing to relinquish control as far as how, specifically, he is raised- but for said caregivers to receive a windfall of several hundred thousand dollars, most of it would be gone within a couple of years with little to show for it. we know this. this is why we've set it up so that the one person with good financial sense (and who knows how to say "no" when needed) would be in charge of the money- it also distributes power a bit... and i see there being some power battles if we were absent.

- i appreciate the perspective, bpgui. we do live in a very expensive metro area, and i know very little about law practice, but that seemed like a high number to me and i was suspicious. i am thinking this attorney is used to dealing with folks who have extensive assets to protect and other complicated issues, and we are no such case. i will *definitely* be talking with several other attorneys now.

-our intent is for the funds from our life insurance proceeds and other assets to be used to provide our child with a stable upbringing and opportunities for betterment (education, music, sports, arts, etc). so for this money to be locked away until age 18 is not what we'd like, and my first point above is the primary reason why we wouldn't just leave the money to the caregivers. i feel like there would be fewer headaches, and more of the money intended for his benefit would actually go to benefit him if we work this out in advance.

-apparently the market simulation post was deleted but... fat lot of good that 3.5k invested would do if we both die when baby is 6 years old. but if we wanted to wait around for 70 years, sure, good point.


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 Post subject: Re: Setting up a trust for the baby
PostPosted: Sat Feb 16, 2013 3:22 pm 

Joined: Sat Jun 16, 2012 8:06 am
Posts: 93
We live in a costly area (San Francisco Bay Area). Our very competent estate attorney would charge $3K for her pkg nowadays, which is fair market price according to what other friends/family have paid.

You have children; you need very badly to get your affairs in order. Can you do it yourself with a will and PoAs? Sure, but it may not be optimal. If your estate is asset rich but cash poor, did you want your insurance proceeds to pay overhead and expenses carrying RE or for college/graduate school?

If you set up a trust, are you intending to pay your trustee for time/effort, and customize the disbursement instructions? Standard Revocable Living Trust language can be very limiting. A good lawyer will go over these issues thoroughly with you.

It wasn't pleasant watching my 20-yr old nephew waste a six-figure inheritance from my sister, who died at age 38 of ovarian cancer. But there was nothing we could do about it, either. I was the executor, and had to hand over his share of the estate to end probate.

We chose a trust for our (moderate) assets, and customized it extensively. As we have no children, there were issues with the designated heirs we would not have been aware of had it not been for the lawyer pointing these out. It was worth every penny we paid.

Just personally, my opinion? Advice on the Net is worth what you paid for it. When it comes to legal and financial issues, I'd rather pay for good professional advice, specific to my personal situation and state of residence.


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