More on Trusts
I've noted previously that most people's estate values are now less than the federal estate tax exemption amounts - currently $5,000,000 per person, at least through the end of this year. While that amount is scheduled to revert to $1,000,000 per person after 2012, most experts who claim to have inside knowledge think that's unlikely to happen once Congress isn't running for re-election any longer. After all, most of our representatives don't want their estates hit with big taxes any more than we do. So for the sake of this piece, let's just say estate taxes are off the table for most of us.
What else then do we need to worry about in our planning? Well, I've mentioned avoiding probate as one good reason for having a revocable trust - see the "Food for Thought" on our website called "A Probate Alternative". But I also mentioned another reason there for considering a trust. That's to make sure what we've managed to accumulate doesn't go to our children or grandchildren the wrong way (in my humble view). Without a trust they're going to get their shares when they turn 18 - that's the age of majority and it's when they become just like us as far as the law is concerned, even though most of them aren't even out of high school yet. Actually, they can't drink alcohol until 21, but many of them consider that just a "technicality", believe me! That's a subject for another day.
A trust can provide otherwise. It can say, for example, that children's or grandchildren's shares of an estate may be used for them to go to college or vocational school (to avoid a fortune in student loans), or to buy a reliable car to get them there, or later on to get married or to start a business. But it can also defer an outright distribution to them until whatever age the trust provides. So instead of 18, that might be 25 or 30, or the trust might call for partial distributions at different ages, such as half at 30 and half at 35. Those ages can be changed, too, once we see how responsible and motivated our teenagers turn out to be. It can also provide that no distributions will be made if the young person runs into trouble, such as with substance abuse (unless it's for rehab perhaps) or when the funds might all be taken by creditors. Needless to say, having the right trustee(s) to make those judgments is all important, and I'll get to that issue, too, another time.
Of course, some of you will say - yes, I can hear you saying it right now! - that you shouldn't try to run your family's lives from the grave. Fair enough in general terms - except that we're not talking about who they're going to marry or where they're going to live. We're talking about what's yours, not theirs. With few exceptions, most of us didn't have a pot of gold left on our doorstep, or win the lottery, or have a visit from Michael Anthony (remember "The Millionaire"? - I'm really dating myself here). No, we worked hard for what we have - and our offspring, in nearly every case, will be better off if they do, too, at least until they're older than 18.
(Posted on June 14, 2012)
What else then do we need to worry about in our planning? Well, I've mentioned avoiding probate as one good reason for having a revocable trust - see the "Food for Thought" on our website called "A Probate Alternative". But I also mentioned another reason there for considering a trust. That's to make sure what we've managed to accumulate doesn't go to our children or grandchildren the wrong way (in my humble view). Without a trust they're going to get their shares when they turn 18 - that's the age of majority and it's when they become just like us as far as the law is concerned, even though most of them aren't even out of high school yet. Actually, they can't drink alcohol until 21, but many of them consider that just a "technicality", believe me! That's a subject for another day.
A trust can provide otherwise. It can say, for example, that children's or grandchildren's shares of an estate may be used for them to go to college or vocational school (to avoid a fortune in student loans), or to buy a reliable car to get them there, or later on to get married or to start a business. But it can also defer an outright distribution to them until whatever age the trust provides. So instead of 18, that might be 25 or 30, or the trust might call for partial distributions at different ages, such as half at 30 and half at 35. Those ages can be changed, too, once we see how responsible and motivated our teenagers turn out to be. It can also provide that no distributions will be made if the young person runs into trouble, such as with substance abuse (unless it's for rehab perhaps) or when the funds might all be taken by creditors. Needless to say, having the right trustee(s) to make those judgments is all important, and I'll get to that issue, too, another time.
Of course, some of you will say - yes, I can hear you saying it right now! - that you shouldn't try to run your family's lives from the grave. Fair enough in general terms - except that we're not talking about who they're going to marry or where they're going to live. We're talking about what's yours, not theirs. With few exceptions, most of us didn't have a pot of gold left on our doorstep, or win the lottery, or have a visit from Michael Anthony (remember "The Millionaire"? - I'm really dating myself here). No, we worked hard for what we have - and our offspring, in nearly every case, will be better off if they do, too, at least until they're older than 18.
(Posted on June 14, 2012)