Hi everyone,
My wife (48) and I (51) have belatedly had our attorney draft pour-over wills, a revocable trust, and advance medical directives. Our primary goal is to ensure the care of our 14-year-old daughter and minimize taxes and probate costs.
Our situation:
Trustee will be able to disburse funds: (1) Until 18 – for health, maintenance, care, support, housing, or education; (2) From 18 to 25 – things the trustee deems reasonable for education, medical, or for other care deemed reasonable or necessary; and (3) when daughter is 30, the trustee shall disburse the remaining balance free and clear of the trust. There is a clause for withholding distribution if daughter has an addiction issue.
Our questions:
My wife (48) and I (51) have belatedly had our attorney draft pour-over wills, a revocable trust, and advance medical directives. Our primary goal is to ensure the care of our 14-year-old daughter and minimize taxes and probate costs.
Our situation:
- Maryland residents
- Net worth of approximately $6 million
- Primary assets include: $900k home (with $130k mortgage), $2.75M in 401ks, $600k in Roths, $1.5M in a Vanguard taxable account, and $300k in 529s.
- Our wills name a relative as guardian until our daughter turns 18 and a separate relative as successor trustee to control the finances.
- At creation, the trust will only hold our home and its contents.
Trustee will be able to disburse funds: (1) Until 18 – for health, maintenance, care, support, housing, or education; (2) From 18 to 25 – things the trustee deems reasonable for education, medical, or for other care deemed reasonable or necessary; and (3) when daughter is 30, the trustee shall disburse the remaining balance free and clear of the trust. There is a clause for withholding distribution if daughter has an addiction issue.
Our questions:
- ToD beneficiaries and 401ks: We plan to name each other as primary ToD beneficiaries for our 401ks, with the trust as secondary. Will this create an immediate taxable event? Is this the best way to transfer the 401ks to the trust?
- Joint Vanguard account: Our $1.5 million Vanguard taxable account is jointly owned. Correct me if I'm wrong or if there is another way to accomplish the same thing, but Vanguard doesn't seem to allow contingent beneficiaries for joint accounts. Does this mean the account could go through probate if we pass away simultaneously? Are there alternatives?
- 529s: We have approximately five separate accounts with my daughter named as the beneficiary. Do we need to name contingent owners (e.g, the revocable trust) for these or does the fact that our daughter is named the beneficiary sufficient?
- Trust distribution: Our trust provides for distributions to our daughter until age 25, with full disbursement at 30. Is it advisable to extend the distribution period to age 29? We’re not sure we want our daughter to get support up until 25, and then to get no support despite there being millions available.
- Finally, regarding the disbursement at 30, we’re wondering now whether it would be better to have my daughter named the trustee at 30 rather than disbursement. We’re concerned that disbursement would create a taxable event. Also, we thought that keeping the proceeds in the trust, if that is what are daughter chose to do, might better protect the assets in the case of divorce. Is there some reason absolute disbursement
would be better (e.g., revocable trusts are taxed differently?)
- Anything else we should likely consider?
Statistics: Posted by ZMonet — Thu Aug 15, 2024 8:04 am — Replies 14 — Views 816