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Suggestions for Grandma setting up inheritance

Home Estate Planning Suggestions for Grandma setting up inheritance

  • Avatar G 
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    Status: Physician, Small Business Owner
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    My mom is asking about setting up inheritance logistics for maximal benefit of her only grandbaby.  (I’m FI and my kid has a well-monetized 529.)  Gifting money now isn’t an option, she is planning for anything leftover.

    Is it best to set up her IRAs to go to me or the kid?  Logistics seem complicated: https://www.whitecoatinvestor.com/forums/topic/kids-inherited-ira-questions-about-rmds/

    How about bequeathing property/real estate?

    I suggested that she set up an living trust, but would it be better to have me or the kid be the beneficiary?  If I’m the trustee, how much of a hassle is it to manage vs just rolling the assets into my own?

    What else should I be asking?

    #100720 Reply
    Avatar StarTrekDoc 
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    Status: Physician
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    First question – how is probate in her State?  If significant – Trust for that reason alone

    If it’s a large estate, would consider a living trust and with whatever direction she wants to give it.   But if it’s really to a single person and smaller estate (assumption since gifting at this time not an option), a Will with Last Testament may be good enough if not special stipulations/situations with the little one.

    #100736 Reply
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    Avatar G 
    Participant
    Status: Physician, Small Business Owner
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    Joined: 01/08/2016

    First question – how is probate in her State?  If significant – Trust for that reason alone

    If it’s a large estate, would consider a living trust and with whatever direction she wants to give it.   But if it’s really to a single person and smaller estate (assumption since gifting at this time not an option), a Will with Last Testament may be good enough if not special stipulations/situations with the little one.

    Click to expand…

    Thanks for that advice, I agree with trust to avoid probate.  Any suggestions on who should be beneficiary–me or kid?

    #100921 Reply
    Avatar RetiredERdoc 
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    Status: Physician
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    if You are fi, I don’t see any advantages to leaving you the IRA. You would have to take rmds at a high tax bracket. Setup the estate plan as a trust for the grandchild. As to real estate, would this be an income producing property, or personal residence?

    #101271 Reply
    Liked by G
    Avatar G 
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    Status: Physician, Small Business Owner
    Posts: 1453
    Joined: 01/08/2016

    if You are fi, I don’t see any advantages to leaving you the IRA. You would have to take rmds at a high tax bracket. Setup the estate plan as a trust for the grandchild. As to real estate, would this be an income producing property, or personal residence?

    Click to expand…

    For the real estate, there would be the house she is living in (this assumes she doesn’t downsize/move sooner) which would be sold, and an income producing farm which we would probably keep at this point.

    #101318 Reply
    Avatar StarTrekDoc 
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    Status: Physician
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    Joined: 01/15/2017

    Interesting and would be fun to have that done with the Farm — Trust for the Grandkid IMHO with you and clear path on administration of the Trust that you and grandma should review.

     

    #101322 Reply
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    Avatar FIREshrink 
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    Status: Physician
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    Joined: 01/11/2017

    google IRAs left to trust. it’s the right answer if it is of any size, but there are a few quirks to understand.

    #101340 Reply
    Liked by G
    jfoxcpacfp jfoxcpacfp 
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    Status: Financial Advisor, Accountant, Small Business Owner
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    • In some states, minors cannot own real estate.
      • Real estate should pass at death for the stepped-up basis factor.
      • If you don’t plan to sell the farm, you might keep it until your death and then pass for more step-up in basis.
    • IRAs should go to the grandchild for stretch distributions.
      • If pre-tax, she should be looking into annual Roth conversions.
      • If she leaves anything to charity, it should come from pre-tax IRAs.
    • A RLT provides anonymity and avoids probate only for the assets that are retitled to it. If your state has simple probate, I’d probably skip this step.
      • Not much hassle to manage an RLT but I think she would have to be the trustee. At her death, the assets would pass to the beneficiaries.
      • You can have multiple beneficiaries and have the appropriate assets go to the appropriate beneficiary.

    I’m sure you’re working with a good E&T attorney, right?

    Johanna Fox Turner, CPA, CFP, Fox Wealth Mgmt & Fox CPAs ~ 270-247-0555
    https://fox-cpas.com/for-doctors-only/

    #101342 Reply
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