• Question
  • I recently became a widow (age 68) with no children to inherit... Planning my estate...

    Asked by a 75 year old woman from Whitwell, TN on 3/2/2013

    I find myself at a "crossroads" having become a recent widow (age 68)with no children to inherit significant assets though nieces and nephews exist, some of which I am not particularly fond & hardly know. I know there is much written on how to prepare for retirement for couples, yet "there seems to be little info for someone in my plight" and I surely am not alone. I am aware of gifting/charitable resources available to me. Up to now I have been the primary manager of our estate monies, but am now wondering where best to move forward to avoid the high costs of trusts & fees to plannners, attorneys & trustees, etc.

    Essentially I have identified 2 responsible family members to handle once I am unable to manage but need help in simplifying holdings in order for this person to not have to spend so much time managing my estate. While the answer may be "either" an annuity, I fear the many pitfalls of such investment or placing all into a trust only to find myself "locked in unable to invade the principal" does not provide any reassurance. (See Henry K. Hebeler's 2/08/03 article on "Can You Trust a Trust or Its Trustees?")

    Suggestions are welcome though I realize some will not be acceptable as my goal is to keep taxes to a minimum & yet ensure monies are wisely retained for my own use as needed/desired and not become a burden for executor.

  • Categories: Retirement Planning, Estate Planning


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  • You have some very specific goals which will serve you well when making a decision: 1) Keep taxes and costs low, 2) keep the use of your money today and 3) simplify the management of your assets so that your executor can easily perform their responsibility as you would want them to.

    While it is best to seek the advice of a board certified estate attorney and financial planner, you may be able to minimize some expense and effort by going into a meeting armed with some options you can educate yourself on.

    Generally, there are two types of trusts, living (or revocable) and irrevocable trusts. Revocable trusts are just what their name implies and could be a better option given your goals. You can revoke or make any changes to the trust, typically any time you choose and name yourself as trustee. This can also be an added benefit to your chosen heirs because a living trust avoids probate hassles and expenses (some states are more expensive to probate in than others and should be considered when you make your decision). The trust becomes irrevocable upon your passing and the person or persons you name as trustees then step into that role and must follow the provisions of your trust.

    Sometimes people find it helpful to name a bank or other trust entity as a co-trustee with limited ability to act who simply serve as a resource for the trustee you do prefer who may have limited knowledge or time to manage the trust. Of course, depending on your ultimate goal, your trustee’s duties may end very soon if your only instructions are to distribute all of the trust assets after you pass away.

    You will have to retitle the assets you want to flow through the trust and likely need a “pour-over” will that “pours over” any remaining assets at death into your will (therefore probate will occur regardless). However, this could still minimize costs depending on your local probate expenses.

    Since the living trusts are revocable, this means that any income inside the trust is reportable to you individually on your tax return. There are typically no other returns to file.

    An annuity probably should not be the only answer (whether you use a trust or not), but there are some with very low costs built almost exclusively to defer taxes. An annuity will also avoid probate and related expenses since you designate an heir per the annuity contract. The trade off, in your case, could be either limited ability to withdraw funds early on or paying a higher fee to have unlimited access from the beginning. However, with the help of a qualified advisor, you might be able to shelter some of your assets from income taxes and keep costs low with an annuity by strategically planning how and when to draw from different investment assets.

    Even if you want to avoid as much expenses as possible, you should at least consider speaking with a few advisors through a free consultation to make sure you are heading in the ultimate direction you want for yourself and your heirs and limit the possibility of winding up with unintended consequences and additional expenses in the end.
    This link may provide you with some additional resources: http://www.newretirement.com/services/Estate_Planning_Advanced_Strategies.aspx.

    This answer is provided as general information only and provided by Master’s students pursuing a degree in Personal Financial Planning at Texas Tech University. No warranty is made regarding the fitness or accuracy of the information provided in this answer. You should seek advice from a licensed CPA, attorney or Certified Financial PlannerTM as to your unique financial situation.

  • Login to rate this answer:   Answered on 5/4/2013
**All above answers are provided as general information only. No warranty is made regarding the fitness or accuracy of the information provided in this answer. You should seek advice from a licensed CPA, attorney or CERTIFIED FINANCIAL PLANNER™ as to your unique financial situation.