Irrevocable Trust for "Small" Estate?

Consider state taxes too... IIRC Florida used take for itself everything that the feds didn't exempt. I mean it would tax the whole estate at 45% or so, except for the portion which already paid the fed equivilent.

Florida isn't so tax friendly as advertised... I believe it's intangible tax can take 1.5% of a retiree's assets every year, which is a lot if you are living off a lump savings instead of pension.

1. Leaving his estate to his nephews is not a "generation skipping" trust. Leaving it to the nephews kids would be.
2. You are right that the estate tax may change, so I would be putting in place a trust with my specific intentions. This would also avoid probate, and hopefully any infighting.
3. I would include terms that allow the trustee discretion to allocate funds to the medical/etc. needs of the nephews. By the time this comes to pass, one might be, heaven forbid, in need of significant care and the other not.
4. Since I don't trust those money grubbing politicians one bit, and if he is sure what he wishes to do, I would put in place a trust to take effect upon the first to die, so as not to loose that person's estate tax exemption. I realize it is now "portable", but do not trust it to remain such.
5. I would tie up the funds until the kids get older (let them earn their own keep while in their 20s and 30s), or to see if there are any special needs that develop.

If he passes away first, should the wife have the right to change beneficiaries on any of the assets? Or is the point to avoid that? And - is there some desire to control the assets after death, e.g. delaying the inheritance until at least some triggering age?

What kind of assets are they? E.g. any real estate, IRAs or life insurance as part of the $1.6?

-Tad

Good point. The husband wants to have the final say on the beneficiaries.

If you are saying that such a desire to control argues for a trust, I understand.

The draft of the trust the friend is considering specifies 35 years old before a beneficiary can receive the dissolved trust's income and/or proceeds. That is, the nephews must be 35 before they get any income from the trust. For the nephews' issue (= the nephews' kids), the nephews must not only die but their issue (kids) must also be at least 35 before the trust dissolves.

Hopefully I am understanding your question correctly and not butchering too badly the legal lingua franca.

The assets are stocks and bonds in an account with only the husband's name on it. The husband recently inherited these stocks and bonds from a parent. My understanding is community property is not an issue for this part (the recently inherited stocks and bonds)of the estate.

Pico rico and dumbstruck, your comments help. Thank you!

It seems estate tax isn't a driver as it's so far below the limit. If the threshold changes downward, he can amend the trust. It's all about use and distribution of the trust assets, especially because he's relatively young - there may be 30+ years ahead.

Community vs separate property - the inheritance from his parents is separate, unless converted. That has significance if his wife passes away first. Community assets are fully stepped up in cost basis at the death of either spouse - eg stocks, stock mutual funds, the house. Keeping them separate gives up that potential tax benefit.

Strictly for passing the assets to the nephews, he could set up a revocable trust for himself that becomes irrevocable when he passes away. Then, it's either distributed to the nephews if they're old enough, or managed by a successor trustee until that time comes. While irrevocable & in existence it would file its own tax returns and, if income isn't distributed, pay taxes.

Of course, that cuts out the wife, so the trust will probably provide some level of support for her if she outlives him. How much depends on his wishes and her finances (less of an issue if there's other money too). This could be a sticky conversation though; every restaurant check during their retirement could raise the question of whether to pay for it using "their money" or "the nephew's trust."

Also given the many years ahead, long-term care, and care and planning around dementia and Alzheimer's need to be considered. Should the trust be available to use entirely for care? Could it be depleted by a successor trustee through gifts to the nephews, in lieu of paying for more expensive care? Is asset protection part of the goal of this trust?

-Tad

Thank you Tad. These seem good points. My bud is studying them all in preparation for the next meeting with his attorney.

I think the intangible personal property tax was repealed in 2007