Trust funds - Chicagoland Sportbikes
Chicagoland Sportbikes
 
Open Forum This forum is for all off-topic discussion.

 
LinkBack Thread Tools Display Modes
post #1 of 10 (permalink) Old 04-07-2008, 10:50 AM Thread Starter
Resident Slow Guy
 
ENutz's Avatar
 
Join Date: Jul 2005
Location: On a plane
Posts: 7,386
Location: On a plane
Sportbike: Ain't got none!
Years Riding: Since May 21, 2011
How you found us: The intarwebz
           
Send a message via Yahoo to ENutz
Trust funds

Anybody ever set one up for their children? Anybody here a "trust fund kid"? How do they work?

<- Erwin

CCS AM #611

"Nigga if you ride, nigga you gon fall!" - Katt Williams

Ashwin Gopal, David Ryan, Baby Ronin Tyler, John George, Chris Kotacka aka 'Arch', Eva Grzegorczyk

Quote:
Originally Posted by Rob, Esq. View Post
image v. substance. Some people want to be motorcyclists, others just want to be seen as motorcyclists.
ENutz is offline  
Sponsored Links
Advertisement
 
post #2 of 10 (permalink) Old 04-07-2008, 01:53 PM
Registered User
 
chibeemer's Avatar
 
Join Date: Apr 2003
Location: Chicago
Posts: 2,047
Location: Chicago
Sportbike: BMW R1100s
Years Riding: 13
How you found us: Rider
           
I just set one up. We established it in our will. Unless you have a ton of money already our lawyer advised us not to set up a trust now (we are mid 30s). The reason is that all your assets need to be put into the trust. Therefore every time you buy or re-fi a home you need to jump over more paperwork to get that done.

That's because you don't own the home, the trust does. However, you run the trust so you do have control.

We settled on stating in our will that upon our death our executor will establish a trust and as the estate is settled (turned to cash) those funds will be placed in the new trust.

Keep in mind this is only in the event that both my wife and I die and our children are minors. Our goal is that our money will be available for our children's well being as they grow up.

Our executor of our will will then be the trustee and will have access to all the funds as stipulated in our will.

Now, that said I also have established a trust for my uncle who is handicapped. He needs the money to ensure his savings are used to support him when he isn't able to do that for himself. He's older so his whole life savings is there and we both believe he won't get much more since he's now retired. We just want to protect it because he has a lot of "friends" who mooch off him and holding his savings in trust partly protects him from loss.

It also helps you distribute those funds to your heirs. 1stly, that since you don't own your assets but instead the trust owns them you will be able to pass more of that to your heirs without the government getting a hold of it.

2ndly, you avoid probate. Probate is the long and frustrating process of reconciling all the assets of the estate after someone's death.

My father passed away in Dec without a will and we are going through probate. To give you an example, a will costs about $500 to draft. If you don't have a will then you need to pay a lawyer and court costs to establish certain things which allow you to sell stocks, property and cancel leases and contracts. This cost me $3500 so far. My vote is a will.

So one thing you get at probate is letters of the court which appoint you executor of the estate (only they call it administrator). The executor pays off all the bills. When that is done you distibute assets to heirs.

If you have a will or a trust you can skip the whole waiting 3 months to get those letters. That's a long time when you have to bury someone and pay up front for those expenses. In my case we had my dad cremated in the lease expensive box (yes, cardboard, which is what he wanted) and then held a simple memorial followed by a luncheon.

All that cost about $3000. Add the lawyer and you are talking some serious money. So it sucks to have to wait 3 months to get paid back.

Blah, Blah, Blah

Get your Portable ID!
chibeemer is offline  
post #3 of 10 (permalink) Old 04-07-2008, 02:05 PM Thread Starter
Resident Slow Guy
 
ENutz's Avatar
 
Join Date: Jul 2005
Location: On a plane
Posts: 7,386
Location: On a plane
Sportbike: Ain't got none!
Years Riding: Since May 21, 2011
How you found us: The intarwebz
           
Send a message via Yahoo to ENutz
Thanks for responding. It sounds to me, and I could be reading this wrong, that a trust fund is similar to a will where funds, property, and what not will be distributed once I pass away. Didn't know that ALL my assets needed to be put in the trust such as my home. I guess a trust fund is not what I need. I need to be able to pass funds to my child through an "executor".....all while I'm still alive!

<- Erwin

CCS AM #611

"Nigga if you ride, nigga you gon fall!" - Katt Williams

Ashwin Gopal, David Ryan, Baby Ronin Tyler, John George, Chris Kotacka aka 'Arch', Eva Grzegorczyk

Quote:
Originally Posted by Rob, Esq. View Post
image v. substance. Some people want to be motorcyclists, others just want to be seen as motorcyclists.
ENutz is offline  
post #4 of 10 (permalink) Old 04-07-2008, 02:30 PM
 
Join Date: Jan 2007
Posts: 309
           
It depends on whether you are looking to set up a trust of all your assets for estate planning purposes, and have your children be the benficiary of that trust, or just looking to set aside some money in their name. If the latter, and you don't have millions for them right now, you can set up what's called a UTMA (uniform transfer to minor account) with any brokerage firm (i.e. Schwab, etc.) for them to have an investment account in their name. Just call a broker or set up an appointment and they can explain all of the benefits/downside. Its more or less just an account in their name that is taxed at their rate (so no tax until and unless they get a job and make enough to even file) and it automaticially transfers to their name at age 21. You (or anybody else you give their account info to like other relatives) can contribute to the account as often or as much as you want, and you control what the money is invested in, and can even cash out under certain circumstances without penalty, i.e. medical emergency for them, college, etc. and can transfer the money to another brokerage firm if you want. The only real downside I've seen is that when they apply for college, if they have enough money in their UTMA it will probably reduce the amount of aid/loans available to them because they have their own assets, but that's probably one of the reasons you are looking to set up the UTMA in the first place. If you really are looking to do some comprehensive estate planning, or do have millions right now to put in a trust for them, then you really should get an estate lawyer and/or accountant involved. But if you are just starting to set money aside from them, a UTMA is an easy way to start.
Johnnie Random is offline  
post #5 of 10 (permalink) Old 04-07-2008, 02:41 PM Thread Starter
Resident Slow Guy
 
ENutz's Avatar
 
Join Date: Jul 2005
Location: On a plane
Posts: 7,386
Location: On a plane
Sportbike: Ain't got none!
Years Riding: Since May 21, 2011
How you found us: The intarwebz
           
Send a message via Yahoo to ENutz
Quote:
Originally Posted by Johnnie Random View Post
It depends on whether you are looking to set up a trust of all your assets for estate planning purposes, and have your children be the benficiary of that trust, or just looking to set aside some money in their name. If the latter, and you don't have millions for them right now, you can set up what's called a UTMA (uniform transfer to minor account) with any brokerage firm (i.e. Schwab, etc.) for them to have an investment account in their name. Just call a broker or set up an appointment and they can explain all of the benefits/downside. Its more or less just an account in their name that is taxed at their rate (so no tax until and unless they get a job and make enough to even file) and it automaticially transfers to their name at age 21. You (or anybody else you give their account info to like other relatives) can contribute to the account as often or as much as you want, and you control what the money is invested in, and can even cash out under certain circumstances without penalty, i.e. medical emergency for them, college, etc. and can transfer the money to another brokerage firm if you want. The only real downside I've seen is that when they apply for college, if they have enough money in their UTMA it will probably reduce the amount of aid/loans available to them because they have their own assets, but that's probably one of the reasons you are looking to set up the UTMA in the first place. If you really are looking to do some comprehensive estate planning, or do have millions right now to put in a trust for them, then you really should get an estate lawyer and/or accountant involved. But if you are just starting to set money aside from them, a UTMA is an easy way to start.
Don't have millions of dollars in the bank so yes, I do want to set money aside a la UTMA, but I'm actually looking for something else. My situation is a bit complicated. I'll need to speak to an attorney or someone that deals in this realm.

<- Erwin

CCS AM #611

"Nigga if you ride, nigga you gon fall!" - Katt Williams

Ashwin Gopal, David Ryan, Baby Ronin Tyler, John George, Chris Kotacka aka 'Arch', Eva Grzegorczyk

Quote:
Originally Posted by Rob, Esq. View Post
image v. substance. Some people want to be motorcyclists, others just want to be seen as motorcyclists.
ENutz is offline  
post #6 of 10 (permalink) Old 04-08-2008, 08:29 AM
Registered User
 
chibeemer's Avatar
 
Join Date: Apr 2003
Location: Chicago
Posts: 2,047
Location: Chicago
Sportbike: BMW R1100s
Years Riding: 13
How you found us: Rider
           
Quote:
Originally Posted by erznana View Post
Don't have millions of dollars in the bank so yes, I do want to set money aside a la UTMA, but I'm actually looking for something else. My situation is a bit complicated. I'll need to speak to an attorney or someone that deals in this realm.
Ya, you can't do anything unless you speak with an estate lawyer. Do that 1st and see if anything makes sense for your situation.

That said, you might still be able to establish a trust to accomplish what you want to do. To clarify, you won't need an executor unless you can't administer the trust (you are dead). You'll be the trustee until that time. As trustee you'll have 100% control over the trust anyway.

I'm not sure if having the trust will allow you to transfer wealth to your children as easily as you wish though. There probably are better ways to do that like the UTMA which I don't know all that much about.

A broker could probably help you. I would caution though that you don't need to pay someone to manage your accounts if you don't have lots of money. Just log onto Vanguard.com and set up an account online. When you choose an investment option read through the scenarios to choose a portfolio position. If that still doesn't make sense just call their customer support line and talk to them about what you want to do. They can't give you advise but they can clarify the options.

Don't pay to have a broker handle your money unless you have some. $20,000 doesn't count as a lot of money. If you are earning $5000+ a month on dividends and interest then you should have someone manage your investments but until you have some serious bank those brokers will fleece your investments of all their potential profits with their fees.

All that said, there are reasons why wealthy people have money. One is of course hard/smart work, another might be luck. However, estate planning is VERY important. Its something most people don't talk about either with their parents or with the children. The wealthy people I know have periodic family meetings to discuss family investments, charity giving, and estate planning.

You see those people don't look at it as "Dad's Money," they look at it as "Family Money."

Oh and by wealthy I don't mean people with high incomes. High income is not wealth. Wealth is income derived from investments. Until your investments become your primary income source you are not wealthy.

Case in point, a lawyer or Dr who makes $400,000/yr. If that person spends $450,000/yr on new luxury cars, housekeepers, big home, etc to support their lifestyle then they are not wealthy. If they loose their job because they are disbarred or have their medical license take away then they are sort of in a jam because their income won't support their lifestyle.

Blah, Blah, Blah

Get your Portable ID!
chibeemer is offline  
post #7 of 10 (permalink) Old 04-08-2008, 08:40 AM
DONATING MEMBER
 
Chicago Performance's Avatar
 
Join Date: Jun 2007
Location: Northlake, IL 60164
Posts: 25,071
Location: Northlake, IL 60164
Sportbike: Trackdayz "I" bike!
Years Riding: since last year
How you found us: In a fortune cookie
           
I just realized I will never be wealthy. Rich maybe, but never wealthy.
Chicago Performance is offline  
post #8 of 10 (permalink) Old 04-08-2008, 08:56 AM
Registered User
 
chibeemer's Avatar
 
Join Date: Apr 2003
Location: Chicago
Posts: 2,047
Location: Chicago
Sportbike: BMW R1100s
Years Riding: 13
How you found us: Rider
           
Quote:
Originally Posted by Bob View Post
I just realized I will never be wealthy. Rich maybe, but never wealthy.
Depending on how you look at it you might be able to define yourself as wealthy some day. You just have to save the crap out of each paycheck.

I suggest reading a book called the Millionare Next Door. Its a little laughable because its one of those self help Dr Phil, mail order degree sort of books but it does have some valid points at its basic levels.

The author contrasts the Dr/Lawyer with the high income/high spending habit to a NYC fireman married to a school teacher. I've already told you the Dr/Lawyer side. The fireman and his wife basically lived paycheck to paycheck to afford their home and family but they also socked away 20% of their annual income. When they retired at age 60 they had over a $million in savings.

20% of you income is a lot to save but I just got done setting up my grandma with live in home care at a senior home in Northlake. She isn't wealthy by any means. In fact, she's 90 years and is a product of the depression. She spent the most productive income earning years of her life either unemployed, supporting the war effort, or a housewife.

Home health care will cost her $3000/month in addition to her rent and medical expenses. That's a lot of money for the wife of a carpenter. The only way she can afford it is because they saved like nuts when my grandfather was able to work.

Sure he was union and she gets a portion of his pension but that's peanuts by todays standards. Plus he was always getting layed off between jobs back in the day so the monthly income wasn't steady. Its amazing that she can afford to live independently now.

Blah, Blah, Blah

Get your Portable ID!
chibeemer is offline  
post #9 of 10 (permalink) Old 04-08-2008, 09:30 AM
 
Join Date: Sep 2006
Posts: 1,145
           
I'm one of those 'trust fund kids' you are referring too. It's generally a relatively safe investment fund that may include any kind of property, with limited access by the recipient, until a set date. Mine was set up for estate tax purposes, by my grandparents.

I think my parents also have trust funds set up in order to protect assets from liability issues associated with owning a business/s. Assets that would be handed to us children upon their death anyway.

Apparently, I scared my parents when I turned 16 and promptly got in a serious car wreck and the plaintiff tried to freeze the families assets because they thought the 500k in insurance coverage wasn't enough for their new car...

I'm not really sure how different a trust is from a well written will, other than the recipient takes possession of the trust when it is opened, but doesn't necessarily have access to it right away.

Just my 2 cents!
kcaarider is offline  
post #10 of 10 (permalink) Old 04-08-2008, 09:55 AM
Registered User
 
chibeemer's Avatar
 
Join Date: Apr 2003
Location: Chicago
Posts: 2,047
Location: Chicago
Sportbike: BMW R1100s
Years Riding: 13
How you found us: Rider
           
A trust is just a legal container you put assets into, it is not an investment. The trust owns the assets but the trustee controls the trust. Its a lot different than a will.

A will just states what you want done in the event of your death. A trust usually has a will also for continuety of the trust.

Start off talking to an estate lawyer and at least draft a will, especially if you have children. As I said earlier, you can draft a will that states you want your executor to establish a trust upon your death to support your children.

Your trust doesn't need to give a set date to distribute wealth. Mostly this is done because you are dead but your children are minors and you don't want them to blow everything on motorcycles while they are in high school.

In my case the person designated to run my trust in the event of my death will get to administer how the funds are distributed until my kids are 25. Basically, my wife's sister raises the kids and uses the money to pay for their clothes, school, food, etc. We have enough faith in her where we don't believe she'll blow my kid's money on TVs and stuff. But we acknowledge she and my brother in law might need to spend some of the funds to upgrade homes, especially since they'd suddenly have extra mouths to feed. So we didn't put too many limits on her use of the funds.

Other trusts simply state that a lump sum distribution would occur upon death. My understanding of this is that while its nice to get all that money at once sometimes there are tax considerations.

Blah, Blah, Blah

Get your Portable ID!
chibeemer is offline  
Reply

Quick Reply
Message:
Options

Register Now



In order to be able to post messages on the Chicagoland Sportbikes forums, you must first register.
Please enter your desired user name, your email address and other required details in the form below.

User Name:
Password
Please enter a password for your user account. Note that passwords are case-sensitive.

Password:


Confirm Password:
Email Address
Please enter a valid email address for yourself.

Email Address:
OR

Log-in










Thread Tools
Show Printable Version Show Printable Version
Email this Page Email this Page
Display Modes
Linear Mode Linear Mode



Posting Rules  
You may post new threads
You may post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is On
Trackbacks are On
Pingbacks are On
Refbacks are On

 
For the best viewing experience please update your browser to Google Chrome