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thejunkelemental · 3 years

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A Retrospective

When I was at the lowest I ever was, it was like blinders had been installed on the side of my head. I was incapable of seeing anything outside of my own pain, loss and crumbling worldview. I had come from a place where I had started to see my life in a certain way, my value in a certain way. For a long time I had struggled through my life to find a place of meaning and value in my own world. I sought it in others, in their validation or their grateful faces when I managed to help or entertain. Fundamentally there was this darkness within me I couldn’t dispel because I had grown up in a world where appearance matters, grades matter, work matters...the REAL world and the codified vision of success I was spoon fed from childhood was something I was just...not compatible with. So I sought that value from others. Now, you could probably write a pretty long book about how often that kind of loadout leads to failure. I took things personally that really weren’t. I spent more time on trying to make myself likable than I did on actually being likable. Somehow through all of that, people would find and love me for qualities I possessed that I barely even thought about...things I didn’t think really made me successful...but they did make me likable. I guess now when I look back at myself I feel like a poorly constructed edifice I needed to scrape together to survive. Things...hit hard. And I never really recovered. In a lot of ways that’s my fault. I didn’t really see myself being able to recover so I adopted this crazy Don Quixote-esque dream that I might be able to win back the things that I lost...but honestly? That was likely doomed fail to the start. There is a paradoxical nature of asking for validation and reassurance in that it starts to become less believable to you the more you ask for it. When it isn’t organic, there is this voice at the back of your skull that tells you it’s only being said to spare your feelings. That it isn’t true. That they’re lying to you. You notice changes in communication, seek out nuances in written texts. You can construct Machiavellian plans about how it might be easy to lie and gaslight you than tell you the truth but it takes a lot to stop and think about how exhausting it would be to continuously lie to someone. Those thoughts...have less weight because you’re waiting for the other shoe to drop. The other shoe is what you get when you have been traumatized into expecting the worst outcome of any situation. You’re always tensed for it and need these micro-expressions of validation or interest to light in the darkness of your own mental state to keep the worst of it at bay. When you struggle with feeling hurt, you struggle to trust. It’s survival. You want to feel safe but when places you relied on collapsed around you, nowhere really feels as safe anymore. You crave to lay down and feel wanted but keep one eye open for any sign of collapse. It makes it hard to take people at their word, even people you very much want to trust. It can make reasonable requests sometimes seem threatening when it really isn’t. You want so badly to find the proof positive that you aren’t being lied to and misled that you don’t stop to consider that nothing will ever be proof enough to silence those voices...not permanently. Because they don’t come from a rational place but one of internal hurt and expectation of being hurt again. So when things change, you naturally seek an explanation...so your hurt self provides the five or so scenarios that would be worst case and most painful...and then you feel driven to seek validation or proof those aren’t real...the cycle perpetuates itself. Honestly the only marker of importance is how you are treated and even that is colored by your own perception of what YOU would do. For those of us who thrive on contact and connection, the motivations and tactics of introverts can feel like retreating or detaching or abandonment. It rarely is and more a need for those people to take time to themselves to refuel to be there for others. It’s the act of asking those people to stretch themselves thinner and thinner that push them away...the wounded extravert seeks validation and comfort, the wounded introvert seeks calm and solitude. What I struggle with is the sense of doom that can sometimes accompany my spirals into anxiety thoughts. The illogical expectation that because things have been bad before, they will be again. It is not always the case and the adoption of these kind of mindset absolutely ensures that the longer I exist in this space, the more needy or desperate I seem to others when they venture in to help me...quickly exhausting their reserves and making them reticent to return. I end up destroying my own goals with my own insecurities. I drive people away from me I deeply want to draw closer. I fulfill my own prophecy of abandonment. Daily I deal with intrusive thoughts and emotional mood swings. I can feel ok until a thought hits me and I am unable to disengage from it. Today I’m an absolute wreck emotionally for so many reasons. A lot of thoughts that turn into other thoughts...a real infestation of darkness. I sleep to escape them but I wake up with them in my brain and less time to deal with them. Can we talk about darkness? When I...was at my lowest. I felt like I was in a burning building with no way out. I didn’t want to burn to death but I felt like death was inevitable. It lead me to consider other ways to escape the pain, the pain of dying slowly, the pain of emotional collapse...I think a lot of people consider these paths because they’re just trying to escape a pain they see as inevitable and all consuming. Sometimes I still feel that inevitable and all consuming pain and...honestly, sometimes I still do have dark thoughts...but they never become more than dark thoughts. I’ve pried the blinders off just enough to get perspective on how choices like that can effect those we love and care about. Sometimes what can seem like an easy out only seems easy because we won’t be looking back at the ruin behind us. And for those who feel that pain? It can mean there’s no easy answer for escape other than riding it out. It becomes about making it through, day by day and staying safe...which, thankfully, I have been able to keep consistent. There are better days sometimes. Bright days. Times when the pain recedes or wraps up in a different way. Times when I am not as reminded of the harder times. I can only hope that those times increase as we all march on. I want that for the people I love too.

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ronaldmrashid · 7 years

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The Benefits Of A Revocable Living Trust

Every parent’s responsibility is to try to give their children as many opportunities in life as possible. As a result, we get life insurance, set up a 529 plan, establish a will, invest for their future, and spend as much time with them as possible. What I haven’t touched upon yet is setting up a revocable living trust, something I plan on eventually doing, especially after reading this post.

I’ve invited Tom, a doctor, a FS reader, a father of five, and the founder of HighIncomeParents.com to tell us why setting up a revocable living trust is a good idea. Most living trusts are “revocable” because you can change them as your circumstances or wishes change. Revocable living trusts are “living” because you make them during your lifetime.

Origins Of The Revocable Living Trust

Trusts may have originated in the 8th century but became more common during the times of the crusades. Knights would travel to far off lands, fighting for their church and king. These men left their families for months if not years with little communication back home.

They left wives and children to tend to the home not knowing if they would return until they either showed up at the front door or the other knights came home and told their families they didn’t make it home from the battle.

If there was no trust in that day, the Crown could claim any property belonging to the knight under royal rights and the wife and children carry on penniless.

Fortunately, we aren’t as archaic today but there are still benefits of a trust, especially for those with a high net worth.

Key Definitions

In order to know what we are talking about, we need to define some terms.

The basic goal of a trust is to provide a responsible person (or firm) for the assets of someone else. The settlor (also sometimes called trustor, grantor or donor) is the person with the assets. The trustee is responsible for those assets. The trustee acts for the benefit of the people receiving the assets once the settlor is dead or incapacitated. The beneficiaries are the people receiving the assets.

High income earners with a large net worth and especially those with children should look into the benefits of a revocable living trust to see if it’s right for them.

Differences Between A Will And A Trust

A will only kicks in after you die. A trust can help transfer assets before and after you die.

A will requires probate. Probate is a process in which the court proves that a deceased person’s will is valid. It can be pretty simple or a real pain in the you-know-what depending on the estate.

A will is public. A trust is private.

A will completely distributes your assets to your beneficiaries after your death if they are of the age of majority. If you have minor beneficiaries the guardian of the beneficiaries (children) don’t get anything to help raise your kids from the inheritance.

With a trust, your assets can stay in the trust and the trustee can distribute assets as your instructions dictate. That means you can give money to the children incrementally to help the guardians care for them.

Privacy Benefits

If you don’t want some busybody knowing your assets and worth, a trust can help keep that confidential. It isn’t 100% full proof because disgruntled family members can still challenge the trust in court and then the assets of the trust become public record. It’s still more private than a will since the will becomes public knowledge automatically.

Some people get pissed off when their attorney includes personal information in a will. This could include social security numbers, birthdays and children’s names.

Related: Adopt Stealth Wealth Into Your Life

Lower Potential Cost

When the settlor dies, all his assets transfer over to the trust. All assets should be titled in the name of the trust while the settlor is alive but if you include a “pour over” will, even those titled in the settlor name should eventually end up in the trust.

For example, the pour-over will could cover a car not titled in the name of the trust, but the settlor name.

The assets covered by the pour-over will are still public and they still have to go through probate, so if privacy is a big concern, make sure you transfer title to the trust.

In Henry Abts III’s book The Living Trust, he estimates the cost of probate between 5-15% but this is highly situation specific. Fees include court filing fee, personal representation fee, posting a probate bond, publication of legal notices, tax preparation fees, property appraisal fees and attorney fees.

If the family starts a heated legal battle over a will’s legitimacy, the heirs might be left with very little once the courts get their cut. Just look at how Elvis’ estate was fleeced.

Fees will vary by state but some states have standardized fees. Just check out California:

Probate fees are ABSURD if you don’t have a revocable living trust

This is a handy probate calculator for Californians. Talk about a ridiculous amount of money in fees. So who gets the fees? Attorneys, accountants, the court costs, a probate bond fee, paperwork, filing taxes at the end of the year, brokerage transfer fees. it all adds up. The government only gets you if you are about the estate tax limit. as long as the estate is below 10.98 million you are good there. Some states might have different estate tax rates so you have to watch that.

When we set ours up it cost $1500. That was about 5 years ago. The estate planning attorney I used streamlined the process. We had an initial hour consultation that if we decided to proceed with the trust, he included in the overall price.

Then he forwarded us a long worksheet that helped my wife and I think through the process and convey our wishes. I bet we spend four or five hours going over that worksheet. It was a long discussion but also very good for us to hash out all our wishes if the worst happens.

He then gave us another 20-30 minute phone consultation to review our wishes and clarify any questions he had. A few days later he had all the documents emailed to us for review. After we reviewed everything, he sent us the documents for notarization and witnessing. We did that and the document should be legally binding after all that.

Trusts Are Also For The Living

If you become incapacitated and unable to care for yourself, without a trust, your heirs are sitting around waiting for you to die before they can receive your assets. Depending on your family relationships, that might cloud some judgment on whether or not they want to continue medical care or other life changing decisions.

On the other hand, if you have a trust your beneficiaries might be clamoring to have you declared incompetent if they can request information from the trustee and see what they are due to get from the trust.

The bottom line is hopefully your beneficiaries like you for more than your money.

Deciding How Much to Give to the Kids

Here is where a trust has an advantage over a will. There are a million and one ways to decide how much and what to give to your kids. It’s situation specific but here is the train of thought on how and what I decided to give to my kids.

1) Figure Out Your Estate’s Value

This could include a life insurance policy, investment accounts, real estate, commodities, basically everything of value. Remember to factor in the costs to sell real estate and other poorly liquid assets. You might not need to sell the assets, like rental property or stocks. The trustee can manage these until the time comes to fund other expenses of the beneficiaries.

2) Prioritize your Goals for your Beneficiaries

What do you want first for your heirs when you’re gone? Topics I thought about were basic needs of life, first home purchase, education, life experiences, and wedding costs.

3) Decide on Guardians

My wife and I figure out who we wanted to take care of our kids. Our primary choice is my brother and sister-in-law. Our second choice is our best friends. Of course, we asked these folks if they would take that responsibility. We also discussed how we planned to compensate them for caring for our kids. That is a must.

4) Pick a Trustee

We decided to use a family member as our trustee. We are fortunate that we have a trusted brother, knowledgeable in personal finance, willing to take on the responsibility. Being a trustee of a large estate is no easy task. Make sure your trustee know what he is getting into when he agrees.

Others will choose a lawyer or other professional. The trustee is entitled to compensation and depending on the complexity of the trust or the needs of the beneficiaries, fees due to the trustee could be equivalent whether it’s a family member or lawyer fulfilling the duty.

5) Make Goals For Your Beneficiaries

Then you have to make some assumptions and the goals you want for your beneficiaries, in my case, our kids.

Our assumptions include the yearly cost of raising a child to age 18. As of right now between our 5 kids, we have 35 more kid raising years to get them to age 18. If the average cost to raise a child is ~$233,610 then that is about $13,000 a year.

$13,000 X 35 = $455,000

Depending on the cost of living in your area or where your potential guardians live, you can adjust this up or down.

6) The Cost Of Education

Some of you may send your kids to private school. Remember to factor in tuition costs. We homeschool our kids. They would go to public school if our selected guardians took custody so we haven’t factored in this cost.

If I’m not around I would still like to give them the advantage of getting a head start on their financial independence. This includes paying for college. The average state tuition with room and board in my location is $26,322 per year.

If I wanted to fund a full ride for each of my five kids I would need 4 x 26,322 indexed to inflation. You could also only fund a percentage.

For my 6-year-old projected college cost for the average state school are $203,742 at a 5% inflation rate. Here are the rest:

6 year old $203,742

10 year old $167,619

12 year old $152,035

13 year old $144,796

16 year old $125,080

Total = $793,272

Here is the calculator I used to find those tuition costs.

Along with basic living costs, we are up to $1,248,272.

Another consideration was helping with their first home purchase.

We instructed the trustee to distribute $100,000 for each child toward a downpayment on their first homes.

Add another $500,000 in my case.

We didn’t want to distribute all the funds as soon as they turn 18 and decided to delay it to when they turn 30 years old. We felt that was old enough for them to establish a career or start a business. In addition to my financial education, we hope that the delay in the distribution of any other assets from the estate will encourage them to become productive members of society and not depend on Mom and Dad’s money to support them.

You can include tolerance bands as well for the various expenses you want to fund. For example, you could fund the average state university tuition but add an extra 10-20% as needed for the situation.

Related: Everything You Wanted To Know About The 529 College Savings Plan

Putting it Together

If I want to do all these things, I need $1,7248,272 to get my kids through college and buy a decent home in Texas.

My net worth isn’t quite there yet plus a lot of my assets are illiquid. I don’t want my trustee scrambling to sell everything to fund my beneficiaries’ lives.

What About Life Insurance?

I don’t want my wife to worry about finances when I’m gone. I bought enough life insurance to cover her ability to invest and live off the profits. She and I are the first beneficiaries of the trust but if we both die, we want the kids covered financially. If that requires more life insurance, then you should buy enough to cover the greater set of expenses.

Related: How Much Life Insurance Do You Really Need?

Getting Creative

Of course, you don’t have to do anything I did, but I figure if I can guide my kids to adulthood and encourage higher education even after I’m dead, I’ve done my job. Hopefully, I’ll give them a lot more than that by living a long life.

You could get really creative and put in a provision that any child who wins a Nobel Prize automatically gets a $100,000 bonus. Maybe you want to inspire physical fitness and give a yearly $10,000 bonus for anyone that can maintain a sub 90-minute half marathon.

You could also disincentivize behavior. For example, if your beneficiary fails a drug test, he gets nothing. The options available through a trust are only limited by your imagination.

Updating The Trust

There’s no standard time interval to make changes to your trust documents. You should review it every year or so but here are some things that could trigger a need to revise the documents.

Divorce (you or your beneficiaries)

New Marriage (you or your beneficiaries)

Birth of another child

Death or incapacitation of a beneficiary or trustee

Moving to a new residence

Financial windfall or setback

Tax law changes that impact assets classes within the trust

Advantages Of A Trust Owning Multiple Properties

This is where you real estate moguls eyes light up. One of the huge advantages of a revocable living trust is owning multiple properties in multiple states. If you create a trust and actually take the time to title each property to the trust, you could avoid probate through multiple states.

This depends on the state because different states have different rules, but if you are developing a real estate portfolio, this may save some time and money if the properties were ever transferred to your beneficiaries through the trust.

Related: Buy Utility, Rent Luxury: The Key To Real Estate Wealth And Happiness

Minimizing Taxes

This depends on what kind of trust we are talking about but a revocable living trust doesn’t avoid taxes. The main concern a lot of us could have is the estate tax. Right now if your estate is worth more than $5.49 million per parent you have to pay a progressive levels of estate taxes depending on how much you go over the $5.49 million.

There is an unlimited transfer of wealth to a surviving spouse but you have to file a special form with the IRS. It’s not a simple task so if you don’t need to do it, I wouldn’t. Some people get in trouble when the second spouse dies by not filing Form 706. It’s 31 pages long the instructions are 54 pages. This form has to be filed the year the first spouses passes to take advantage of the exemption, otherwise, you don’t get the combined amount.

For example, let’s say your estate is worth 9 million dollars. You can transfer all your wealth to your spouse. Then she/he can file Form 706 and have 10.98 million available for transfer to heirs without paying tax.

Related: How To Pay Little To No Taxes For The Rest Of Your Life

Other Trusts

If you have an estate worth more than that, you could separate out your life insurance into an Irrevocable Life Insurance Trust (ILIT). This entails placing your life insurance into this trust. As long as you don’t die within three years of establishing the ILIT, it’s not considered part of the estate.

Upon death, the ILIT receives the insurance money and the beneficiaries can get distributions. While alive, you must transfer enough money to the ILIT to support the insurance premiums and that money is subject to the gift tax rules. (maximum $14,000 per person per year)

>Other trusts such as Qualified Personal Residence Trusts, Grantor Retained Annuity Trusts, Charitable Remainder Trusts and Charitable Lead Trusts can also help you reduce the estate tax.

If you find that you’re swimming in more money than you know what to do with, you could always give $14,000 per beneficiary per year to reduce your estate tax while you’re alive.

Between my wife and I we could give $140,000 a year to our kids. If each child has a spouse, double it to $280,000.

Over 10 years that’s another $1.4 million-$2.8 million I could shelter from estate taxes saving up to $560,000-$1,120,000 if tax laws remain the same. That is also assuming the yearly allowable gift amount doesn’t rise.

Unless you’re certain you’ll end up above the lifetime exemption, all these hoops may not be worth jumping through. If we retire with several million dollars in our 40’s or 50’s it’s entirely possible to be bumping up or exceeding the exemption level if we live another 40 or 50 years.

The Bottom Line

If you have people you care about that could inherit your wealth, a trust could be the best way to allow your wealth to transfer constructively with relatively low costs. With our trust, if anything ever happened to my wife and me, we would have the kids covered financially and give them a head start toward adulthood.

Tom – HighIncomeParents.com

Readers, anybody set up a revocable living trust? If so, why? How much did it cost for you to set up the trust? Any funny conditions you have in your trust for your beneficiaries? Isn’t life insurance an easier way to make sure your surviving depends are taken care of? When do you tell your kids, if ever, they have a trust fund? How much financial security is too much? This will be a topic of a new post.

from http://www.financialsamurai.com/revocable-living-trust-benefits/

#Financial Samurai

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