Anonymous
10/10/2023 15:32
Subject: Inheritance Question
Anonymous wrote:My husband has a very small family. One sister, parents. His father just died leaving a marital deduction trust, or bypass trust, and a family trust with percentages created for both children and four grandchildren.
My husband’s sister is mostly talking with the attorney named as executor of the Will. She keeps telling us that no one gets money until their mother dies. I told her that was inaccurate and that the family trusts will be funded with the assets that didn’t go into the marital trust and should be available once funded. Am I wrong?
The reason people are jumping on you OP is because of THIS. Your DH's sister is talking to the attorney (not you), so she is getting legal guidance from someone who understands the actual will/trust. Unless you are an estate attorney, and have reviewed the trust document, you have no business telling his sister she is wrong/inaccurate. You are trying to paint a rainbow of potential trust situations as being black and white, and the only person qualified to explain any of this with any legal certainty is the estate attorney. So you just come across as being focused on claiming to know better than his sister (and the attorney advising her) and getting your hands on the "should be available" monies. If you phrased this paragraph differently you stood a better chance of getting less critical replies.
Anonymous
10/10/2023 13:03
Subject: Inheritance Question
Anonymous wrote:Anonymous wrote:Anonymous wrote:Anonymous wrote:OP, why do you think the widow is not inheriting all of the money? Did you Inlaws tell you otherwise?
Because of estate taxes. If she inherited everything her estate would have huge estate taxes to pay. In order to avoid this a marital deduction trust is created calculating how much needs to be put in that trust to avoid the estate taxes. The remainder is put in a family trust which goes directly to his beneficiaries. That trust is available according to the trust terms.
There’s also a generation skipping trust so the estate isn’t taxed twice. When my husband’s mother dies some assets skip her two children and goes directly to the grandchildren to avoid estate tax.
My dh asked me to explain it, not sure why people who don’t know the answer just respond with rudeness.
Ok, I think part of the problem here is that you don't understand how the estate tax works and then you're assuming the trust is doing things to avoid estate taxes that don't exist or work differently than you think they do. The first thing to understand is that there is an unlimited deduction from the estate tax for any transfers to a surviving spouse, so there is no need to create a trust to avoid estate tax on transfers to a spouse. A marital deduction trust or bypass trust used to be a technique to capture the first deceased spouse's estate tax exemption when the spouses wanted that money to go to the surviving spouse instead of other descendants, although it isn't needed anymore because of changes in the estate tax law that allow for portability of the exemption. Those trusts almost always are for the benefit of the surviving spouse while they were alive (the whole point was to allow the surviving spouse to use the assets while also preserving the estate tax exemption from the first spouse) so your husband or kids wouldn't see any of that until she dies.
Generation skipping trusts could be funded during life, or at time the first spouse dies, or when the second spouse dies. Depends on the plan. If there aren't enough assets for the surviving spouse, they may have decided to wait on funding those or only partially funded them. But even if they are funded now, that doesn't mean the beneficiaries can draw from them now. Trusts very often have limits on when the beneficiaries can draw from them and for what purposes, particularly when the beneficiaries are minors. They may say your kids get no access until they are 18, or 30, or 50. Maybe they say they can only take money out for college or a first home purchase.
The surviving spouse has enough of her own money to survive a lifetime. The dad wanted to leave the children and grandchildren his estate. But he lived in Massachusetts and the estate tax starts at a ridiculously low
$2 million dollars.
So he could only leave $2,000,000 to his children and grandchildren without paying taxes. That amount is held in separate Trusts for immediate use for basic needs, education health.
The remaining assets went through a trust for his spouse only. There is no estate tax between spouses but the marital trust has benefits when the surviving spouse dies.
Do you see any specific inaccuracies?
How could I say if your description is accurate without seeing the documents?
Anonymous
10/10/2023 12:58
Subject: Inheritance Question
Anonymous wrote:
The surviving spouse has enough of her own money to survive a lifetime. The dad wanted to leave the children and grandchildren his estate. But he lived in Massachusetts and the estate tax starts at a ridiculously low $2 million dollars.
While Massachusetts has an estate tax threshold much lower than the federal government, for large estates there is still a very strong reason to wait to bequeath assets until the second spouse dies to save on federal estate taxes.
Anonymous
10/10/2023 12:51
Subject: Inheritance Question
Anonymous wrote:
My husband’s sister is mostly talking with the attorney named as executor of the Will. She keeps telling us that no one gets money until their mother dies. I told her that was inaccurate and that the family trusts will be funded with the assets that didn’t go into the marital trust and should be available once funded. Am I wrong?
Have you read the trust documents and do you understand them? Without that info, it's hard to say. The people I've worked with who set up bypass trusts did so as a last-to-die arrangement, where the real purpose of the Bypass trust comes into play after the second spouse passes away. No assets got passed to beneficiaries until the second spouse died.
It's possible that there are other trusts that were set up to share assets after the father died, but that's far less common arrangement vs doing so after both spouses die. I'm unclear why you would assume there's money on the table now unless you've read the trusts and have evidence to the contrary.
Anonymous
10/10/2023 12:49
Subject: Inheritance Question
I have no clue, but I do know it has nothing to do with you.
Anonymous
10/10/2023 12:47
Subject: Inheritance Question
Anonymous wrote:Anonymous wrote:Anonymous wrote:OP, why do you think the widow is not inheriting all of the money? Did you Inlaws tell you otherwise?
Because of estate taxes. If she inherited everything her estate would have huge estate taxes to pay. In order to avoid this a marital deduction trust is created calculating how much needs to be put in that trust to avoid the estate taxes. The remainder is put in a family trust which goes directly to his beneficiaries. That trust is available according to the trust terms.
There’s also a generation skipping trust so the estate isn’t taxed twice. When my husband’s mother dies some assets skip her two children and goes directly to the grandchildren to avoid estate tax.
My dh asked me to explain it, not sure why people who don’t know the answer just respond with rudeness.
Ok, I think part of the problem here is that you don't understand how the estate tax works and then you're assuming the trust is doing things to avoid estate taxes that don't exist or work differently than you think they do. The first thing to understand is that there is an unlimited deduction from the estate tax for any transfers to a surviving spouse, so there is no need to create a trust to avoid estate tax on transfers to a spouse. A marital deduction trust or bypass trust used to be a technique to capture the first deceased spouse's estate tax exemption when the spouses wanted that money to go to the surviving spouse instead of other descendants, although it isn't needed anymore because of changes in the estate tax law that allow for portability of the exemption. Those trusts almost always are for the benefit of the surviving spouse while they were alive (the whole point was to allow the surviving spouse to use the assets while also preserving the estate tax exemption from the first spouse) so your husband or kids wouldn't see any of that until she dies.
Generation skipping trusts could be funded during life, or at time the first spouse dies, or when the second spouse dies. Depends on the plan. If there aren't enough assets for the surviving spouse, they may have decided to wait on funding those or only partially funded them. But even if they are funded now, that doesn't mean the beneficiaries can draw from them now. Trusts very often have limits on when the beneficiaries can draw from them and for what purposes, particularly when the beneficiaries are minors. They may say your kids get no access until they are 18, or 30, or 50. Maybe they say they can only take money out for college or a first home purchase.
The surviving spouse has enough of her own money to survive a lifetime. The dad wanted to leave the children and grandchildren his estate. But he lived in Massachusetts and the estate tax starts at a ridiculously low
$2 million dollars.
So he could only leave $2,000,000 to his children and grandchildren without paying taxes. That amount is held in separate Trusts for immediate use for basic needs, education health.
The remaining assets went through a trust for his spouse only. There is no estate tax between spouses but the marital trust has benefits when the surviving spouse dies.
Do you see any specific inaccuracies?
Anonymous
10/10/2023 12:46
Subject: Inheritance Question
OP I am guessing you either weren’t close to your family or haven’t lost a beloved parent or don’t come from money or all of the above? When my mom died it was all I could do to stay above water. Aside from the grief, there simply were not enough hours in the day to run through the logistics that needed to be done with the estate attorney, trust documents, legal filings with the city, etc. Those who needed to be involved were. Clearly your husbands family was smart enough not to make you or your husband one who needed to be involved. There are a hundred ways they could have set up the trust. Just read the docs that you said you received. Do not reach out to your sister in law other than to apologize. Then read some basics on estate law. There is no tax for things passed to the spouse.
Anonymous
10/10/2023 12:41
Subject: Inheritance Question
Anonymous wrote:Anonymous wrote:Anonymous wrote:Anonymous wrote:OP, why do you think the widow is not inheriting all of the money? Did you Inlaws tell you otherwise?
Because of estate taxes. If she inherited everything her estate would have huge estate taxes to pay. In order to avoid this a marital deduction trust is created calculating how much needs to be put in that trust to avoid the estate taxes. The remainder is put in a family trust which goes directly to his beneficiaries. That trust is available according to the trust terms.
There’s also a generation skipping trust so the estate isn’t taxed twice. When my husband’s mother dies some assets skip her two children and goes directly to the grandchildren to avoid estate tax.
My dh asked me to explain it, not sure why people who don’t know the answer just respond with rudeness.
There are no estate taxes on amounts inherited by a spouse.
That is true. But there would be estate taxes when the surviving spouse died. That’s why there are marital deduction trusts which are commonly used.
The person gives his heirs assets that don’t go over the amount that would owe taxes. The spouse gets the rest because there are no taxes between spouses. The spouse already has enough money to last her lifetime.
No, that's not what marital deduction trusts did (they aren't used much anymore because of a change in the federal estate tax law). The martial deduction trust is funded with the amount of the federal estate tax exemption for the first to die spouse (roughly $13M this year). The trust's beneficiary is the spouse. The purpose was to preserve the exemption of the first to die spouse when the couple didn't want to transfer that $13M to the next generation when the first spouse died. If they didn't use a trust, then that amount would transfer directly to the surviving spouse and the estate tax exemption for the first spouse would essentially disappear. Starting in 2010, you could elect to preserve the exemption when the first spouse died, which eliminated most of the need for these trusts. They still only exist because of old estate plans or state estate tax laws that don't have portability.
Anonymous
10/10/2023 12:32
Subject: Inheritance Question
Anonymous wrote:Anonymous wrote:Anonymous wrote:OP, why do you think the widow is not inheriting all of the money? Did you Inlaws tell you otherwise?
Because of estate taxes. If she inherited everything her estate would have huge estate taxes to pay. In order to avoid this a marital deduction trust is created calculating how much needs to be put in that trust to avoid the estate taxes. The remainder is put in a family trust which goes directly to his beneficiaries. That trust is available according to the trust terms.
There’s also a generation skipping trust so the estate isn’t taxed twice. When my husband’s mother dies some assets skip her two children and goes directly to the grandchildren to avoid estate tax.
My dh asked me to explain it, not sure why people who don’t know the answer just respond with rudeness.
There are no estate taxes on amounts inherited by a spouse.
That is true. But there would be estate taxes when the surviving spouse died. That’s why there are marital deduction trusts which are commonly used.
The person gives his heirs assets that don’t go over the amount that would owe taxes. The spouse gets the rest because there are no taxes between spouses. The spouse already has enough money to last her lifetime.
Anonymous
10/10/2023 12:28
Subject: Inheritance Question
Anonymous wrote:Anonymous wrote:OP, why do you think the widow is not inheriting all of the money? Did you Inlaws tell you otherwise?
Because of estate taxes. If she inherited everything her estate would have huge estate taxes to pay. In order to avoid this a marital deduction trust is created calculating how much needs to be put in that trust to avoid the estate taxes. The remainder is put in a family trust which goes directly to his beneficiaries. That trust is available according to the trust terms.
There’s also a generation skipping trust so the estate isn’t taxed twice. When my husband’s mother dies some assets skip her two children and goes directly to the grandchildren to avoid estate tax.
My dh asked me to explain it, not sure why people who don’t know the answer just respond with rudeness.
Ok, I think part of the problem here is that you don't understand how the estate tax works and then you're assuming the trust is doing things to avoid estate taxes that don't exist or work differently than you think they do. The first thing to understand is that there is an unlimited deduction from the estate tax for any transfers to a surviving spouse, so there is no need to create a trust to avoid estate tax on transfers to a spouse. A marital deduction trust or bypass trust used to be a technique to capture the first deceased spouse's estate tax exemption when the spouses wanted that money to go to the surviving spouse instead of other descendants, although it isn't needed anymore because of changes in the estate tax law that allow for portability of the exemption. Those trusts almost always are for the benefit of the surviving spouse while they were alive (the whole point was to allow the surviving spouse to use the assets while also preserving the estate tax exemption from the first spouse) so your husband or kids wouldn't see any of that until she dies.
Generation skipping trusts could be funded during life, or at time the first spouse dies, or when the second spouse dies. Depends on the plan. If there aren't enough assets for the surviving spouse, they may have decided to wait on funding those or only partially funded them. But even if they are funded now, that doesn't mean the beneficiaries can draw from them now. Trusts very often have limits on when the beneficiaries can draw from them and for what purposes, particularly when the beneficiaries are minors. They may say your kids get no access until they are 18, or 30, or 50. Maybe they say they can only take money out for college or a first home purchase.
Anonymous
10/10/2023 12:23
Subject: Inheritance Question
Anonymous wrote:OP it's such a reasonable question and I don't understand why the negative posters are being so rude about it. Understanding how money changes hands is basic financial literacy.
I don't have any answers for you OP just wanted to tell you not to be put off by the trolls.
Thanks. People are rude here a lot. My husband as never gotten along with his sister and I cringe when he is rude to her for no reason. We were all worried about him starting to scream at her during the call so did it.
Anonymous
10/10/2023 12:05
Subject: Inheritance Question
Anonymous wrote:Anonymous wrote:OP, why do you think the widow is not inheriting all of the money? Did you Inlaws tell you otherwise?
Because of estate taxes. If she inherited everything her estate would have huge estate taxes to pay. In order to avoid this a marital deduction trust is created calculating how much needs to be put in that trust to avoid the estate taxes. The remainder is put in a family trust which goes directly to his beneficiaries. That trust is available according to the trust terms.
There’s also a generation skipping trust so the estate isn’t taxed twice. When my husband’s mother dies some assets skip her two children and goes directly to the grandchildren to avoid estate tax.
My dh asked me to explain it, not sure why people who don’t know the answer just respond with rudeness.
There are no estate taxes on amounts inherited by a spouse.
Anonymous
10/10/2023 10:25
Subject: Inheritance Question
Anonymous wrote:Anonymous wrote:Anonymous wrote:Anonymous wrote:Anonymous wrote:Anonymous wrote:If there’s a lawyer as the executor, just talk to them or don’t worry about it.
PS I also think people are being really unfair to the OP. Spouses divvy up financial management responsibilities differently, and she’s also a parent of beneficiaries. Inheritances are like other assets and you have to be diligent.
But I don’t think you should argue with the sister about it because that doesn’t do anything. Just contact the executor and ask for copies of anything you’re entitled to see and/or for a meeting to review.
Last thing, it’s really helpful imo to share the details of your estate plan and the documents with your adult children. There’s no reason why anyone needs to be in the dark unless they’re in a personal crisis or something. Just because inheritance involves someone dying doesn’t mean it needs to be secretive.
I totally agree with this. Some people feel very awkward about money and some people don’t want a large inheritance to influence their children’s’ work ethics. I understand the latter as a parent myself but it’s short sighted and creates a lot of confusion.
OP, your husband did you a disservice by asking you to fill in for him on the call. If my husband had asked me to do that I would have told him that he needed to be on the call and that if he couldn’t make it he should ask for it to be rescheduled. Your husband should call the lawyer and ask if he is confused. My husband’s parents have a large estate worth millions and even though they have included me in some discussions about it I make a point to let my husband ask questions. I may say “you should ask XYZ because of ABC” but I don’t ask myself and I would never get on a call in his place.
I understand some would not include want to discuss it with their in-laws but we aren’t like that. He’s just as included in my family and my husband writes my mother’s bills for her because her eyes are bad. I have been included in the estate planning for years. They have given me a check for the tax gift exemption along with my husband and two children every year for 20 years. When the federal tax estate was temporarily repealed around 2010 they gave us $400,000 (both our names). When the estate tax returned they went back to the estate gift tax exemption every year and gave each of us a separate check.
I explained to him about the marital bypass trust and the family trust will be partially funded as soon as they gather the assets. His sister tells him the opposite which is why he’s confused.
I know I’m right but I was hoping there might be experts who could chime in. Not so many know nothings talking about greed and leave it to my husband like it’s 1955. Thank you for the posters who tried to help in a civil way.
This point has been made several times — no person here (expert or otherwise) can answer your question, because they have not seen the trust documents. It is possible that the family trust will be funded immediately, but not made accessible to you right away. Read the terms of the trust, and if you don’t understand them, call the lawyer handling the estate.
This. There are MANY ways to design trusts. You also may not even be entitled to view the trust document unless you are the designated trustee - though most will share it with the beneficiaries (thought maybe not their greedy partners). Its not uncommon for example, for parents from prior marriages with kids to have trust for each spouse which is revocable, with each only converting to irrevocable upon their death - BUT the funds are not disbursed and CAN be used by the surviving spouse for his/her maintenance/care/healthcare costs.
ONLY an attorney can help you understand how the trust works in your DH's case - and I would strongly suggest you take a humble pill because odds are the funds may not be immediately dispersed and the surviving spouses trust is likely still revocable, so you can find yourself cut out of that.
Anonymous
10/10/2023 01:12
Subject: Inheritance Question
Anonymous wrote:Anonymous wrote:Anonymous wrote:Anonymous wrote:Anonymous wrote:If there’s a lawyer as the executor, just talk to them or don’t worry about it.
PS I also think people are being really unfair to the OP. Spouses divvy up financial management responsibilities differently, and she’s also a parent of beneficiaries. Inheritances are like other assets and you have to be diligent.
But I don’t think you should argue with the sister about it because that doesn’t do anything. Just contact the executor and ask for copies of anything you’re entitled to see and/or for a meeting to review.
Last thing, it’s really helpful imo to share the details of your estate plan and the documents with your adult children. There’s no reason why anyone needs to be in the dark unless they’re in a personal crisis or something. Just because inheritance involves someone dying doesn’t mean it needs to be secretive.
I totally agree with this. Some people feel very awkward about money and some people don’t want a large inheritance to influence their children’s’ work ethics. I understand the latter as a parent myself but it’s short sighted and creates a lot of confusion.
OP, your husband did you a disservice by asking you to fill in for him on the call. If my husband had asked me to do that I would have told him that he needed to be on the call and that if he couldn’t make it he should ask for it to be rescheduled. Your husband should call the lawyer and ask if he is confused. My husband’s parents have a large estate worth millions and even though they have included me in some discussions about it I make a point to let my husband ask questions. I may say “you should ask XYZ because of ABC” but I don’t ask myself and I would never get on a call in his place.
I understand some would not include want to discuss it with their in-laws but we aren’t like that. He’s just as included in my family and my husband writes my mother’s bills for her because her eyes are bad. I have been included in the estate planning for years. They have given me a check for the tax gift exemption along with my husband and two children every year for 20 years. When the federal tax estate was temporarily repealed around 2010 they gave us $400,000 (both our names). When the estate tax returned they went back to the estate gift tax exemption every year and gave each of us a separate check.
I explained to him about the marital bypass trust and the family trust will be partially funded as soon as they gather the assets. His sister tells him the opposite which is why he’s confused.
I know I’m right but I was hoping there might be experts who could chime in. Not so many know nothings talking about greed and leave it to my husband like it’s 1955. Thank you for the posters who tried to help in a civil way.
This point has been made several times — no person here (expert or otherwise) can answer your question, because they have not seen the trust documents. It is possible that the family trust will be funded immediately, but not made accessible to you right away. Read the terms of the trust, and if you don’t understand them, call the lawyer handling the estate.
Anonymous
10/09/2023 22:40
Subject: Inheritance Question
Anonymous wrote:Anonymous wrote:DH’s father just died and you are in a hurry to grab money. You know how badly you sound?
Not just literally died but you don’t know anything do you. I wanted to clarify what I told him was accurate. Just a simple question and not one answer from anyone who knows what they are talking about.
Hoo Boy, you're a treat!