How does one set up a trust fund?

[Viper GTS]

My employer provides life insurance of one year's salary to everyone, with increased amounts (up to 3 year's salary, I believe) available at very low costs (less than $100 a year for the three year). Three years'n salary for me would be almost $80,000. Right now I have the one year automatically, but with no specified recipient. What I would like to do, is make the policy payable to a trust fund, which then distributes the money as I see fit. Probably something like 20% to my g/f, 20% each to my sister & brother, & 40% to my parents. How would I do this?

I have to have this established & ready by November 30th if I want to do it this benefits enrollment session. Anybody have any experience with this?

Viper GTS

 

[Sluggo]

You can either pay a lawyer a crapload of money to set it up, or just name your parents as beneficiary, and leave them a note on how you would like it distributed for free. There is just to much lawyer crap involved, you can get

Power of Attorney
Durable Power of Attorney
Living Trust
Trust

and of course you have to name an executor for the trust and he gets paid as well.

Basically lots of legal-ese and money.

 

[lepper boy]

Well, first you find a really rich relative. then convince them that you need to get all there money......


but, go the parent way.... easy and cheap.....

 

[Lvis]

At your age you probably can do even better than your employers plan. Check out any of the term life insurance companys. With a life insurance policy, and a will, you'll be all set.

 

[kranky]

I agree that it will cost too much to go the formal trust fund route. That's an option some people choose for tax reasons, which won't apply in your case (at least in the near future).

Since you will choose a trustworthy executor, just make out your will explaining your wishes and you can achieve the same result.

 

[Gustavus]

Viper
Basically there are two main reasons for setting up a trust as opposed to using a will to distribute your estate after your death. From what you say, neither of these probably applies in your case. First, a trust can be used to hold the assets of your estate for the benefit of a minor (or minors) or incapacitated persons. In that case the Trustee would be given instructions in the trust as to how the income or principal be distributed for their use. This is generally done when the grantor(s) have children or dependent(s) who cannot act in their own interest -- or for children whom the grantors think would not use the assets of their estate wisely, even though they are of age. The other reason is to shelter the assets of the trust from estate taxes. In 2000 the amount that could be protected in this way is $675,000 for a spouse in a B trust. For example a husband and wife acting as grantors in a standard A-B living trust would set up a revocable trust. When the first of them died, $675,000 could be put into the irrevocable B trust and not be subject to estate taxes on the death of the second grantor(spouse). The amount goes up each year, but using this device a couple could shelter $1,350,000 from estate taxes instead of just $675,000 which is what would happen if the assets were passed directly from the estate of the first one to die to the other spouse. There is another benefit, the trust avoids probate -- which is a public process. Many people would prefer that their estate not be public at the time of their death.
It sounds as though all you need to do is to specify as your personal representative in a will a person whom you trust to carry out your wishes as spelled out in your will or a later codicil to your will -- or even as you have asked them to do if you have someone you trust completely to do so. It is common for people to leave their personal representative freedom in distributing their personal property, and to depend on the will to specify the distribution of titled property such as real estate. Since a will must be probated, the probate court is in an oversight position to verify that the terms of the will are carried out by the personal representative.
Doesn't sound like you need a trust, but hope this is of some help.

 

[kranky]

Always good to see a Gustavus post. I never fail to learn something.

 

[Viper GTS]

OK, let's say I set it up payable to my parents, & then they handle the distribution. Would the recipient(s) have to pay taxes? $80,000 is practically nothing, & I'd be pissed as hell if they took half of it for taxes.

Viper GTS

 

[bigvince]

Back to the election...



that all depends on who gets elected and if that person wants to eliminate the death tax. if not just about half of that will be taken in taxes.

 

[denali]

Viper, Money from a life insurance is tax free I think for the benificiary. However the benificiary wouldn't be able to give more than 10k/year to anyone without gift tax having to be paid. I'm not 100% sure about anything in this post but think it's correct.

 

[Gustavus]

Viper
I quote from the instructions for the Federal 1040 form "Do not report any non taxable oncome on line 21, such as -- life insurance proceeds received because of a persons death". Recipients of proceeds from your life insurance do not pay taxes on them.

 

[ATLien247]

I would highly recommend a lawyer who specializes in estate planning. There are just too many ways that the IRS can screw you over, even after you're dead!

 

[cxim]

name all 5 as equal co-beneficiaries.

Why try to make it complicated.

 

[NikPreviousAcct]

<< How does one set up a trust fund? >>

Very carfully.

 

[jjm]

One thing that people are forgetting is that if there is no one who depends upon you financially, you don't need any life insurance. Reject all the crap about using life insurance as a form of forced or tax-deferred savings. There are cheaper vehicles for meeting those goals.