^^ I"d love to be able to have this problem…
@AttorneyMother, what does it mean by being settled? Can you give please an example so I can understand what it means by settled and not settled.
@DrGoogle , “settled” is just the fancy way of saying “transferred” in the context of trusts:
http://info.legalzoom.com/difference-between-trustee-settlor-california-revocable-trust-22006.html
The “settlor” = the person creating the trust.
Thank you. My house is now owned by my trust. So I guess that’s the equivalent to transferred then.
If it’s a living revocable trust, assets within will still be part of your estate IIRC. Remember to distinguish between the different types of trust. Living revocable trusts do not have any effect on the avoidance of estate tax, but are intended to either avoid or simplify “probate” in the context of transferring title.
Not saying this about you, but a lot of people have been persuaded to set up LRTs (including my late ILs) who do not parse the difference.
I think it’s can be changed, revocable trust, but the minute one spouse dies it becomes irrevocable trust, is that correct understanding?
@DrGoogle , you should consult (1) your trust document and (2) with your attorney to see how your RLT works. 
But, generally:
– if the asset has been settled into the RLT, then the RLT has title to the property and “owns” it
– the present Trustee is the individual who has legal power to act on behalf of the RLT
– so…so long as there is a Trustee (the original Trustee or any sucessor Trustee appointed in accordance with the terms of the RLT), that individual can act on behalf of the RLT
– one of the (supposed) purposes of having an RLT is to avoid the problem of title transfer upon the death of the beneficiaries of the RLT, which, in your example, are normally the spouses who were the original title owners of the real property
For example:
– H&W transfer title of House to RLT (properly recorded in the deed records)
– RLT now holds title to House
– both H and W are trustees of RLT
– H dies but RLT still holds title to House
– W is still one of the trustees of RLT
– W wants to sell the house
– W can act as trustee on behalf of RLT to convey title of House
– no “probate” of H’s will or administration of H’s estate is required to transfer title of House
I’ll be sending you my statement for services rendered via PM!
It was explained to me but I forgot. I did a lot of research and also now forgot. Thanks for explaining to me.
Ok now that I’ve read your post, it seems to be what I’ve remember. I just want to make sure that’s what it is.
@DrGoogle , some estate planning attorneys promote RLTs fairly aggressively. I mentioned that my ILs had one set up. They also had wills. The only asset they transferred into their RLT was their residence, which proved useful because they died very close in time to one another and my H was the successor trustee. He was able to act to sell the house cleanly and quickly.
However, the RLT was poorly drafted and contained provisions that conflicted with their wills and purported to take action with regard to my ILs’ IRAs, which would have had a stupid result.
In the end, I ended up having my H probate both parents’ wills so that he could act as executor on behalf of both estates and do clean up work.
The lesson is that often times people do not quite understand the implications of their estate planning even with counsel And, if there are problems, the heirs will be the ones trying to sort things out despite best intentions.
I have to reread this whole thread again. I remember you mentioned the same thing earlier when you first join this thread.When I retire, I have more time to make sure I have the right trust.
I’ll give a personal example of trust ‘settled’. My dad for years wanted to set up a A/B Trust (this was back in the days when estate taxes had a lower financial threshold) - my mom didn’t want to sign because she was concerned about losing control of her money. Mom was intelligent but had mental health issues (bi-polar, narcissistic). Dad had laid the foundation with attorney and tried to revisit over several years with mom; dad was dying (went in hospital with phlebitis while on the decline with lung cancer on Friday and passed the following Friday - two days before Father’s Day and his birthday). I had visited Mother’s Day weekend, and told my OOS older brother that he needed to get home if he wanted to see dad alive - he was supposed to fly in Wed (two days before dad’s death) but showed up at the airport Tues and was able to get home a day earlier. He firmly talked to mom and was able to get her to agree on Wed about the Trust. The attorney got all the papers needed to be signed by a very weak dad Wed. Months later, in August, driving home on a sunny afternoon after seeing her OOT psychiatrist, mom fell asleep at the wheel and went head on with a semi (semi veered so impact crushed where the front seat passenger would have been) - she had an airbag in her Cadillac, and was slumped down from falling asleep - due to the sight of the vehicle, they airlifted her. The trust had not been ‘approved’ yet via IRS, so it wasn’t ‘settled’. For such a horrific accident, mom came out in pretty good shape - had re-broken a wrist she had broken as a teen; facial injuries that required surgery (loss of tear duct and therefore loss of half of her sense of smell), body bruises. Deacon who had gone on a group vacation with mom said she had three guardian angels, and based on the situations and outcomes she has had, she had great divine intercession.
@lxnayBob I can appreciate your desire to personally check out various states, Maine, North Carolina, Texas, Oregon, California, etc - many people decide with heavy weighting based on grandchildren, where they have friends/family, and many other factors. I know a number of families where the grandparents moved to our city specifically for grandchildren/children and good quality of life - both from OOS and in-state. Just had some 80 YO friends that are moving across the state to where son/grandchildren live - house in their same neighborhood - he had an insurance business here and lived here for the last 20 years. I know a couple that was going to buy a home in our city and in Dallas/Ft Worth area because grandchildren at both places; H died after they purchased the house here (and the majority of grandchildren are here) so she just will take an airline flight to visit the other family/grandchildren and only has to deal with one house by herself.
We have general ideas of where we will live, but know for sure we will sell our primary residence (to downsize) with the right price after we retire and fix it up to compete to sell in our market.
Schwab has an annuity calculator. I am 59. My wife is 58. This is for annuities Schwab handles. Schwab is a middleman. These are annuities sold by an insurance company with a relationship with Schwab. I have no idea what the financial condition is of the insurance company or which firm is the insurance company. I guess I would know if I actually bought this annuity.
This annuity is a SPIA.
I said I would spend $100,000 for the annuity. Monthly income is received as long as my wife or I am alive.
For receiving $3 less a month, my heirs are guaranteed at least $100,000 minus payments my wife or I received. I feel good about this…I guess the insurance company thinks at least one of us, my wife or I, will be alive in 20 years.
These were the responses. The $400+ responses are the monthly payouts with the 4 plans.
$404 $0 Life only. You will receive this income for life. However, your beneficiaries do not receive a death benefit once you pass away.
$403 $48,360 Life with 10 year certain. You will receive this income for life. If you pass away within the first ten years your beneficiaries will receive the remaining income payments until the end of the ten year period.
$402 $96,480 Life with 20 year certain. You will receive this income for life. If you pass away within the first 20 years your beneficiaries will receive the remaining income payments until the end of the 20 year period.
$401 $100,000 Life with cash refund. You will receive this income for life. Your beneficiaries will receive a lump-sum payment of the original investment less income payments made to date.
When would you start receiving the annuity? Right away or not until age 65?
Right away.
@anxiousmom, I am not pushing this annuity. i don’t like it. I just found it on Schwab.
People can use this to compare other annuities or other financial products.
@dstark, it is useful for comparing to other plans, just to get a ballpark figure. It is easier to use than the one I suggested.
At the risk of having @IxnayBob insist* I read this article by Michael Kitces (which I adamantly refuse to do for the time being), I am going to post this here because it addresses SPIAs:
- :) I hope Kitces' take helps (and there are underlying studies linked inside the article), but I won't be reading it because I'm still busy worrying about other things and I have to save some things for my H to do when he stops working, like reading this article.
Kitces is a little more complicated than necessary for me.
I would first …
First compare annuities with other fixed assets. Where do you get the better return? At what age do annuities give you a better return and how likely is it to get to that age?
I don’t like the annuities I have seen because the returns are too low.
If the returns were better, I would like annuities better.
These Schwab annuities, if I can buy a fixed income product that pays me more than 3 percent with a similar risk profile, I am dead before the Schwab annuity is better.
Then after you figure out which fixed assets you want in a portfolio, you can play with asset allocation. That is my opinion.
I wrote about the annuity IxnayBob posted. I think breakeven compared to a 4 percent muni was around 94 years old. There are variables. Let’s just assume that is correct.
Between age 63 to 94, 4 percent munis are better. After age 94, the annuity is better. So, how likely is it that you make it to age 94 and how important is it, if you do make it past age 94, that you make more money after age 94.
@dstark, clearly the insurance co. has to make some money, etc. and the pooled actuarial risk will be in its favor.
But, and I’m not making any judgment one way or the other, there is an intangible benefit of having an SPIA take care of one’s monthly income during extreme old age if (1) one does not have family or trusted people who can take over the management of finances and (2) there are other assets that can handle liquidity demands.
Analyzing the returns of any particular product I’ll leave for another day but your napkin numbers look convincing.
Are you only looking at munis to minimize credit risk or are you worried about taxes also?
I am worried about credit risk and taxes. I look at after tax returns. Munis make that easier. I don’t see anything out there in the fixed income market that will give me a better after tax return than munis with similar risk. If there is something better, I am all ears.
Preferred stocks may be an asset class that could be compared to annuities. I haven’t looked at these for awhile.
Even dividend stocks can be compared. Corporate bonds can be compared.
There is some psychology involved. People may not be comfortable owning certain assets. If you own fixed income, you can see the price changes as rates rise. That can bother people because long term fixed income securities are going to decline in price with rate rises.
Is the value of the annuity tracked? This I don’t know. The value of an annuity drops with higher long term rates. Does the owner of an annuity see this?
My uncle and aunt died within months of each other. He was 84 and she was 78.
I was surprised to see several annuities in their portfolio. I am not handling the estate so I am staying out of it. When the handling of the estate is finished, I hope to find out more about these annuities. I am doubtful they were better than other investments.
I am writing a guide. A thought process. Something to think about. If the returns are different, you have to use those different returns to compare. People may not be comfortable owning munis. I couldn’t get my aunt to buy them. I wasn’t going to force her. Being in a comfortable place mentally is better than money.
I don’t like how financial products are sold. That’s why I like to write about this stuff. Probably goes over the head of a lot of people. That’s ok.
My son in law’s broker sent him an investment idea. It was total garbage. The investment was called a bond. It was not a bond. The firm makes 10 percent of your investment. That’s a big hurdle to climb. This wasn’t clear in the prospectus. The prospectus said the investor wouldn’t get the dividends of the S&P for 3 years. The firm would. That’s about 6 percent right there. I hate that!