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Subject:  Re: Talk me out of a Financial Advisor Date:  6/4/2013  7:01 PM
Author:  ResN Number:  72433 of 88533

Related to trusts, I believe I mentioned that he suggested setting up a trust to help pass our estate on to our 12 yo daughter.

I'm no expert on trusts, but here are some thoughts. Whether you could benefit from a trust for your daughter depends on a lot of factors, so you should consult an estate attorney, not a financial advisor. One important factor is the amount of money involved in your estate. Under current law, on the federal level, you and your wife would get a combined estate tax exemption of a little more than $10M, which could pass directly to your daughter tax free after both parents are gone. The exemption is indexed for inflation, at least under current law. If your estate is more than this amount (or close), then you might benefit from gifting to a trust set up for your daughter. You and your wife can gift a combined $28K ($14K each) tax free each year to the trust, also indexed for inflation. This won't count against the $10M exemption level, nor will you have to even file a gift tax return. This would drain money out of your estate at a relatively slow pace, but a steady pace. Whether it could get you under the $10M level depends again on your total estate value. You can also make additional annual gifts tax free and not counted against the exemption for things like education expenses, which would include private school (depending on age). There are many such things, all of which an estate attorney can tell you about. Also, if you fear both parents dying while you child is too young to handle money (for some, this can go far into adulthood), a trust would name a trustee and whatever conditions or limitations you might want to impose (such as the age of final distribution). I'm not a big fan of trusts for children, but our estate won't exceed $10M, at least I doubt it ever will. My son also is 31 and married to an accountant, so the time for needing one has passed for us. Institutional trustees can be expensive, and many won't handle trusts under a certain amount, so that's also a consideration. I seriously caution against letting a financial advisor handle this, due to the many inherent conflicts of interest that can arise. Also, this can get into complex legal issues, so a true estate attorney is your best bet. Good luck.
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