By Terry Savage on December 11, 2023 | Financial Planning / Retirement

In making a trust or will is it best to indicate a dollar amount or a percentage of total amount to be distributed?. Can both methods be used within the same document?

Terry Says

Your attorney will guide you through this process. The reason you typically don’t want to use a dollar amount is that you never know how long you will live –or how much money will be left in your estate when you die! Long term care expenses can eat into your savings very quickly.

So you would typically say that you leave your home to your three children, with the understanding they will sell and divide the proceeds equally — unless one agrees to buy the others out.
You would leave the balance in your money market account equally to all three children. So that’s percentages.
You could have separate IRA accounts (easily done by rolling over assets from your account at Fidelity to another one at Vanguard, for example) and naming a specific beneficiary for each account. Or you could make them equal beneficiaries on the same IRA account. They will be subject to the same distribution rules in either case.

But if you wanted to make specific mention, for example, of your caregiver, you could specify a dollar bequest of say $2500. (That will not be considered taxable income to her.) And that presumes you will have that amount of cash available in your estate.
Similarly, if you want to name a good (preferably younger) friend who has agreed to take care of your dog, you might want to leave a specific dollar amount to the friend for vet care, etc.

Just remember that retirement accounts and life insurance bypass probate and go directly to the named beneficiary. So be sure you have updated those beneficiaries– easy to do.

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