Like most people, fed or private sector, you’d probably describe yourself as middle-class even, if secretly, you know you are a notch or two above the herd. Maybe several notches to be honest! Most federal workers have college degrees. Most Americans don’t. While that doesn’t automatically mean anything, it’s something to consider when taking stock of your cash value.
And the thing is, you may be correct! You may be one of the leaders of the pack.
After all, the day when the government was an army of low-paid clerks — if it ever existed — is long gone.
The average white collar (GS) government salary was $50,510 in 2020. The most populous civil service grade, by a lot, is GS-12. That includes 301,906. In the metro Washington-Baltimore area, that pays $87,198 to $113.362. GS-1, the lowest paying grade in government, has 793 employees whose D.C. salary ranges from $25,754 to $32,216. If there are any in the D.C. area.
With good pay, maybe a house, insurance, a retirement plan, and a Thrift Savings Plan, many feds are better off than they thought. And they may need to readjust their thinking about things like do-I-have-an-estate and if so, what’s the plan. Download a will off the internet and forget about it. Or do nothing and let the courts – eventually — decide. Meantime your surviving spouse and children may be at each other’s throats because they know what you really intended! So we asked D.C. area attorney Tom O’Rourke to join us today on our Your Turn radio show. That’s 10:00 a.m. EDT streaming at FederalNewsNetwork.com or 1500 AM in the D.C. area. If you miss the show, it will be archived on our home page. And if you have a question for Tom, an estate and tax specialist and former IRS employee, send them to me before show time: email@example.com
To bring you up to speed on what today’s show is about, and what an “estate” means, Tom has written this introduction. Check it out and listen if you can:
“A revocable trust is a tool used in many estate plans. It is sometimes referred to as a living trust or a revocable living trust. All of these terms refer to a trust that becomes effective during the life of the person establishing it, and that can be revoked or changed at any time while the trust creator is alive and competent.
Trusts are often thought of as tools for the rich, but are frequently used by individuals with more modest assets. All trusts are vehicles for managing and distributing property or assets. A trust can be used to accomplish any legally permissible goal.
All trusts have three parties:
The grantor (also sometimes referred to as the settlor or trustor) is the person who establishes the trust and specifies how assets in the trust are to be held, managed, and distributed.
The trustee is the person or entity who manages assets held in the trust.
The beneficiary (ies) is/are the person/persons for whom trust property is managed.
As typically used, an individual establishes a trust while he/she is alive. This individual is the grantor, the trustee, and the beneficiary while he/she is alive. Following the death of the grantor, a successor trustee is named and given instructions as to how to manage and distribute trust property. Frequently, a trustee is instructed to distribute property among beneficiaries. The trust may, however, continue in existence and be managed for the benefit of one or more beneficiaries.
A revocable trust has two advantages over a will. It can be used as a vehicle for managing the assets of the grantor if the grantor becomes incapacitated. It also can avoid probate following the death of the grantor. These goals can only be accomplished if the trust is funded. Assets must be titled in the name of the trust. Establishing a trust, but not funding it, is a waste of time and money.
While establishing a revocable trust can be a most useful tool, there are certain goals it cannot accomplish:
It does not reduce either your income or estate tax liability. A revocable trust is generally not a separate taxable entity. The trust uses the grantor’s social security number as its tax I.D. number while the grantor is alive. Following the death of the grantor, a revocable trust become irrevocable and must then obtain its own tax I.D. number. Any assets held in the trust are included in the grantor’s taxable estate.
A revocable trust does not protect assets from any creditors of the grantor.
Assets held in a revocable trust are treated as belonging to the grantor in determining the grantor’s Medicaid eligibility.
A revocable trust only controls those assets titled in the name of the trust.
A revocable trust does not have any impact on assets held in joint names or that are governed by a beneficiary designation.” –Tom O’Rourke
There are eight times as many atoms in a teaspoonful of water as there are teaspoonfuls of water in the Atlantic Ocean. A teaspoon of water (about 5 mL) contains 2×1023 water molecules, but each water molecule is comprised of 3 atoms: two hydrogen atoms and one of oxygen. Moreover, if you laid down end to end each water molecule from a teaspoon down end to end, you’d end up with a length of 50 billion km — 10x the width of our solar system.