Additional Information About the Multi-Investor Future Income Trust Model (MIFIT)
By: Mark E. House
As part of the launch of the MIFIT, I thought it might be useful to provide answers to many of the questions I am receiving on a fairly regular basis. To that end, here are some of the frequently asked questions:
- Can I hold investments outside of cash in the MIFIT? No. Because the MIFIT is going to be invested in FIT Investments, Inc., which will then invest in a diversified portfolio, there is no ability to hold other assets inside of the trust. All of the cash will be invested in FIT Investments after legal death, meaning that the only asset in the trust during biostasis is stock of FIT Investments.
- Is there an investment minimum? The investment minimum is $25,000. Because of the costs of establishing the trust ($5,000), the decision was made that an investment minimum is required. The target for the MIFIT is $100,000 – $300,000. The cap is $500,000, but approaching that level, we would rather prepare a custom trust (which, by the way, is the same cost).
- Can I create a MIFIT for a loved one who is already a patient (in biostasis)? Yes. This was one of the initial design considerations of the MIFIT program. If you have a loved one already cryopreserved and desire to use their assets (from their estate or another trust) to create a MIFIT, that can be accomplished. Unfortunately, it is not quite as simple as creating one for yourself, so it will take some additional work to create and fund and thus, will cost slightly more to structure. If you want to use your own assets to create a MIFIT for a loved one, that is only slightly more complex than setting one up for yourself (in that it might require a gift tax return).
- What is the process of getting the MIFIT set up? The MIFIT is designed to be an “add-on” to an existing estate plan. That is, your current will or trust will name the MIFIT as either a specific or residuary devisee. Because the MIFIT can only receive cash, the administration of the balance of your assets must be done in an estate (through a will) or through a different trust (i.e., a revocable trust). Once your estate plan has been reviewed, we will advise you what changes need to be made to your existing estate plan. For most clients, we will not make the changes. Rather, you will return to your estate planning attorney to make the changes needed.
- What documentation do I need at the first meeting? Ideally, we will need to see your existing estate planning documents. We will also need information about your immediate family, if any, as well as information about the amount of money you intend to fund to the MIFIT. The other decisions in the MIFIT include: (1) how much you are willing to distribute annually if your cryopreservation is at risk?; and (2) who would you like to serve as the initial trust protectors? It would also be useful to know if you are anticipating any challenges to your estate plan.
- What happens at death? At your legal death, your estate will be administered (assets collected, creditors and taxes paid, etc.). At that point, whatever is allocated to be fund the MIFIT would be transferred to the Trustee (Raymond James). The Trustee would then use the cash to buy stock in FIT Investments based on the market value of the assets under management. The cash is then added to the investment pool at FIT Investments and invested until revival.
- What communications happen at set-up? At legal death? At revival? At set-up, you will receive the original of your MIFIT. Copies of your trust will also be given to Alcor (because they have the right to name a trust protector at your legal death) and to Raymond James (the successor trustee). We will also keep a copy for our records. At your legal death, we will receive notice from your personal representative or trustee of your non-MIFIT trust of your death and the amount to be funded to the MIFIT. In the event cryopreservation was not completed, the MIFIT would not be funded. At revival, you would be given notice of the existence of the trust funds and the funds will be distributed to you.
- How much does the MIFIT cost? When is it paid? The MIFIT cost is $5,000. This does not include your other estate planning – the $5,000 cost is solely for the MIFIT and the services for investing in FIT Investments. When you retain us to create the MIFIT for you, the $5,000 will be placed in our trust account for payment once the documents are signed. That fee includes the service necessary at legal death to purchase the shares of FIT Investments.
- Can I name a different trustee? We require a corporate trustee due to Securities and Exchange Commission regulations. Because the corporate trustee is not being paid from the MIFIT, but rather is being paid from FIT Investments as the investment manager, Raymond James will be the trustee of all of the MIFIT’s. Although we genuinely appreciate clients’ preferences regarding other investment brokers and trustees, this is not something that can be changed.
- How do the taxes work? At your legal death, any taxes would be paid by your estate before any assets are transferred to the MIFIT. As such, there is no tax at inception. FIT Investments will pay taxes annually. Because the MIFIT’s will not have income, there will not be an income tax during biostasis. At revival, the trust will redeem its stock shares in FIT Investments and a capital gains tax would be due at that time. The MIFIT is NOT designed to evade income tax. It is a plan to avoid paying income tax at the trust level so as to minimize the yearly expenses which would otherwise be required.
- Do I have to put all of my assets into the MIFIT? Again, this was part of the initial design. Even if you are worth $5,000,000, you may only want to fund $250,000 into the MIFIT for your revival.
- What happens if I am not revived? If revival is not possible, the funds will be distributed in accordance with the terms of the trust.
- Do married couples need separate documents? At present, yes. This is an issue we are looking at going forward to see if we can change it so married couples could accomplish the intended purpose in a single document. Because we believe at some point we may be able to have married couples under one document, we are giving a significant discount on the spouse’s trust. The total cost for spouses would be $5,500.
Have a question you don’t see addressed above? Please feel free to call or email me and I will provide an answer to you.