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? Because the MIFIT is going to be invested in MIFIT Investments, Inc., which will then invest in a diversified portfolio, there is no ability to hold other assets inside of the trust. All the cash will be invested in MIFIT Investments after the grantor of the trust is cryopreserved, meaning that the only asset in the trust during biostasis is stock of MIFIT Investments. The MIFIT was designed to save taxes and yearly expenses that could eat the corpus within a few years or decades.
- 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. MIFIT 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 MIFIT Investments and a capital gains tax would be due at that time. The MIFIT is NOT designed to evade or avoid income tax. It is a plan to avoid paying income tax at the trust level, and paying it at the corporate level, so as to minimize the yearly expenses which would otherwise be required.
- 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 most productive range of investment for MIFIT is $100,000 – $300,000. The cap is $500,000, as a person can then use the custom Future Income Trust and approaching that level, we would rather prepare a custom trust (which, by the way, is the same cost and has much greater flexibility).
- Can I create a MIFIT for a loved one who is already in stasis at Alcor? 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). I will be happy to discuss your individual situation and provide a quote.
- 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 beneficiary. 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 (this is the only exception to the rule that assets are not distributed during biostasis)?; and (2) who would you like to have serve as the initial trust protectors (these are the people who watch over the trustee and make sure your biostasis is secure)? It would also be useful to know if you are anticipating any challenges to your estate plan, such as relatives who are opposed to your being cryopreserved.
- 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 fund the MIFIT would be transferred to the Trustee (Raymond James). The Trustee would then use the cash to buy stock in MIFIT Investments based on the market value of the assets under management. The cash is then added to the investment pool at MIFIT Investments and invested until revival.
- 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 MIFIT 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.
- 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 distribute in accordance with the failure of revival terms of the trust. At revival, you would be given notice of the existence of the trust funds and the funds would be distributed to you.
- 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.
- 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 MIFIT 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 MIFIT Investments. Because revival may occur decades in the future, there may be additional expenses at revival.
- 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.
- Can I use a MIFIT for my pets? Because of the rules requiring an ascertainable beneficiary, we are not allowing MIFIT’s to be created for pets at present.
- Is there an age limit for children for the trust? Even after legal age (18 years old) can a family member make an account for them? No, there is no age limit for children. Yes, we can create a MIFIT for an adult child as a separate trust.
- Are there certain estate planning programs that MIFIT recommends or works closely with so that the sign up is easier? Unfortunately, no. Given the complexity of the issues involved, using estate planning software to prepare your estate plan is not recommended. We would much prefer to work with an estate planning attorney ensure the adequacy of the documents.
- Is there a limit with how many people can be in one trust? At present, each trust may only have one grantor and one beneficiary. If multiple members of the same family are interested in creating MIFIT’s, we can discuss discounts for each additional family member.
- Do married couples need separate documents? At present, yes. Given the experience where one spouse changes his or her mind about being cryopreserved, there is some reluctance to have joint trusts for spouses. We are giving a significant discount on the spouse’s trust. The total cost for spouses would be $6,000.
Have a question you don’t see addressed above? Please feel free to contact me and I will provide an answer to you.