Elderlaw Advocates Nov. 1, 2019
Many people are under the impression that since they have a trust, they donít need to do anything else. Thatís not true. The trust you created years ago may not be appropriate for you now. Donít blame your lawyer. Things change. What was a good idea 15 years ago may not be such a good idea today.
Start with the Table of Contents, if there is one. There should be a paragraph labeled something like ďSuccessor Trustees.Ē Turn to that page. Are the trustees you named still alive? Are they honest? Are they good with money? Do they get along with the rest of your family, or are they a source of conflict? If the eldest male child you named as trustee thinks that since heís trustee he can lord it over his brothers and sisters, then heís not the right man for the job.
Next, find the paragraph that says something like ďDisposition on DeathĒ or ďDisposition on Death of Surviving Spouse.Ē Thatís the paragraph that says who gets what when you die. Read it. Does it still make sense? Have any of your children died? Are any of your children now disabled? Do you have a spendthrift child who canít be trusted with money? Does your trust leave your sonís ex-wife an inheritance you donít want her to get any longer? Does your grandson have a drug problem? Maybe you need to make some changes.
Now look at the last pages of your trust. There should be a Schedule of Trust Assets. Read it. Have you moved? If so, is your new home in the trust? Are your retirement accounts listed in your trust document (they shouldnít be.) Who are the beneficiaries of your retirement accounts and life insurance policies? Did you leave your IRA to the trust? (Donít unless your lawyer says so.)
If youíre married, find the part of the trust that talks about what happens between the first death and the second. Do you have an A/B trust that divides everything between a ďSurvivorís TrustĒ and a ďBypass TrustĒ or ďExemption Trust?Ē If so, then maybe you donít need or want an A/B trust any longer. An A/B trust is a great way to avoid death tax, but itís more expensive to administer after the death of the first spouse to die.
As of January 2019, up to $11,400,000 of your assets may pass free of Federal Estate Tax upon your death, and that amount goes up annually with inflation. This means that many of you with A/B trusts should update your trusts to the ordinary type of trust that leaves everything to the surviving spouse, who wonít be answerable to anyone.
Is either you or your spouse in a nursing home? Do you suffer from an ailment that will likely put you in a nursing home before you die? Are you already on Medi-Cal running up an estate claim that will be due and payable upon your death? If so, itís not too late to protect your assets from the cost of your medical care.
If you are not completely comfortable with the answers to all of these questions, then you need to see a trusts and estates attorney to review and update your estate plan.
Len & Rosie
Dear Len & Rosie,
My father died a year ago. He had a trust that named his business partner, Angus, as the trustee instead of any of his children. There are four of us, and we donít get along that well. I assume Dad thought we would fight, and wanted to prevent that. But now we are all concerned about Angusí behavior. He showed us copies of the trust, and we all get equal shares, but he has made no distributions, saying itís better if he continues to manage the assets. He also sold trust real properties to himself. And he even gave Dadís girlfriend $20,000, even though sheís not a beneficiary. He says Dad told him to do it. None of this seems right, but is it?
Without seeing a copy of the trust, itís difficult to answer your questions without guessing. Your fatherís trust includes written instructions for the trustee to follow. Angus canít make up his own rules. He canít continue to hold everything in the trust indefinitely unless the trust says so. Angus cannot decide what he thinks is best for you.
Even if Angus is right, and you plan to waste your inheritance on drugs and casinos, he canít withhold your share, even if itís for your own good. Likewise, if the trust didnít give your fatherís girlfriend $20,000, then she gets nothing. Angus canít give away your money unless you say itís OK. Your fatherís verbal instructions donít amount to a legal trust amendment. The law draws a red line between your fatherís verbal and written intentions.
If the court relies on statements your father is rumored to have said, then everything is up for grabs. Anyone can step forward and claim your father promised them a well-deserved gift. Thatís too messy, so the law imposes a burden on us to state our wishes in writing.
Itís harder to guess whether Angus was entitled to purchase your fatherís real properties. Since he was your fatherís business partner, there could have been a buyout agreement between them. The trust could also have dictated the terms of the sale. However, judging from Angusí other actions, he may have breached his fiduciary duty as trustee. He may have sold himself properties at the expense of the beneficiaries. If you havenít done so yet, you and your siblings should engage an estate planning attorney to review the trust and tell you what it really says.
Len & Rosie
Dear Len & Rosie,
After my fatherís death, my mother gave my brother Stephen a durable power of attorney. Mom was never all that good with finances, and all of us agreed that it would be better for Stephen to take care of things in case anything bad happened to her. Now I am wondering if my brother has exceeded his authority. He borrowed almost all of her life savings, over $32,000, to keep his home out of foreclosure.
Stephen signed a note for the money and agreed to pay interest at six percent per year that was later reduced to four percent by Mom. The problem is that she does not even know how much money Stephen pays each month, because he handles all of her finances. Mom hasnít seen a checkbook or account statement for a decade. I donít know what I can do. Mom hasnít got Alzheimerís or anything and she seems happy with Stephen handling her money. I donít know if I should sue or just leave it alone.
Stephen, as attorney-in-fact, has a legally imposed fiduciary duty to your mother. Unless the power of attorney your mother signed specifically authorizes him to self-deal, he cannot loan himself your motherís money. Of course, if your mother told him that it was OK to borrow the money, then it is perfectly legal.
An interest rate of four percent is fairly reasonable these days. Your mother is making more interest from Stephen than if she kept her money in a certificate of deposit, assuming that Stephen is making the payments like he promised. The fact that he asked your mother to reduce the interest rate implies that he is making payments. If heís lying about it, why would he bother renegotiating the loan?
You said that your mother seems happy with the way that Stephen is handling things and that she even agreed to lower the interest on the money he borrowed. This is a free country and a competent person can do anything she wants to, even if it is not in her best interests. Still, you should talk to your mother. Make her aware of what you think is going on, and have her ask Stephen to give her the account statements showing his payments and what heís doing with her money.
Then step back to see what happens. Hopefully everything is above board. If it isnít, or if Stephen refuses to show your mother the books, then she should fire him. As long as your mother is still in possession of her faculties, she can revoke the power of attorney at any time. Should your mother sue Stephen if he isnít making payments? Most parents donít want to see their children get in trouble, no matter what they do. But if your mother is willing to go the distance, she should consult with an attorney and consider suing her son for a breach of fiduciary duty.
Len & Rosie
Len Tillem and Rosie McNichol are elder law attorneys. Contact them at 846 Broadway, Sonoma, CA 95476, by phone at (707) 996-4505, or on the Internet at www.lentillem.com. Len also answers legal questions each weekday, Noon-1 p.m. and Sundays, 4-7 p.m. on KGO Radio 810 AM.