Calculate a remainder interest?

[pedorrero]

I am trying to get all Mom's loot gain control of a family trust so that my return will increase. I have yet to find a shyster to screw the Trust an attorney to represent my interests, so I am proceeding as best as I can.


I was told by one attorney that in cases like this, one step is to negotiate with the remainder beneficary a lump sum pay-out. I have no idea how this is done. I am not afraid to put my foot in my mouth write a proposal letter to him, but I am not sure how the lump sum is calculated. So if you wish, help me in an actuarial exercise.

The assets of the trust are about $680,000. I am likely to live about 40 more years. Obviously it is in my interest to minimize the amount that I would pay the remainder man. Therefore, I would like to assume that I receive both income and principal during my life. I guess I would plan to live to 100 therefore, and piss away the money. (If only the Trustee would agree with that reasoning!) In any case, I have no idea what to offer the remainder man.

[Texas Proud]

Hmmm.... so your mother set something up to prevent you from getting her money... and also leave money for someone else... and now you want to screw that someone else..... ain't families great!!!!

There are lots of things to consider... what IS your interest... is it only income? For health education etc? Blah Blah Blah... that has a big impact on what truly is your interest...

If it is a straight annuity (you get a certain amount for the rest of your life), then that is easy to figure out... there are many place such as the IRS tables or instantannuity.com... If you just get 'the income'... that is a bit harder... is the trustee investing to GET income or capital gains? (I have seen both).. that would mean you have a variable amount ... the IRS tables I think don't care... maybe the site doesn't also.. who knows...

[pedorrero]

I am being somewhat tongue in cheek. The Trust is, in fact, solely for me during my lifetime. There are no other beneficiaries. If I have a wife or child, they would get the loot after my death. Ditto the remainder man. I feel that I am more entitled to Mom's legacy than the town she lived in. Yes the usual language for "care and maintenance" is in their but that is just B.S. Trust is very discretionary; In practice I get net income, a piddling 2.7% or so. (I have griped about attacking the trust elsewhere, you can hunt those posts if you care.) I did get a preliminary figure (using firecalc.org): I can get about $19K/year using the 680K principal, 60/40 stock/bonds, 2.0% management fees. Using similar assumptions, but a 0.2% management fee (self-managed), I'd only need about $519,000. So, if that figure is correct, I could offer the remainder man a lump sum of about $161,000 and still come out even, and a Trust officer might have to drive a Honda instead of a Acura or wear a Timex instead of a Rolex, and the Town of Former Residence could name a park bench after Mom or something.

[Texas Proud]

OK... so she have left the remainder to the city.... strange to do that, but there are stranger things....

I still think you have a tough time to break the trust... unless there is some language in there that would allow it, even you and the remainderman agreeing on a split does not obligate the trustee to do you wishes... he follows the trust...

NOW, you could work on him / her and say that you should be getting 4% or even 5% of principal.... and try and force changes in investments, but then again that is tough to do unless you can show that you need the money...

If I am not mistaking... this is called a spendthrift trust and it is set up specifically so the person CAN NOT get their hands on the money because the person thought they would waste it all... It does not sound like you will, but to bad, the trust thinks so...

Also remember... any money that is spent defending any lawsuits you bring will be deducted from the trust... the bank pays nothing... and that means the legal fees AND the extra trust fees for the person handling the case...

I made my bank a pretty penny doing corp bankruptcies on bond issues..... I got nothing but my salary, but the bank got lots right out of the account...

[pedorrero]

Yes, thank you for stating these things, and I've been told same by others. Mom's trust has a provision that any or all of the funds could be paid to me at any time, but only at the Trustee's "absolute and uncontrolled discretion." Since trustee is earning around 2.0% a year for the financial brotherhood, he has very little incentive to do so. Trustee wants to resign (he's not earning enough -- boo hoo) and perhaps most likely, I will have a new trustee (I have the "right" (?) to nominate a new Trustee, but I think it still needs court approval.) I may see a bit better distributions, but that is no more guaranteed than under the old one. I'm trying to be pro-active as (maybe) a good time to attack the trust's existence itself, or its terms, is while the issue is in court anyway due to fee approvals and/or approval of a new trustee. I'm hoping I WON'T have to make such arguments myself, as I'd definitely have a fool for a client!!! On the other hand, it's amazing how hard it is to find an attorney to take the case.

[twaddle]

If the trustee can make a distribution at his discretion, then you want to offer him a buy-out, not the remainderman.