Need Annuity advice-brother is foolish with money

[OldShooter]

This!

To amplify a little now that I am at a real keyboard:

A very straightforward trust provision is called the "HEMS Standard." (You can google it and read until you doze off.) The trustee is directed to provide for the beneficiary's Health, Education, Maintenance, and Support. IOW to disburse what makes sense; part of the trustee's stewardship is to manage the money and the disbursements so that your brother doesn't run out of money.

An annuity is a poor tool for what you want to do because there is no flexibility. What if your brother ends up in a nursing home? IANAL but I think that annuity is an asset that must be spent before he gets any public support. Again, IANAL, but the trust is not your brother's asset so I don't think it gets automatically tapped. That's just one scenario and I may be wrong about the spend-down issue, but you can certainly think of others. What if he ends up on hospice for 6 months? The trustee can accelerate payments to make his end-of-life more comfortable while an annuity can't.

The trust can include other instructions, too, maybe about payments on his birthday, or whatever. The trust grantor can also specify what happens to the balance of the trust if the beneficiary dies. Charity? Family? ... whatever.

Finally, both Schwab and Vanguard are now advertising very inexpensive trust services. I would check those out before agreeing to pay big bank fees. I am sure that Fido, too, will enter that market if it has not already done so.

 

[enginerd]

Does #2 know he is getting a million dollar inheritance? If so, anything you try do at this point will only cause strife with him.

I think your only way is to get your oldest brother on your side first. Play up the fact that #2 is living with him. Even though he might not admit it, it is probably causing issues in his own life as well.

 

[lwp2017]

The different perspectives are insightful , reading your replies helps. I appreciate each of you.

Mom and I talked last night, she accepts she enabled his behaviors & resulting mess. She wants to fix it and trusts me with financial advice.

Thank you ERD50, I did not know a fixed annuity could be sold for a lump sum. I predict that would be the outcome ( curses on JG Wentworth!).
As CaptTom said, brother #2 already has the money mentally spent, he will use all his energy and talent to get the full annuity sum immediately. That was so obvious but I hadn't yet considered that outcome.

I'm following up on MarieIG's and OldShooter's advice, a HEMS trust may be the solution. I will start researching and discussing with the attorney we use.

My relationship with brothers is already strained, we are civil to each other at family events once or twice a year. That is the only time we speak.
I don't hate my brothers, but they are narcissistic and rude, not people I want to associate with, so I minimize contact with them.

However Brother #2 will most likely be a homeless street person if Brother #1 dies first. That outcome would definitely haunt my conscience, which will prevent me from completely abandoning him.
My good wife has already made it clear we scrimped, did without living very modestly, saved & invested for 35 years building a retirement nest egg while Brother #2 goofed off and travelled. She will not agree to support him one cent- I understand and will support her.

Thus my desire to resolve while mom mentally can, even if that hurts Brother #2's pride.

Thanks!

 

[ERD50]

I do appreciate the different perspectives, reading the postings helps. I appreciate each of you.

Mom and I talked last night, she accepts she enabled his behaviors & resulting financial mess. She wants to fix it.

I did not know a fixed annuity could be sold for a lump sum. I predict that would be the outcome ( curses on JG Wentworth!).
As CaptTom said, brother #2 already has the money mentally spent.
As MarieIG and OldShooter posted, a HEMS trust may be the solution. I will start researching and discussing with the attorney we use.

It may sound harsh but I don't care about a relationship, it is already strained, we are civil to each other at family events once or twice a year. That is the only time we speak. So I don't care if the best solution hurts either brothers feelings.

However Brother #2 will be a street person in brother #1 dies first. I know that will definitely haunt my conscience.
thus my desire to resolve while mom mentally can.

Sounds like you are on a good path. One bit of caution, that you hopefully will not need to cross, but your comment struck a nerve with me (emphasis mine):

Mom and I talked last night, she accepts she enabled his behaviors & resulting financial mess. She wants to fix it.

Good luck. Since she is an admitted enabler, she has had the opportunity to 'fix it' all these years and has not. So while she may say she wants to 'fix it', she may not be able to pull the trigger and actually do it.

This is how my Mother was. Talked and talked about stopping the enabling of my brother, saw multiple counselors, all family and friends told her the same thing, but she never changed her ways ("I know what I have to do, but..."). Protected and sheltered him, gave him money, excused his bad behavior, covered for him, turned a blind eye when he stole from her, and babied him right to the end.

I don't think any rational people can deal with the irrationality of an enabler. One of her counselors made references to 'battered wife/spouse syndrome' - they just keep coming back to the one that hurts them, and provide them with 'ammo'. Why? A mystery to me.

"Tough Love" may be tough, but it always seemed tougher to me to be dealing with the fallout of enabling bad behavior. Maybe I'm just too logical to get past that?

-ERD50

 

[ivinsfan]

The different perspectives are insightful , reading your replies helps. I appreciate each of you.

Mom and I talked last night, she accepts she enabled his behaviors & resulting mess. She wants to fix it and trusts me with financial advice.

Thank you ERD50, I did not know a fixed annuity could be sold for a lump sum. I predict that would be the outcome ( curses on JG Wentworth!).
As CaptTom said, brother #2 already has the money mentally spent, he will use all his energy and talent to get the full annuity sum immediately. That was so obvious but I hadn't yet considered that outcome.

I'm following up on MarieIG's and OldShooter's advice, a HEMS trust may be the solution. I will start researching and discussing with the attorney we use.

My relationship with brothers is already strained, we are civil to each other at family events once or twice a year. That is the only time we speak.
I don't hate my brothers, but they are narcissistic and rude, not people I want to associate with, so I minimize contact with them.

However Brother #2 will most likely be a homeless street person if Brother #1 dies first. That outcome would definitely haunt my conscience, which will prevent me from completely abandoning him.
My good wife has already made it clear we scrimped, did without living very modestly, saved & invested for 35 years building a retirement nest egg while Brother #2 goofed off and travelled. She will not agree to support him one cent- I understand and will support her.

Thus my desire to resolve while mom mentally can, even if that hurts Brother #2's pride.

Thanks!

So this boils down to an issue between you and your spouse. If my spouse got a million bucks from his family and had a brother who for whatever reason could end up homeless it wouldn't be appropriate IMO for me tell my DH he couldn't spend one red cent of his inherited money on his brother. I suggest you think over a figure in your mind you would spend to help support bro ( if he indeed ends up on the street) and talk to your wife about setting aside a little inheritance money to fund that.

 

[Texas Proud]

I think speeches are wasted on brother #2.

Research "spendthrift trust." You have probably seen those singing commercials to "get your money now." Those are geared for people who are looking to accelerate their annuity payments, i.e. in most cases blow through their money. There are buyers that are willing to help them. So be careful that your brother does not have the power to sell or accelerate his future monthly income.

Look into an institutional trustee.

Most trusts do not qualify for these lump sum payments as they are not guaranteed... not sure about an annuity...

These are for people who won in court or settlement and are getting regular payments... or someone who chose the annuity option on the lotto but now wants the money...

 

[MooreBonds]

Given the costs with some trusts, and the unethical behavior that happens perhaps more frequently than you might expect with trusts (i.e. excessive fees, dumping it in high-load funds, dragging things out, etc.), I think having your mom will his share into an annuity is the best, lowest-cost, option for his best interest. He can't touch it or get to it, and the overall net "cost" of managing this is built in to the annuity. If you're talking about $1MM share, it would be worth it to have him spread out among 2 (or even 3) insurers, to diversify risk against one insurer going out. Each insurer could make quarterly payments, with staggered months (one on a Jan/Apr/July/Oct cycle, one on Feb/May/Aug/Nov cycle, another on Mar/June/Sept/Dec cycle).

 

[tmm99]

Might be easier to have your Mom (and lawyer) create a trust that distributes the inheritance out over a period of time instead of all at once.

+1. That is the only way things may work )unless he racks up so much debt and end ups spending his future $.

Another poster said to give him the lump sum and telling him to do whatever he wants with it but when the money runs out, it’s all on him... That is like giving a pyromaniac a box of matches and locking him up in a room IMHO.


Sent from my iPhone using Early Retirement Forum

 

[jollystomper]

Does anyone think that a 60 something brother is going to accept advice from a much younger brother about how to handle his inheritance?

Not a chance.

Decades of personal experience along these lines. In fact, based on my experience I would say he is unlikely to accept advice from anyone, period.

I have to agree with this. I have seen this play out between my 67 year old brother and my 54 year old brother.

 

[lwp2017]

So this boils down to an issue between you and your spouse....it wouldn't be appropriate IMO for me tell my DH he couldn't spend one red cent of his inherited money....

Not a spousal issue. Our planning for retirement has always been conservative assuming zero inheritance.
Thus discussions of taking care of B. #2 would require us to cut back or resume work. Those are not options I want either. However potential of him living on streets in 10 years is a reality.

Also since first married, we have been a team on money, DW and I consider spending, saving, and investing to be a joint decision. So any inheritance is her money too. Full transparency & agreement financially.

If we get inheritance that will be very nice addition, but you never know, mom may decide to give it all to the church or charities. My aunt left nothing to family after talking to her priest right before she died, will was revised. Surprised her kids.
Father in law did something very similar.

 

[Calico]

The different perspectives are insightful , reading your replies helps. I appreciate each of you........

However Brother #2 will most likely be a homeless street person if Brother #1 dies first. That outcome would definitely haunt my conscience, which will prevent me from completely abandoning him.

My good wife has already made it clear we scrimped, did without living very modestly, saved & invested for 35 years building a retirement nest egg while Brother #2 goofed off and travelled. She will not agree to support him one cent- I understand and will support her.......

Thanks!

These two statements conflict.

I agree with previous posters. Both of your brothers are grown men. Neither is going to change now.

When the time comes, accept your share of the estate, continue to live the life you and your wife sacrificed and planned for, and let the chips fall where they may for younger brother. If older brother is that concerned about him, let him make any arrangements to provide for younger brother in the event older brother passes first.

That way you aren't dragged into a conflict, accused by younger brother of trying to "steal his share" or "control him" yada yada yada. There is no way this ends well for you if you insert yourself into the middle of this.

Will you really want to deal with this drama when the time comes, while you are trying to enjoy the retirement you and your wife sacrificed for?

In fact, if your mother's wishes are that she wants an equal, three-way split, I would go further and take steps to make sure that your third of the anticipated inheritance is protected. Your oldest brother drafted the will, and you don't want to find yourself in a position where your younger brother suddenly "is entitled to more than a third" because someone decides "he needs it more" than you. Believe me, I have seen this happen more than once.

Good luck to you.

 

[OldShooter]

Given the costs with some trusts, and the unethical behavior that happens perhaps more frequently than you might expect with trusts (i.e. excessive fees, dumping it in high-load funds, dragging things out, etc.) ...

Sorry, these ghost stories are not a "given." Trusts are used all the time for various purposes with none of those things happening. Re "more frequently than you might expect" is this your very own fact or do you have some backup for it? For reference, what "I might expect" is low single-digit problem % rates with many of them due to badly drafted or home-made documents.

It's really no different than investing. Stay out of dark alleys and don't talk to strangers. Stick with reputable banks and trust companies.

Actually, IMO you are more likely to get ripped of by an annuity salesman than by a reputable trustee.

 

[ivinsfan]

Not a spousal issue. Our planning for retirement has always been conservative assuming zero inheritance.
Thus discussions of taking care of B. #2 would require us to cut back or resume work. Those are not options I want either. However potential of him living on streets in 10 years is a reality.

Also since first married, we have been a team on money, DW and I consider spending, saving, and investing to be a joint decision. So any inheritance is her money too. Full transparency & agreement financially.

If we get inheritance that will be very nice addition, but you never know, mom may decide to give it all to the church or charities. My aunt left nothing to family after talking to her priest right before she died, will was revised. Surprised her kids.
Father in law did something very similar.

Right no one knows how things will play out, but it's an emotional issue with you and not so much for your spouse as it's not her brother.I don't consider inheritance as "separate" money either but you either will need to accept he may be homeless for years or try for a compromise with your spouse. You have very little power over this situation which is rough.

 

[Dancfo]

Sorry, these ghost stories are not a "given." Trusts are used all the time for various purposes with none of those things happening. Re "more frequently than you might expect" is this your very own fact or do you have some backup for it? For reference, what "I might expect" is low single-digit problem % rates with many of them due to badly drafted or home-made documents.

It's really no different than investing. Stay out of dark alleys and don't talk to strangers. Stick with reputable banks and trust companies.

Actually, IMO you are more likely to get ripped of by an annuity salesman than by a reputable trustee.

+1 - This situation is a classical example for a corporate-trusteed trust. Family and money don't mix well in most cases. The "spendthrift" provision would be something that you would want to be included, which would help protect the assets against creditors and reduce the chance for "pledging" the assets for a loan. Other language could help minimize the chance for encumbering the funds. As noted, funds for unforeseen and "real" emergencies can be made available in addition to some stipend.

 

[JustCurious]

As far as annuities go a Single premium immediate annuity (SPIA) is the best option. It can be adjusted for inflation but that would mean that it will yield less up front. It sounds like it will be a few years before he gets the money. By that time an annuity will yield quite a bit. Even at 7% (I believe after 70 it will much higher) he will get a large some of money to live one. Add social security to it (even if it's small) and he should not need any support unless he blows it all and then it's not your issue.

The problem with that, as has been pointed out already, is the brother can cash out the annuity. Google "J.G. Wentworth."

 

[harley]

Not a spousal issue. Our planning for retirement has always been conservative assuming zero inheritance.
Thus discussions of taking care of B. #2 would require us to cut back or resume work. Those are not options I want either. However potential of him living on streets in 10 years is a reality.

I don't understand why the only options are having someone else controlling his money or living on the street. Will he get SS? Just because you've been self employed doesn't mean there will be no SS, unless he worked 40+ years in an completely under-the-table form. As pointed out in many other threads, living on SS may not be joyful, but it's possible. Add in food stamps, section 8 housing, Medicaid, and continued gig employment (Welcome to Walmart) and he should be able to afford at least a two room cardboard box.

Sure, continue to talk to Mom about a trust or whatever, but other than that don't assume the worst. He's obviously got a lifetime of experience figuring out how to get by.

Also, if I inherited $1M at age 70 or so and was able to blow right through it, the odds are that the blow out would probably kill me anyway, with a smile on my face. Problem solved.

 

[Nature Lover]

When the time comes, accept your share of the estate, continue to live the life you and your wife sacrificed and planned for, and let the chips fall where they may for younger brother. If older brother is that concerned about him, let him make any arrangements to provide for younger brother in the event older brother passes first.

+1 to this.

 

[Scuba]

This!

+1

 

[Yarnstormer]

Also, if I inherited $1M at age 70 or so and was able to blow right through it, the odds are that the blow out would probably kill me anyway, with a smile on my face. Problem solved.

That's what I was thinking! If your older brother is not willing to step up and get involved then theres nothing you can do, just like you have not been able to fix the situation all these years. You never know, assuming your brother was a low earner all these years he might handle the money better than expected.

Would he turn to you for help if he needed money? Has he already?

 

[Yarnstormer]

Maybe your mom should set up the trust NOW and start giving him income. Then it will seem more normal to him and like a good deal. Plus your mon would have the peace of mind knowing he was taken care of. That's what my Mom did with my brother who is not a spendthrift but has pretty severe aspergers.

 

[Sunset]

I have a relative, getting a trust from dear dad, which is currently providing for him.
The relative has told me, as soon as dear dad dies, he is getting a lawyer to break the trust because "That money is mine".

 

[Dancfo]

I have a relative, getting a trust from dear dad, which is currently providing for him.
The relative has told me, as soon as dear dad dies, he is getting a lawyer to break the trust because "That money is mine".

If mom is okay with the money not staying in the family when he dies, make the remainder beneficiary a large charity. That would put a roadblock to terminating the trust - although not impossible.

 

[Gumby]

You are not required to accept behavior from a relative that you would not accept from a stranger.

 

[jazz4cash]

You are not required to accept behavior from a relative that you would not accept from a stranger.

Huh?

 

[ERD50]

I have a relative, getting a trust from dear dad, which is currently providing for him.
The relative has told me, as soon as dear dad dies, he is getting a lawyer to break the trust because "That money is mine".

I'd be curious if anyone can find a documented case of this, where there were not obvious issues with how the trust was written.

The purpose of the spendthrift trust is to keep the lump sum away from the beneficiary. If it is easily 'broken', there is no point to it. A little searching, and I'm not finding anything indicating that this can be done routinely.

-ERD50