Can Siblings Amicably Alter a Will/Trust?

[Midpack]

I’ve searched but every discussion I find is when there’s contention between siblings - not the case for us.

My Dad’s assets are all in trust and the [-]will[/-] distribution is a 50:50 split between sister and I. But I’ve told her we can split everything, except I want her to have the house outright (she’d live in it until she decides where to relocate and buys property elsewhere, and then she’d sell Dad’s house and keep the net proceeds) contrary to the will. The house is about 1/3rd the value of the estate.

We’ll go through the attorney who wrote up the trust, will, etc. - but we’re meeting to plan this out next week so it might be nice to know our options in advance. Maybe I’m wrong, but I’m assuming coming to an agreement at the time of distribution might be cleaner than trying to gift a like amount?

 

[RunningBum]

I knew you could total disclaim an inheritance, but wasn't sure about a partial. Looks like you can, with details how:

https://info.legalzoom.com/disclaim-part-inherited-assets-23715.html

 

[bingybear]

I’ve searched but every discussion I find is when there’s contention between siblings - not the case for us.

My Dad’s assets are all in trust and the will is a 50:50 split between sister and I. But I’ve told her we can split everything, except I want her to have the house outright (she’d live in it until she decides where to relocate and buys property elsewhere, and then she’d sell Dad’s house and keep the net proceeds) contrary to the will. The house is about 1/3rd the value of the estate.

We’ll go through the attorney who wrote up the trust, will, etc. - but we’re meeting to plan this out next week so it might be nice to know our options in advance. Maybe I’m wrong, but I’m assuming coming to an agreement at the time of distribution might be cleaner than trying to gift a like amount?

If the assets are in the trust, does the will have any part in the distribution? What does the trust say about distribution?

 

[Another Reader]

I would meet with a knowledgeable trust and estate attorney that is not the attorney for the trust. The duty of the trust's attorney is to carry out the terms of the trust.

 

[mexexpat]

It is your Dad's trust. It remains his decision to make any changes. Why would you and sister go to you Dad's attorney and not directly to your Dad??

Unless you are implying that your Dad is deceased, in which case I am sorry for your loss.

 

[SecondCor521]

Cheapest and easiest thing to do is a partial disclaimer. I believe all you need to do is send a note to the executor of the estate in a timely manner specifying that you disclaim your interest in the house. The house would then pass as though you had predeceased your father; if your sister is the only other beneficiary then it would go to her.

Note that partial disclaimers are legal at the federal level but I have heard it can vary by state, so you'd want to check on if it was allowed in the state that is relevant (I'm guessing the state where the house is located, but IANAL).

Also, I don't think you can do a disclaimer if the house is disposed of via the trust; a disclaimer would only be if the house passed via his will. If the house is disposed of via the trust, there is a law you can use called TEDRA that allows you and your sister to modify the terms of the trust after your Dad passes away, but that can get quite expensive as it is a pretty specialized area of the law - I wouldn't recommend it.

If your Dad is still in command of his faculties and willing to make the change, you could ask him to write a codicil to his will. This would probably be a little more expensive than doing the disclaimer.

You could just inherit your half and then sign a quit claim deed to gift her your half of the house later. Or you could inherit your half, let her live there, sell it with her, and then gift her the proceeds. Either of these would probably eat into your unified estate/gift credit.

 

[ERD50]

Does the will or trust (not sure which applies here - I've seen where the will just 'points' to the trust, and the trust spells the details) specifically say each item is to be split 50-50, or just the total value?

If the house is appraised for ~ 1/3rd of the total, then just include that in her half and she gets an additional 1/6th in other value.

Or are you saying you want to give her the house, plus 50-50 of the remaining value of the estate, and want to avoid 'gifting' 50% of it to her?

-ERD50

 

[bingybear]

Does the will or trust (not sure which applies here -
-ERD50

If the house is in the trust, then the trust likely controls the distribution. Same with other items. It would be odd to have a trust push assets into probate. Usually kids cannot change either of these documents unless that trust has wording to allow them to make modifications.

If the parent is still alive and capable, he could change either or both most likely.

 

[Midpack]

If the assets are in the trust, does the will have any part in the distribution? What does the trust say about distribution?

Sorry, I edited the OP, sister and I are named in the trust but Dad controls it while he’s alive. The entire estate is supposed to be split 50:50 including the house, I just want my sister to have a larger portion of the estate by giving her the house free and clear, without creating legal or tax issues if possible.

It is your Dad's trust. It remains his decision to make any changes. Why would you and sister go to you Dad's attorney and not directly to your Dad??

Unless you are implying that your Dad is deceased, in which case I am sorry for your loss.

He is not deceased but he’s no longer mentally capable, he’s 96 yo in hospice care, I’ll leave it at that.

Cheapest and easiest thing to do is a partial disclaimer. I believe all you need to do is send a note to the executor of the estate in a timely manner specifying that you disclaim your interest in the house. The house would then pass as though you had predeceased your father; if your sister is the only other beneficiary then it would go to her.

You could just inherit your half and then sign a quit claim deed to gift her your half of the house later. Or you could inherit your half, let her live there, sell it with her, and then gift her the proceeds. Either of these would probably eat into your unified estate/gift credit.

That’s one of the reasons I’m asking.

We will go through the attorney, and there won’t be any kind of dispute between my sister and I. It sounds like I’ll have to wait until we actually meet with the attorney, that might be next week.

 

[audreyh1]

If worst came to worst: Eating into your estate credit - such a thing can be gifted (or forgiven) over a series of years without eating into any unified estate gift credit. A couple gifting to another couple could gift $60K a year.

Sorry to hear of your Dad's situation.

 

[Texas Proud]

Does the trust require that the house be distributed right away?


If not, just keep the house in trust and let your sister live in it... worry about the proceeds when the time comes for her to sell... heck, by then one of you might have passed and then nobody cares...

 

[Midpack]

Does the trust require that the house be distributed right away?


If not, just keep the house in trust and let your sister live in it... worry about the proceeds when the time comes for her to sell... heck, by then one of you might have passed and then nobody cares...

My sister doesn’t want to live in the house (way too big) or the city it’s in. She’ll be looking to relocate to another state as soon as the house is empty and sold. We both want to “liquidate” the estate as soon as possible. We don’t want top dollar, but we don’t want to just donate or toss everything either. Someone mentioned an estate auction above, sounds better than an estate sale to me, but I haven’t found an estate auction house in that city yet - still looking.

 

[gauss]

Maybe I am missing something but wouldn't it be very simple to accept the inheritance as written, take ownership of half the house, then quit claim your share of the house so that that you are no longer a co-owner. If memory serves, you can unilaterally quit claim the house without anyone else signing off (with possible exception of your spouse).

Technically you may need to file a federal gift tax return to document (but not tax) the amount of the gift to your sister. I suspect in many times this is not actually done.

-gauss

 

[gauss]

Someone mentioned an estate auction above, sounds better than an estate sale to me, but I haven’t found an estate auction house in that city yet - still looking.

It is possible that this a regional thing or a amount of wealth thing. In my location and my upper-middle class circle of friends, I have only heard of estate sales.

 

[kcowan]

He is not deceased but he’s no longer mentally capable, he’s 96 yo in hospice care, I’ll leave it at that...

Does anyone hold POA for him?

If all else fails, set up a multiyear gifting plan to achieve your objectives after tax.

 

[Midpack]

Maybe I am missing something but wouldn't it be very simple to accept the inheritance as written, take ownership of half the house, then quit claim your share of the house so that that you are no longer a co-owner. If memory serves, you can unilaterally quit claim the house without anyone else signing off (with possible exception of your spouse).

Technically you may need to file a federal gift tax return to document (but not tax) the amount of the gift to your sister. I suspect in many times this is not actually done.

-gauss

I’d never heard of a quit claim, thanks to you and others, I am looking into it. It sounds like there may be tax consequences I was trying to avoid. Sounds like we need to broach this with Dad’s attorney and see where it leads.

Fortunately there is no chance of any dispute between my sister and I. And we’ve known the attorney for many years, we trust him. I am trying to let my sister walk away with more than the trust 50:50 directive and minimize taxes to both of us, and keep taxes with assets received, sounds like I may be naive in that goal.

Does anyone hold POA for him?

If all else fails, set up a multiyear gifting plan to achieve your objectives after tax.

My sister and I are executors, with POS, medical POA, etc. Thankfully our Dad had an attorney set up the trust about 15 years ago, and thankfully he was very thorough. As far as we know, all the bases are covered.

 

[sheehs1]

We will go through the attorney, and there won’t be any kind of dispute between my sister and I. It sounds like I’ll have to wait until we actually meet with the attorney, that might be next week.

I have disclaimed twice. Once, my siblings and I collectively disclaimed one of my mom's IRA's for the sole purpose of forcing it into her estate so her estate was responsible for paying the taxes. This resulted in more "net" dollars up to the Unified Tax Credit amount for each of us from her other sources.

I then disclaimed my portion of the family business stock Percentage owned by Mom that was routed to her Trust upon her death and that was to be distributed to me and my sibling when my dad passed. I disclaimed as a means of giving my daughter that stock. It did not go to the other beneficiaries.

It is my understanding that disclaiming does not force it to the other beneficiaries. It goes to your heirs. If your sister is your only heir, then disclaiming might work. If not, I'm not sure.

I'd be curious to know if there is a way to direct it to your sister. Since that was never my intention, I never looked into that. Definitely ask the estate attorney.

 

[CaliKid]

You only need to talk about "disclaimers" if people have taxable estates (over $10m). Otherwise you can do by assignments or agreements. Distribution agreements are very common after death of parents to divide the assets in some fashion that the kids want. I would use an experienced estate attorney.

 

[ERD50]

... My sister and I are executors, with POS, medical POA, etc. Thankfully our Dad had an attorney set up the trust about 15 years ago, and thankfully he was very thorough. As far as we know, all the bases are covered.

So you two are the executors, and now that I understand you actually want to give your sister more than the trust states, I would take the pragmatic approach - just do it. No one else is affected.

When I was helping DW settle her father's estate, and I was questioning some of the overly detailed, specific and complicated wording in the trust with the lawyers (IIRC, it said that certain expenses, like funeral "shall be paid from the trust" - and I read that "shall" means "must" in legal docs? Some things like that.). MIL had just paid the bills, why the heck do we need to follow the trust document, what's the consequence if we don't?

Lawyer basically said "There are no Trust police". If you do not harm any beneficiary, no one will know or care. Now this would probably be different if a bank was executor, they would need to follow the letter of the law, I would think.

If the trust did split it 2/3 - 1/3, taxes would be no different than a 50-50 split, so I don't see the Feds/State getting involved either.

The only question would be if your Sister was worried that you would come back later, and claim the extra 1/6th (if I did my fractions right) must be returned to you. Then she might be in a bind. But that seems very, very unlikely (your DW is on board with this I assume).

Just do it.

-ERD50

 

[Midpack]

So you two are the executors, and now that I understand you actually want to give your sister more than the trust states, I would take the pragmatic approach - just do it. No one else is affected.

Forgive my stupidity but I've never been through this. If there are no tax consequences for me, I'd be happy to do that. The estate is large enough that I'd rather not pay taxes on 1/6th the estate (my half of the house) that should go with the house, or to my sister. I want her to get the entire proceeds from the sale of the house after associated taxes. Again, I may be completely wrong.

 

[ivinsfan]

Forgive my stupidity but I've never been through this. If there are no tax consequences for me, I'd be happy to do that. The estate is large enough that I'd rather not pay taxes on 1/6th the estate (my half of the house) that should go with the house, or to my sister. I want her to get the entire proceeds from the sale of the house after associated taxes. Again, I may be completely wrong.

What do you mean by paying the taxes. that one confused me. Any estate taxes will be payed by the estate before distribution by the estate itself not you.If you meant you don't want the house asset to be counted on your lifetime estates exemption that's another subject.

I had a first cousin die without a will and the taxes came off the top and were not prorated against each person share of the estate.

 

[gauss]

Would it make sense to clear the air on the possibility of an estate tax being due?

The individual exclusion for a death that occurs between 2018 and 2025 will have an over 11 Million dollar exemption.

If Dad's estate is nowhere near that amount perhaps we could mention that to simplify the discussion of estate/gift taxes.

edit: Actually it would be Midpack's future estate that would be effecting by his giving, so this may be a premature question. sorry.

-gauss

 

[Starsky]

I just went through this with my brother last month, and as long as the beneficiaries are all in agreement, you can pretty much do what you want distribution-wise. If you are the trustee, you have quite a lot of discretion to settle the estate - especially if you and your sibling are on the same page. My brother and I get along great, so it was no problem.

My impression was that the guidelines in the Trust regarding distribution were as absolute, or flexible, as the beneficiaries could agree among themselves it should be. The Trustee's job is just to execute the distribution according to the wishes of the deceased. It's his or her job to interpret what the intent of those instructions are, if there is any question. The beneficiaries can fight it out in court if there's a problem. There's nobody else following up to make sure the trust document is followed to the letter besides the Trustee and beneficiaries.

Unless you are over the lifetime inheritance cap, the tax consequences are nil. In some states you may also have a reasonably high limit (I think in CA it's $100K) of assets that can be inherited without having to go thru probate - in case your father left anything out of the trust that should have been there. Your dad's trust attorney can help you if there are any questions about assets.

P.S. A Quitclaim deed is what you as the trustee will sign when your father passes away to gift the property to your sister (or anyone else). It is the legal document filed with the County that passes the deed from one party to the other - kind of like the Pink Slip for your home. Once it is filed, a new Deed is generated and registered with the county with the name of the recipient of the Quitclaim Deed.

P.P.S. The Trustee has zero discretion as to the distribution of IRAs and other tax-deferred accounts and insurance policies. Those assets are distributed directly according to the beneficiaries listed in the policy/agreement. (Edit: The Trust itself can also be a beneficiary)

 

[ERD50]

Forgive my stupidity but I've never been through this. If there are no tax consequences for me, I'd be happy to do that. The estate is large enough that I'd rather not pay taxes on 1/6th the estate (my half of the house) that should go with the house, or to my sister. I want her to get the entire proceeds from the sale of the house after associated taxes. Again, I may be completely wrong.

Values are stepped up at the date of death. Assuming the estate is less than current Estate Tax limits (~$5M?) no taxes should be due. IOW, if the house is appraised at $X at date of death, that's the cost basis going forward (not your Father's purchase price). You say you plan to sell in a short time, after things are cleared out. So after commissions and expenses, you are unlikely to have any gain over that $X, so no cap gain tax due either. If there were some small tax due, you could even gift that to her, it would certainly be under the annual exclusion ( ~ $14K).

This might be different in a community property state? Maybe half was already stepped up? I'm not sure how that works. Someone else can chime in on that.

-ERD50

 

[sheehs1]

In addition to all of the above and with the Unified Tax Credit amount so high I doubt there will be Federal Estate taxes (but obviously do not really know).

However, just know there will probably be Federal and State Estate Tax Returns that have to be filed.

In those Estate returns, the recipients of the assets are listed and the amounts going to each party are also listed.

And in our case, a copy of both the Will and the Trust as well as the Disclaiming Form was included in the return.

While no taxes may be due, the Government wants to know who got what, at the time the returns are filed. What you do after doesn't matter.

Let your Estate Attorney and the CPA doing the returns guide you.

Add on: And ERD50 is right and brings up an excellent point. After death there is advantage of stepped up basis for real estate, stocks, etc. At least for now. There has been some talk of eliminating these step ups but I don't think anything has come from it.