Sister’s Trust - Am I Crazy?

[Midpack]

My sister wrote out her Trust 4+ years ago, I am the successor trustee, executor and sole beneficiary. I doubt her estate is large amount net. She may only have days or weeks to live. We live 1200 miles apart.

Met with her in person today, and she tells me she’s thinking about “leaving a third to Jane, and a third to Sue (fictional names of step daughters).” Presumably a third to me but she didn’t actually say that. DW thought she heard ‘one third to the stepdaughters (IOW 1/6th each).’

Also said she wants to leave a chunk to her favorite charity. When I ask how much she says it depends on what’s left after the house is sold (mortgage in progress) - she’ll be gone at that point, so she won’t be able to decide what amount!!!

When is asked if this is documented in her Trust, she said ‘no, she’s still deciding.’ I told her that has to be documented by an attorney (her pryestate attorney who provided her Trust retired in July…). She seems to think she can just leave the Trust as is and send me a Word doc with her wishes re: distributing her assets, or just tell me orally. I am very uncomfortable with that.

I meet with sister again tomorrow, may be the last time. I will probably politely demand she document her wishes, though she’s let this float for over 4 years already. I don’t care about the $, I doubt her net worth is much, but I’m shocked about the ambiguity of her wishes at the last minute.

All her financial information is in a notebook I’ve never seen at her home. I won’t have any idea what her assets & liabilities are until she’s gone. I’m fairly sure she has a positive NW.

Maybe I’m overreacting…

 

[Retch The Grate]

sounds frustrating, and like it may be very hard to get her to nail anything down unfortunately.

 

[street]

Wow!! Sorry to hear your story of your sister, that is sad. I wonder if there is a notary where she is at to write down in front of that person and you if her wishes could be done doing something like that if she wants change.

 

[steady saver]

I'm sorry Midpack. That's a tough situation to be in all the way around. I second Street's suggestion if that's viable.

 

[cathy63]

If you want to honor her wishes, there's nothing stopping you from giving her stepdaughters or the charity the money after you carry out the instructions in the trust doc. The funds will be yours at that point, so you can give the money to whomever you want. It sounds like it's probably not going to exceed the gift reporting requirements, but if it does you can spread the gifts to the stepdaughters over two years. You also get the tax deduction for the charitable donation.

 

[SecondCor521]

I'm sorry you're going through this.

If she's mentally and legally competent to write a new will and/or trust and wants to spend some of her remaining precious time to do so, if I were in your shoes I would try to facilitate that. Her estate attorney may be willing to handle the updates given the timing and the scenario.

If not, and you can document her wishes in writing with her so you clearly know what they are, that would give you a roadmap even though it's not legally binding.

You could investigate a partial disclaimer. If you disclaim 1/3 or 1/6 or whatever, then that money flows as though you predeceased your sister. You'd need to investigate where the money would flow in that scenario, either with an attorney or the institution holding the assets. It's possible the money could flow to the stepdaughters depending on how things are currently written. A partial disclaimer almost certainly would not help with the charity situation.

If a disclaimer doesn't work, then I think the approach cathy63 describes is what you'd need to do.

 

[Midpack]

If you want to honor her wishes, there's nothing stopping you from giving her stepdaughters or the charity the money after you carry out the instructions in the trust doc. The funds will be yours at that point, so you can give the money to whomever you want. It sounds like it's probably not going to exceed the gift reporting requirements, but if it does you can spread the gifts to the stepdaughters over two years. You also get the tax deduction for the charitable donation.

It will exceed the gift requirement. Given the situation I pressed her on the value of the estate last night and it looks like over $600K total (more than I’d guessed), mostly equity in her home. So gifting will be messy?

It’s my understanding from ChatGPT as trustee “you must be especially careful: honoring a verbal wish by altering the trust distribution can be considered a breach of fiduciary duty. In that case, you should only share by gifting from your personal funds after the distribution.”

I’m inclined to get an estate attorney on the phone with her and I this morning, my flight leaves just after noon…

 

[HarveyS]

In the OP you stated that you are the sole beneficiary. If that is the case, you can do as Cathy suggests with no concerns. Honor the trust and you receive all assets after SIL's bills are paid. Then divide it as she asked. Yes, there is an IRS form that you need to complete if you give someone more than $19,000 this year ($38,000 if you and spouse both give) but it is a non-issue.
Assuming she is competent to make a decision, I'd attempt to understand exactly what she wants since the OP stated you were unclear. Then, I'd honor her wishes. I'd avoid getting a lawyer involved if there was any chance that would negatively impact her quality of life (ie add stress to an already stressful situation).

 

[Aerides]

I would let all this go and just say "ok when it's documented I'll be happy to take a look" and if it's not, just let it fall by the wayside. I'd spend the rest of my time with her enjoying her, holding her hand, and telling good stories. I wouldn't be pressing her with lawyers. She doesn't sound stupid, she'd just rather not have the bother when she only has a little time left. I wouldn't.

After she passes, and the financial dust settles, since you are the SB, then you can decide to gift to whomever, and you might find it is a whole lot less than she estimates. Most people tend to overestimate

 

[Jerry1]

I would let all this go and just say "ok when it's documented I'll be happy to take a look" and if it's not, just let it fall by the wayside. I'd spend the rest of my time with her enjoying her, holding her hand, and telling good stories. I wouldn't be pressing her with lawyers. She doesn't sound stupid, she'd just rather not have the bother when she only has a little time left. I wouldn't.

After she passes, and the financial dust settles, since you are the SB, then you can decide to gift to whomever, and you might find it is a whole lot less than she estimates. Most people tend to overestimate

I share this advice. When it’s all done, you can give the others anything that you want and if the amount causes gifting issues, just give less or draw it out over time. Just spend the time now saying goodbye. Hopefully there are some old stories you two can share that will bring some joy to her final days and give you some comfort as well.

 

[Stormy Kromer]

This is lawyer territory. She needs more than a hand written note witnessed by a notary.

 

[RunningBum]

If you were to disavow a share of her estate, would the step daughters be next in line? You could disavow the amount your sister wants them to get. And then either give to charity out of her estate, or just accept the rest as your and give to charity out of your own holdings, like QCDs or appreciated equities.

 

[JohnnyPHX]

It's not so easy to chose who to leave your estate to unless you have children which makes it a little easier. I could see how your sister could have a hard time deciding.
At this point I would have her share her thoughts so you have clarity in her wishes, in writing if possible and as others have said tell her you will do your best to honor them. If you are the sole beneficiary then you can do your best to honor those wishes.

 

[mystang52]

Playing Devil's Advocate here. Any chance sister's mental acuity would be called into question? If so, any chance the step daughters will challenge the Trust distribution? Presuming no to both questions, add me to the responders suggesting OP take no action, and give step daughters "their share" after the Trust obligations are fulfilled. If either question calls for a Yes response, unfortunately a lawyer will be likely be needed.

 

[pb4uski]

My sister wrote out her Trust 4+ years ago, I am the successor trustee, executor and sole beneficiary. I doubt her estate is large amount net. She may only have days or weeks to live. We live 1200 miles apart.

Met with her in person today, and she tells me she’s thinking about “leaving a third to Jane, and a third to Sue (fictional names of step daughters).” Presumably a third to me but she didn’t actually say that. DW thought she heard ‘one third to the stepdaughters (IOW 1/6th each).’

Also said she wants to leave a chunk to her favorite charity. When I ask how much she says it depends on what’s left after the house is sold (mortgage in progress) - she’ll be gone at that point, so she won’t be able to decide what amount!!!

When is asked if this is documented in her Trust, she said ‘no, she’s still deciding.’ I told her that has to be documented by an attorney (her pryestate attorney who provided her Trust retired in July…). She seems to think she can just leave the Trust as is and send me a Word doc with her wishes re: distributing her assets, or just tell me orally. I am very uncomfortable with that.

I meet with sister again tomorrow, may be the last time. I will probably politely demand she document her wishes, though she’s let this float for over 4 years already. I don’t care about the $, I doubt her net worth is much, but I’m shocked about the ambiguity of her wishes at the last minute.

All her financial information is in a notebook I’ve never seen at her home. I won’t have any idea what her assets & liabilities are until she’s gone. I’m fairly sure she has a positive NW.

Maybe I’m overreacting…

First off, I'm sorry to hear tht you are hving to deal with this all at the same time that your sister is so ill.

You are not overreacting at all. As trustee, you are required to follow the written terms of the trust. If she wants a different distribution then she need to sign an amendment of the trust to change the beneficiary distribution.

I'm not a lawyer but I don't think a side letter would be sufficient but it might be a moot issue unless you object to these other parties getting money that would be going to you, but technically if the trust isn't amended you would be the sole beneficiary and then gift some of what you receive to the other parties.

You don't necessarily need a trust lawyer to amend the trust. You could draft an amendment of the trust to reflect her revised wishes and have her sign it and have her signature notarized.

Also, since her ultimate demise is near, it is time for her to open the komono and share her financial details with you.

 

[pb4uski]

.... It’s my understanding from ChatGPT as trustee “you must be especially careful: honoring a verbal wish by altering the trust distribution can be considered a breach of fiduciary duty. In that case, you should only share by gifting from your personal funds after the distribution.” ..

While the above is true, the only party who could challenge the distribution violates the trust is the current sole beneficiary, which is you, Unless you plan to sue yourself for breach of fiduciary duty I think you are ok.

 

[pb4uski]

In the OP you stated that you are the sole beneficiary. If that is the case, you can do as Cathy suggests with no concerns. Honor the trust and you receive all assets after SIL's bills are paid. Then divide it as she asked. Yes, there is an IRS form that you need to complete if you give someone more than $19,000 this year ($38,000 if you and spouse both give) but it is a non-issue.
Assuming she is competent to make a decision, I'd attempt to understand exactly what she wants since the OP stated you were unclear. Then, I'd honor her wishes. I'd avoid getting a lawyer involved if there was any chance that would negatively impact her quality of life (ie add stress to an already stressful situation).

The only problem with that approach is that the gifts use up part of your exemption amount but the exemption amount is so high these days it probably doesn't matter.

 

[pb4uski]

This is lawyer territory. She needs more than a hand written note witnessed by a notary.

Technically, she can amend the trust in writing (not typed) with a notarized signature.

 

[pb4uski]

Playing Devil's Advocate here. Any chance sister's mental acuity would be called into question? If so, any chance the step daughters will challenge the Trust distribution? Presuming no to both questions, add me to the responders suggesting OP take no action, and give step daughters "their share" after the Trust obligations are fulfilled. If either question calls for a Yes response, unfortunately a lawyer will be likely be needed.

I fail to see how the step daughters would have standing to challenge the distribution done in accordance with the terms of the trust, even if the OPs sister told them that they would be getting something from the trust but never amended the trust to reflect that.

 

[starry night]

I think a pertinent question might be is this a revocable or irrevocable trust? And, there may be additional assets that are NOT included in the trust assets.
If some assets are irrevocably attached, that might constrain her, but otherwise, she is the living grantor and trustee of her estate/trust, and can direct them as she wishes.
If she is making her wishes known, and directing action regarding her estate/trust, do be sure they are clearly understood, not just a musing or an “I might want to…”.
I would think your role as successor trustee is to see that her wishes are carried out, and as successor trustee and beneficiary, you would be entitled, after settling her wishes and obligations, to any remaining assets or values.
Attached is a display of how a grantor/trustee might act:

“Before their death, a grantor/trustee can manage trust assets, amend or revoke the trust (if it's revocable), and even change beneficiaries
. This flexibility allows the grantor to retain control while alive and the successor trustee to take over smoothly upon incapacity or death, often without going through probate.

Key actions a grantor/trustee can take

• Control and manage assets: The grantor is typically in control of the trust property during their lifetime and can manage it as they see fit.
• Add or remove assets: You can transfer assets into the trust or move them out as needed. For the trust to function properly, the assets must be retitled from your personal name into the trust's name.
• Amend or revoke the trust: As long as the trust is a revocable living trust, you can change its terms, add or remove beneficiaries, or even terminate the entire trust at any point during your life.
• Name a successor trustee: The grantor should name a successor trustee to take over management of the trust if the grantor becomes incapacitated or dies.
• Change beneficiaries: You can change who the beneficiaries are and how they will inherit assets in the future.
• • Make specific provisions: You can create rules for the trust, such as allowing the trustee to withhold income from a beneficiary if the beneficiary is a minor and is under a legal disability, and to distribute that withheld income to whomever the trust names as the principal recipient.
  • Establish an irrevocable trust: In some cases, you can set up an irrevocable trust to minimize estate taxes or protect assets from lawsuits. Once an asset is placed in this type of trust, it cannot be easily modified or terminated.

Important considerations

• Successor trustee's role: The grantor should familiarize the successor trustee with the trust documents and the location of important papers, including the trust document, assets, and insurance policies.
• Irrevocable trusts: For irrevocable trusts, decisions must be made carefully, as they cannot be easily changed after being funded.
• Tax implications: Grantor trusts are often considered "tax transparent" for income tax purposes, and transfers are viewed as incomplete gifts.
• State laws: Trust laws vary by state, so it's important to work with an estate planning attorney to ensure your trust is structured correctly.

 

[pacergal]

My thoughts are with you and your sister.
If you can, spend this last time with your sister enjoying each others company.

She has expressed new views, you have heard them. If her trust doesn't get changed beforehand, after all is said and done, as sole beneficiary, you are free to give money to whomever you wish.
Honor your sister as best you can.

Take care.

 

[marko]

My sister wrote out her Trust 4+ years ago, I am the successor trustee, executor and sole beneficiary. I doubt her estate is large amount net. She may only have days or weeks to live. We live 1200 miles apart.

Met with her in person today, and she tells me she’s thinking about “leaving a third to Jane, and a third to Sue (fictional names of step daughters).” Presumably a third to me but she didn’t actually say that. DW thought she heard ‘one third to the stepdaughters (IOW 1/6th each).’

Also said she wants to leave a chunk to her favorite charity. When I ask how much she says it depends on what’s left after the house is sold (mortgage in progress) - she’ll be gone at that point, so she won’t be able to decide what amount!!!

Am I missing something? You are the sole beneficiary. The legal implication is that you receive the entire estate. It's up to you then how to distribute what do do with it. Small estate, so little impact if "done wrong".

I see no need for legal action (and you know that 'get an attorney' is always my first reaction! ).

When the time comes, I'd distribute in line with final, verbal wishes. Sometimes, if things are unclear, you just have to make an "executive decision", but again as sole beneficiary, it's technically your money.

Write a check and say "Here, she wanted you to have this". KISS. Done it myself.

 

[CRLLS]

Depending on the state, 2 witnesses may be all that is needed for a self-written amendment. You would have to check her state requirements. I would think it would be best if the 2 witness signatures are not named beneficiaries. Being a successor trustee in a different state, I would contact a lawyer that is local to her.

 

[OldShooter]

There is a bigger picture risk here. If the trust is amended to include other beneficiaries besides the OP, unless the trust is definitive on exactly who gets what, there is a potential for a serious family rift where one of the not-the-OP beneficiaries becomes unhappy with something the OP has done. Pricing and sale of the house, perhaps? Division of the proceeds? Fees and costs the OP charges as trustee? Lots of real or imagined potential causes for unhappiness. If I were the OP I would strongly consider adding a professional trustee who can act as the bad cop if necessary. A well written trust should give the OP some flexibility to do this.

 

[pb4uski]

^^^ That would argue for leaving the trust as is and then the OP can gift to the others consistent with his sisters wishes... then they would have no standing to challenge anything that the OP does as trustee.