Sister’s Trust - Am I Crazy?

[COcheesehead]

Technically, she can amend the trust in writing

This is true. I just went through this with my sister in her last days.

 

[marko]

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.

Always been a proponent of having a third party as executor for this exact reason.

But from what OP states, time is short and making changes would likely be rushed and poorly thought out, creating even more friction. "What do you mean she changed her will three days before she died?! See you in court!"

In this case, it's clear who the beneficiary is.

 

[Midpack]

Although the advice isn’t all aligned, it seems I’ll probably just settle the estate as sole beneficiary, and then gift per her wishes - assuming she makes a clear decision. I’ll have to complete a Form 709 but I’ve never done one before so there should be no added tax IIRC - it’ll just start the clock on my estate & gift tax lifetime exclusion?

She says the now retired estate attorney who wrote her Trust told her I could distribute the Trust any way I want, so she can verbally change her mind as often as she wants and I’m free to do whatever she last suggests - no IRS or tax implications at all. She thought might be a state reg for TX.

When I asked this morning how much she wanted to give charity and how much stepdaughters and I should get, she says still thinking about that - 4 years in. For some reason she thinks she has to provide a $ amount for the Trust doc, I told her % is the best approach. So I said ‘so one-third to the three of us?’ She said I don’t know yet…

At that point I let it go. So we mostly talked old times this morning, probably the last time we will see her alive. When I go to settle estate I’ll do the best I can even though a simple Trust amendment would make this cleaner and easier. A sad day.

Thanks all!

 

[Aerides]

When I asked this morning how much she wanted to give charity and how much stepdaughters and I should get, she says still thinking about that - 4 years in. For some reason she thinks she has to provide a $ amount, I told her % is the best approach. So I said ‘so one-third to the three of us?’ She said I don’t know yet…

So we mostly talked old times this morning, probably the last time we will see her alive. When I go to settle estate I’ll do the best I can even though a simple Trust amendment would make this cleaner and easier. A sad day.

If it comes up again, just tell her "Don't you worry about it, I'll make sure it's handled and done fairly."

She might be hesitating because of the brain fog of her illness (ugh math on a good day), or because...as long as she hasn't tied up all the loose ends she doesn't quite have to face the very real end just yet. She postpones the decision assuming she has tomorrow, and maybe in some way that means she still has tomorrow, to her.

 

[Jerry1]

Although the advice isn’t all aligned, it seems I’ll probably just settle the estate as sole beneficiary, and then gift per her wishes - assuming she makes a clear decision. I’ll have to complete a Form 709 but I’ve never done one before so there should be no added tax IIRC - it’ll just start the clock on my estate & gift tax lifetime exclusion?

She says the now retired estate attorney who wrote her Trust told her I could distribute the Trust any way I want, so she can verbally change her mind as often as she wants and I’m free to do whatever she last suggests - no IRS or tax implications at all. She thought might be a state reg for TX.

When I asked this morning how much she wanted to give charity and how much stepdaughters and I should get, she says still thinking about that - 4 years in. For some reason she thinks she has to provide a $ amount for the Trust doc, I told her % is the best approach. So I said ‘so one-third to the three of us?’ She said I don’t know yet…

At that point I let it go. So we mostly talked old times this morning, probably the last time we will see her alive. When I go to settle estate I’ll do the best I can even though a simple Trust amendment would make this cleaner and easier. A sad day.

Thanks all!

It was already mentioned, but I don't think you, as trustee, can assume her mental state is sufficient to make any changes to the trust at this point. Just do your best. Praying for you and your sister.

 

[mystang52]

I negelected to add, in my prior post: My best wishes to you and easy final time for your sister.

 

[38Chevy454]

Sad that your visit may be the last time you can spend time together. I agree that making changes to the trust now is likely to raise suspicion as to her metal capacity and health, those being made so near the end. I think the easy button solution is as many suggested, just leave trust as-is, and you can distribute funds to the step-daughters from your entire estate proceeds. Assuming you have a reasonably good relationship to the step-daughters?

 

[Texas Proud]

Do a condicil.... should not be that hard...

Have her sign it with witnesses... and as others have said you would be suing you... no need to do gifts or gift tax returns...

No need to make it hard...

An example... my mom had a trust and left money to each of her GKs... but I got married late with step kids... we never did make changes to the trust. (OH, also I never did adopt them so they were not legally GKs)... all of my siblings said they were 'my' kids and should get some money.. so I gave them the same amount as the others... nobody was upset, nobody sued..... life goes on...

 

[iloveyoga]

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…

I had a good friend want to make changes on her deathbed, some got taken care of but not all. You can't wait until you are not able to go get signatures, etc. I still feel bad because I heard what she wanted and we were not able to accomplish all of it.

 

[Koolau]

I'm sorry you're going through this - especially imminent loss of your sister.

My biggest concern would be how much your sister has shared verbally with the Step Daughters. They may have "high hopes" and become upset - no matter how you handle the estate. Some people can not be pleased! For that reason, I'd cross every "T" and dot every "I" as far as executing the trust is concerned. THEN you can do what you desire as far as honoring your Dear Sister's final wishes. Hopefully good-will is maintained during the process.

Do, please, let us know how it turns out. Blessings on you at this time of stress and loss.

 

[Midpack]

^^ I doubt she’s told them anything regarding her Trust/Will. And since I am sole beneficiary, now appears unlikely to change, they have no legal basis to contest anything I do. I’ll do right by them regardless if that’s my sisters last directive.

 

[ERD50]

^^ I doubt she’s told them anything regarding her Trust/Will. And since I am sole beneficiary, now appears unlikely to change, they have no legal basis to contest anything I do. I’ll do right by them regardless if that’s my sisters last directive.

This does seem the simplest and least risky. As others have said, making changes to the trust/will in her current mental state could raise a lot of questions. I think you can easily get around filing a Form 709 as well. You and your wife can combine the $19K limit, and give $38K per individual. Depending on the amount and number of heirs, it might take a few years, but no tax repercussions.

Sorry for you being in this situation, hope all goes as well as it can, under the circumstances.

 

[brett]

I am in the same boat at the moment. First will in 1986. Final will at a law office done 2months before death.

As executor of this estate, just over 7 figures, I have been very thankful for the advice and direction of the estates lawyer. There could well be a challenge to the will.

I had unsolicited advice from a number of people. Fortunately I did not follow through with that well intentioned advice. You don’t know what you don’t know.

I approach well intentioned advice from graduates of the Facebook School of Law just as I do with advice from graduates of the Facebook School of Medicine.

 

[Midpack]

Unfortunately sister still hasn’t provided any guidance as to gifting instructions, I’ve asked her twice, once in person. I’m considering sending her exactly how I’ll gift her estate if she doesn’t tell me otherwise - maybe that’ll prompt her to act. But I really don’t want to stress her - she just doesn’t want to make any decisions it seems.

She also has a $23K 401k with her Trust named as beneficiary - I have begged her to change the beneficiary to her favorite charity (a no kill shelter), to no avail. Why she won’t take 30 seconds to change that beneficiary to save $3000-5000 in RMDs and taxable income for heirs is beyond baffling. But at this point I’m done asking, we’ll just make the most of the time left.

 

[Jerry1]

we’ll just make the most of the time left.

That’s really all you can do. Praying for you and you sister.

 

[brett]

You can only do your best as to what your sisters final wishes would be.

 

[Midpack]

Assuming you have a reasonably good relationship to the step-daughters?

I have never met the step daughters, never even seen a picture that I recall. I don't think my sister ever lived with step daughters (they lived with their mother), but she did spend some time with them when they were younger visiting their dad. I don't think they've maintained much contact as adults, but some. But I will honor my sisters wishes, with my best guess if she doesn't provide anything concrete.

 

[ERD50]

.... I’m considering sending her exactly how I’ll gift her estate if she doesn’t tell me otherwise - maybe that’ll prompt her to act. ...

That's an excellent idea. It's far easier for most people to agree/disagree with something concrete, than it is to come up with something - like multiple choice vs an essay. And even more-so in her current mental/physical state.

Just say "I gather this is what you'd want me to do, are there any changes I should make?"

 

[brett]

My deceased sister’s personal finances are a mess. For lack of attention, not lack of funds.

Lots of work on my part to deal with these issues. Locally and remotely. It has been very frustrating because we keep our affairs in order.

At the end of the day I am not mad or upset. My view is simply that this is the last kind thing that I can do for my only sibling. So, I got on with it and am doing my very best for her.

I have come to believe that she probably knew that this would be how I felt. We each had our own individual strengths and weaknesses.

 

[Midpack]

My deceased sister’s personal finances are a mess. For lack of attention, not lack of funds.

Lots of work on my part to deal with these issues. Locally and remotely. It has been very frustrating because we keep our affairs in order.

At the end of the day I am not mad or upset. My view is simply that this is the last kind thing that I can do for my only sibling. So, I got on with it and am doing my very best for her.

I have come to believe that she probably knew that this would be how I felt. We each had our own individual strengths and weaknesses.

I think maybe the relationship between my sister and I is similar. Sister tells us repeatedly she ‘just doesn’t want to be a burden’ and yet leaves me to make multiple decisions she should make for herself, she’s had 4+ years to make some decisions. I get to decide how much to leave her charity, home care worker and stepdaughters - with no idea whatsoever what her relationship was with the stepdaughters, thought evidently not close.

I also just looked at the Trust federal tax tables, yikes. I’ve read it’s best to leave assets in the trust until all is settled and distributed - but there will be significant trust income taxes it appears. As sole beneficiary, I’m starting to think I should distribute $ assets to myself as soon as possible to minimize trust income taxes. I can gift from my assets once all her assets (her house will be the holdup) have been settled. But I’ll consult a tax advisor/CPA soon.

 

[38Chevy454]

Yes, trust tax rates are considerably higher than personal tax rates. Just watch trust income and not to be confused with estate distributions. Only trust income is taxable or you can transfer trust income to recipients with K-1 form.

 

[pb4uski]

I think maybe the relationship between my sister and I is similar. Sister tells us repeatedly she ‘just doesn’t want to be a burden’ and yet leaves me to make multiple decisions she should make for herself, she’s had 4+ years to make some decisions. I get to decide how much to leave her charity, home care worker and stepdaughters - with no idea whatsoever what her relationship was with the stepdaughters, thought evidently not close.

I also just looked at the Trust federal tax tables, yikes. I’ve read it’s best to leave assets in the trust until all is settled and distributed - but there will be significant trust income taxes it appears. As sole beneficiary, I’m starting to think I should distribute $ assets to myself as soon as possible to minimize trust income taxes. I can gift from my assets once all her assets (her house will be the holdup) have been settled. But I’ll consult a tax advisor/CPA soon.

Why keep money in the trust at all if the distribution provisions of the trust are triggered?

With my dad's living trust, after he died, income was distributed to my mom (sole beneficiary as long as she lived) each year on a K-1 and the trust got a deduction for the amount on the K-1 that offset the trust income so trust taxable income and taxes were nil... the trust was just a passthrough to mom and other than paperwork of the 1041 and K-1 was as if the income were reported to her on a 1099 under her SSN.

Then when mom passed, the money in the trust was distributed to the secondary beneficiaries (us 5 kids) within 30 days. The beneficiaries each set up brokerage accounts at Schwab and as co-trustee of the trust I sent Schwab instructions on how to do in-kind transfers of each holding to our 5 brokerage accounts.

In your situation I would transfer everything other than what might be needed to pay her liabilities and pay whatever is needed for the house until it is sold to you and then do a final transfer after the house is sold. You could even do the gifting at any time that pleases you, either as soon as you get the initial distribution or after the house settles.

 

[brett]

My advice…speak with an estates or tax specialist ASAP.

Understand what needs to happen, what needs to be signed by your sister or can be signed by you if you have POA. Then get it done. If no POA…get one done properly, signed, and witnessed. It may well come in handy.

My sisters and my BIL’s estates will carry 2X or 3X the tax burden that they would otherwise have had simply because of lack of some very simple planning. Now it is a complicated mess that requires a fair amount of professional oversight. Both of which will divert funds from the estate.

All jurisdictions are different. When my mother passed just every dime of her estate had been sheltered from tax and from probate by some basic pre planning.

 

[Midpack]

My advice…speak with an estates or tax specialist ASAP.

Understand what needs to happen, what needs to be signed by your sister or can be signed by you if you have POA. Then get it done. If no POA…get one done properly, signed, and witnessed. It may well come in handy.

My sisters and my BIL’s estates will carry 2X or 3X the tax burden that they would otherwise have had simply because of lack of some very simple planning. Now it is a complicated mess that requires a fair amount of professional oversight. Both of which will divert funds from the estate.

All jurisdictions are different. When my mother passed just every dime of her estate had been sheltered from tax and from probate by some basic pre planning.

I wish I could. My sister absolutely refuses to take even simple steps to make her Trust easier to administer. e.g. changing her 401K beneficiary to a favorite charity would avoid over $5K in income taxes, it would take 30 seconds to change, I’ve offered to walk her through it or do it for her. Not happening. I plan to talk to an estate attorney and CPA to optimize the hand I’m being given.

 

[38Chevy454]

I wish I could. My sister absolutely refuses to take even simple steps to make her Trust easier to administer. e.g. changing her 401K beneficiary to a favorite charity would avoid over $5K in income taxes, it would take 30 seconds to change, I’ve offered to walk her through it or do it for her. Not happening. I plan to talk to an estate attorney and CPA to optimize the hand I’m being given.

Do you have financial POA? You might be able to get her to sign forms for the brokerage to allow you to access; which also could allow you to change beneficiary to the charity. Of course POA ends when she passes away.