Sister’s Trust - Am I Crazy?

[EastWest Gal]

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.

Just a thought regarding the 401k. When she passes and the trust is the beneficiary, and if you are still the sole beneficiary of the trust, you could roll that over into an inherited IRA. Why wouldn't you be able to make a QCD from the inherited IRA, if you are over 70-1/2? Or am I missing something?

 

[Midpack]

Just a thought regarding the 401k. When she passes and the trust is the beneficiary, and if you are still the sole beneficiary of the trust, you could roll that over into an inherited IRA. Why wouldn't you be able to make a QCD from the inherited IRA, if you are over 70-1/2? Or am I missing something?

From what I can tell, that might be possible - clever idea I had not thought of. Thanks.

 

[SecondCor521]

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.

Something I learned about POA because I have two for my Dad is that my state at least excludes gifting unless the POA explicitly includes it.

Point being, OP might get in trouble if they use their POA to change the beneficiary to charity. Nobody might care, but I think it's good to be cautious and aware of the rules.

 

[Anitya]

OP,

First of all, there is nothing to do now. Do what needs to be done when it comes to you. You already know the process.

After you pay all the service providers, allocate yourself some of the estate $$ for the hassle (time and costs) of dealing with it. Distribute the remaining net amount as your sister wishes, including to yourself. Your sister trusts you more than anyone. So, you do not need to stress yourself trying to hold yourself to the highest standards in dealing with her affairs or having to make personal sacrifices. No one is there to judge you.

Do not insist on changing documents or doing anything now.

Time is not unlimited. Live and let live.

 

[Midpack]

^^^ Agreed, as I stated a few days ago (but after the OP). I’ve given up on asking my sister to do anything more. We’ll make the most of the little time we have remaining, mostly long distance unfortunately. I’ll do my best to honor her (vague) gifting wishes in settling the estate and be as tax efficient as I’m able - it just won’t be optimal. I don’t care about that anymore.

 

[BubbaChris]

Midpack, my heart goes out to you for these many challenges. It sounds like you're doing your best to not add any more stress to your sister or for yourself.

Yes, Trust income is highly taxed. My sister is close to hitting the 6 year mark of not accepting her distribution. And as the trustee, I've been filing those taxes each year. TurboTax requires the "Business" version, and they don't support anything related to the State of Utah. It isn't fun, but I have the best relationship with her I've had in decades.

One additional thought. Both the lawyer who wrote my mom's trust and our lawyer who wrote ours included a clause that cuts anyone out of the will who challenges it. AFAIK this is to make life just a bit easier for the Trustee. Ideally informing anyone who is getting pushy will create breathing room.

If you distribute the estate to yourself ASAP per what is written, the clause may assist you in taking the high road as you implement your sister's verbal wishes. You can point to the Trust having been executed as documented, and you also want to keep these other distributions separate from closing out the Estate.

Grief is often complicated, and I have compassion for how your sister's choices are adding to the things you have to do while grieving.

Kind regards,
Chris

 

[pb4uski]

....My sister is close to hitting the 6 year mark of not accepting her distribution. And as the trustee, I've been filing those taxes each year. TurboTax requires the "Business" version, and they don't support anything related to the State of Utah. It isn't fun, ...

That seems ridiculous unless there is a good reason for it. Why don't you just hand her a check? Or tell her you resign as trustee and hand her the trust's checkbook.

Do you charge the trust for the work you do? If not, then you should.

 

[Koolau]

That seems ridiculous unless there is a good reason for it. Why don't you just hand her a check? Or tell her you resign as trustee and hand her the trust's checkbook.

Do you charge the trust for the work you do? If not, then you should.

Yup $100/hr isn't out of line to charge.

 

[pb4uski]

No, not at all out of line. My understanding is that she can not accept or disclaim her distribution only once and that once she disclaims it, it is distributed to others. The provisions of the trust and the trustee determine when distributions from the trust occur, not the beneficiary. She shouldn't be able to string the trust and trustee along for 6 years.

 

[BubbaChris]

That seems ridiculous unless there is a good reason for it. Why don't you just hand her a check? Or tell her you resign as trustee and hand her the trust's checkbook.

Do you charge the trust for the work you do? If not, then you should.

The best way I can start a reply to you and Koolau is by quoting part of my post - "It isn't fun, but I have the best relationship with her I've had in decades."

Honestly, one of the biggest challenges on my side of this relationship is in how to set aside judgements based on how DW and I approach our lives. My sister is wired very differently from me, and it caused friction, jealousy, and resentment to be a factor since we became adults. Four decades later I've mellowed, and she has the best mental health of her life. Staying in the Trustee role is part of how I can support her and feed our relationship. Prior to mom's passing, I fully expected my sister to demand her portion of the estate ASAP and we'd never talk again. I'm grateful for this turn of events.

The good reason for not taking the distribution? She and her now ex-husband had been self employed their whole time together. They owed substantial amounts to the IRS at the time of our mother's passing. So She's waiting for that debt to be declared uncollectible. That certainly isn't a path I'd walk, but it's her choice.

Here's a chance for a PSA - If you know anyone who is self employed, see if you can get them to really consider the long term impact of manipulating their income to minimize Social Security and SEP payments each year. My sister will likely get around half of what her cohort will once she starts taking Social Security. And sadly she's constantly tempted to take SS before FRA.

Finally I didn't know much about Trusts when this all began, so I'm very thankful the attorneys who've advised us created the most flexibility for the Trustees.

Kind regards,
Chris

 

[OldShooter]

.... Both the lawyer who wrote my mom's trust and our lawyer who wrote ours included a clause that cuts anyone out of the will who challenges it. AFAIK this is to make life just a bit easier for the Trustee. Ideally informing anyone who is getting pushy will create breathing room. ...

We have the same kind of poison pills in the testamentary trusts that will be created from our estate. Our attorney, though, cautioned us that they may not be honored by the courts. Apparently this is a state-by-state thing. We went ahead with them, though, as the worst case is that they don't work and the best case is that they work or at least intimidate a bad actor.

 

[Koolau]

The best way I can start a reply to you and Koolau is by quoting part of my post - "It isn't fun, but I have the best relationship with her I've had in decades."

Honestly, one of the biggest challenges on my side of this relationship is in how to set aside judgements based on how DW and I approach our lives. My sister is wired very differently from me, and it caused friction, jealousy, and resentment to be a factor since we became adults. Four decades later I've mellowed, and she has the best mental health of her life. Staying in the Trustee role is part of how I can support her and feed our relationship. Prior to mom's passing, I fully expected my sister to demand her portion of the estate ASAP and we'd never talk again. I'm grateful for this turn of events.

The good reason for not taking the distribution? She and her now ex-husband had been self employed their whole time together. They owed substantial amounts to the IRS at the time of our mother's passing. So She's waiting for that debt to be declared uncollectible. That certainly isn't a path I'd walk, but it's her choice.

Here's a chance for a PSA - If you know anyone who is self employed, see if you can get them to really consider the long term impact of manipulating their income to minimize Social Security and SEP payments each year. My sister will likely get around half of what her cohort will once she starts taking Social Security. And sadly she's constantly tempted to take SS before FRA.

Finally I didn't know much about Trusts when this all began, so I'm very thankful the attorneys who've advised us created the most flexibility for the Trustees.

Kind regards,
Chris

Thanks for the excellent explanation. I think you are right to value your relationship with your sister over any financial issues.

I apologize for my previous remarks. I hope you w*rk things out with the trust when the time is right. Blessings on your relationship with your sister. Family trumps all.

 

[BubbaChris]

Thanks for the excellent explanation. I think you are right to value your relationship with your sister over any financial issues.

I apologize for my previous remarks. I hope you w*rk things out with the trust when the time is right. Blessings on your relationship with your sister. Family trumps all.

Thank you for understanding. Family dynamics are often messy with long histories. There are some very nice things in the works that may facilitate stepping away from the Trustee role.

I took no offense at your remarks. In a way I'm glad my post generated some thinking and discussion.

Kind regards,
Chris