Jan L. Warner & Jan Collins
Question: My father was a very organized individual. He said that his and Mom’s lawyer had drawn up trusts that couldn’t be changed when the first of them died. As he explained it, the survivor got everything in trust at the first death, and whatever was left was to be divided equally between my brother and me at the second death.
When Dad died six years ago, he left Mom pretty well fixed, and we had no concerns until Mom remarried two years later without an advance word to my brother or me, which was totally unlike her. She was 72, and the man was 78. We thought Mom’s assets were tied up until we learned that she had taken the vast majority of the assets out of the trust so that she and her new husband could buy a home, furniture, and car and do some traveling. When she died, only $35,000 remained in the trust. The house in which she invested, and all of her other bank accounts, belonged to her second husband as the survivor. Although this is not what our parents intended, our lawyer said that because of the way the trust was prepared and the assets were titled, we have no claim. Surely there should be something we can do to prevent this man from getting this unintended windfall.
Answer: From what you tell us, it appears that your father intended to sign a trust that would become irrevocable at his death, benefit your mother during her life, and leave any residue to you and your brother. Had his trust been created as he explained it to you, it would have become irrevocable at his death, and there would have been controls over distributions of principal to your mother. Your father could also have specifically listed the types of benefits that he wanted his beneficiaries to receive – including provisions in case of remarriage. In this way, the assets could have been protected and not used to pay a nickel to the new spouse. While your father had a good idea, it appears that his plan wasn’t implemented. If it had been, your mother wouldn’t have had unfettered access to trust assets.
But unless you can prove that your mother was vulnerable and preyed upon by her new husband (which is difficult to demonstrate), you and your brother have been “accidentally disinherited" and probably have no recourse – unless, that is, you can find a “smoking gun.” And that would be that your father’s lawyer did not follow directions.
Question: Although I love my daughter-in-law dearly and don't have that much money, I want to make sure that my only son and his three children receive my entire estate. I’m afraid that if I leave everything to my son and he dies or they get divorced, my daughter-in-law will get what I intended for my son and grandchildren.
Answer: You assume correctly that given the right mix of circumstances over which you have no control, your assets could well end up scattered to people outside of your bloodline because of a divorce or an unexpected death of a child or other beneficiary.
If you want your estate to benefit only your son and his children, you should consider a trust that will benefit only your lineal descendents – that is, your blood descendents. Once created, you can fund the trust via gifts during your lifetime, a bequest under your will, or a distribution from your living trust at your death. You could also use life insurance.
You can direct that your chosen trustee pay out only certain specified benefits at your trustee’s discretion. You can give – or not give – the trustee the right to invade the corpus of the trust. In this way, with proper legal help, you can create a vehicle that will hold your assets and never pay a penny to an in-law. This, we think, is the best way to assure that your assets will not be lost to your son and his children and future grandchildren due to an untimely death or divorce.
A final tip: When it comes to this kind of planning, we urge you to seek the assistance of a qualified lawyer. While books are great to give you the background, planning and document preparation should be handled by a lawyer who knows his or her stuff.