Dear Newsweek, Our mother died last year leaving an inheritance of about $300,000 to be given to each of 5 siblings. None of it has been distributed yet by the trustees, my sister and brother, because of some legal issues. Those issues will be taken care of within a few months.
My brother, one of the trustees, died recently leaving his 70+ year old widow broke because of their spending habits. We love our sister-in-law, but she cannot handle money and will quickly blow through it, if it is given to her at one time. Morally, we feel that she is entitled to it, but is there a way that it can be given to her children to give it to her in small installments or is there a way that we surviving siblings can set up a legal entity to hold it and give it to her in increments? If she does not get it in the same way as the rest of us, she will be furious. She does have SS and his small pension to live on. Their home has been refinanced numerous times to pay credit cards, so I fear there is little equity in the home.
What can we do? Thank you in advance for your help.
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Read the Trust Documents and See What They Say
Andrew M. Lieb, Managing Partner of Lieb at Law.
What a tough situation and I’m sure that you aren’t the only one who feels stressed about something like this; letting your parents’ money be wasted away is emotionally challenging.
However, when it comes to a trust, the terms of the trust dictate what happens to the money from the trust. So, other beneficiaries cannot do anything to change who gets money from the trust regardless of how well-natured you are motivated. That said, perhaps, your sister, who is the trustee, or the substitute trustee for your deceased brother, has power to restrict distributions in the trust documents.
Oftentimes, a trustee is afforded such power in the trust. You should consequently read the trust documents and see what they say. When it comes to trusts, giving legal advice without reviewing the documents is like giving medical advice on a break without first reviewing the x-ray. Good luck.
It May Be Possible to Protect the Trust Funds and Support the Sister-In-Law
Family law attorney, Sabrina Shaheen Cronin, founder and managing partner of The Cronin Law Firm.
Distributing the assets contained in a trust after a loved one passes away can sometimes come with a unique set of challenges, such as the predicament presented in this matter. In general, a well-written trust document will provide instruction to the trustees regarding their ability to control and distribute the assets in the trust. For example, some trust documents will provide trustees with the ability to distribute assets within their reasonable discretion given the circumstances. This type of language can provide the trustee power to distribute the assets to beneficiaries as they deem fit; be it in one lump sum, installment payments, or into an entirely separate trust designed to support the beneficiaries. In the event the trust does not contain the language conferring broad power to the trustee, but instead has strict instructions regarding to whom the funds are to be distributed, how, and when, the asset distribution process can become more complex.
In this particular scenario, if the trust allows the trustees to distribute the funds as they see fit, it may be best to create a separate trust with the funds to be used to support their sister-in-law; however, doing so may subject the trust to additional scrutiny and potential litigation if she feels the need to challenge the trustees’ decisions in court. In the event the trust document does not provide the trustees with such broad authority and the family truly believes their sister-in-law is incompetent or unable to provide for herself, it may be worth consulting an experienced probate attorney regarding obtaining a guardianship over the sister-in-law. Generally speaking, family members are able to petition the probate court for guardianship over those who may be incapable of supporting or caring for themselves, especially in cases where there are demonstrable mental incapacities. If this is the case, an experienced probate attorney who is well-versed in guardianship matters would be able to assist the family in moving forward and, potentially, obtaining guardianship and control over the sister-in-law’s finances and, ultimately, the inheritance under the trust.
Another option might be for one of the sister-in-law’s children to obtain power of attorney over her finances. So long as a durable or financial power of attorney is properly drafted and executed in accordance with state law, it could provide one of the sister-in-law’s children the ability to monitor her finances and control spending. This, of course, would need to be voluntarily agreed upon by the sister-in-law, and would require the assistance of an experienced Estate Planning attorney.
In sum, depending on the specific provisions in the trust, along with the laws of the state where the trust is being administered, it may be possible to protect the trust funds and support the sister-in-law to ensure she is able to continue living comfortably and without worry. Either way, it is a loving and kind gesture for the siblings of the late brother to ensure his surviving spouse is cared for out of funds they may not necessarily have to give her. Neil mentions the inheritance should have been distributed a while ago. He does not mention what the legal issues are that prevented the distribution, or if the trust provides instructions relative to whether the spouse of a deceased sibling is entitled to inherit anything. Many facts that remain unknown could significantly impact the outcome. Neil does state that morally they all feel it is the right thing to do; and when everyone is aligned, things generally go much smoother.”