Elderlaw Advocates Aug. 15 2017
Len Tillem & Rosie McNichol
Dear Len & Rosie,
Property was left to my brother, sister and me from our mother in a trust. My mother had signed a trust amendment stating that I should receive an additional $15,000 off of the top for taking care of her. My brother, the trustee, says that he and my sister wonít agree to it, and heíll leave all of the money in the trust until we all agree. Can he do this? My motherís home has been sold. The title company says, by law, that since the house was sold, my brother must pay the attorney fees and then divide the rest of the trust amongst the three of us. Can he hold on to the money legally?
We hope you are not looking to a title company for legal advice. They do a very good job at what they do, insuring that a home buyer is actually getting what he or she is paying for, but title companies really donít know anything about trust law except as to how it applies to deeds and title insurance.
One of the great advantages of trusts is that since trusts avoid probate, cooperative families have the opportunity to cut a few corners. As long as the taxes and creditors get paid, the trustee and beneficiaries of a trust can more or less agree to wrap up the trust in a quick and dirty manner, because the trust beneficiaries are the only persons that have any rights with respect to a trust, other than creditors, the IRS, and the California Franchise Tax Board.
Even when beneficiaries donít get along so well, trusts are usually cheaper and easier to deal with than wills in probate, but trustees have to be careful to follow all of the rules. Your brother was supposed to provide you, your sister, any other trust beneficiaries, and certain other persons notice under California Probate Code section 16061.7 within 90 days of your motherís death. This notice triggers a 120-day countdown on their right to challenge the validity of the trust amendment. If that notice was provided, and if the 120 days are up, then the $15,000 gift is yours legally and your brother and sister may whine about it all they want but they canít do anything about it. Except stall.
Being a trustee is like standing behind the counter at a bank. Itís not so much a position of power as it is a position of responsibility. If the trust says you get another $15,000, then the trustee has to honor your motherís wishes and give you the money. If he doesnít, you could sue him for breaching the fiduciary duty he owes you as a trust beneficiary. Youíll win, assuming your mother didnít lack capacity when she signed the trust amendment, but you can give up on the idea of cutting corners. Trust administration will be more expensive for everyone.
This puts you in the difficult position of deciding whether or not itís worth it to take your brother to court. Itís only $15,000 and you would have inherited $5,000 of it anyway. That means youíre arguing over $10,000. While you certainly deserve what your mother intended you to receive, remember that itís only money, and giving it up may help preserve peace in your family. Itís up to you to decide whether that peace is worth $10,000.
Len & Rosie
Dear Len & Rosie,
We finished our trust in 2003. We would like to change our beneficiaries. One of our charities is out of business and we would like to give that charityís share to another. Our original lawyer has moved and the new lawyer wants to charge us to ďtalkĒ to us before he will tell us how much it will cost to change the trust. Can we cross out the old list and handwrite changes ourselves? We are only in our 50s and expect that there will be other changes down the line. This is getting expensive.
You should understand that youíre putting your new lawyer into a Catch-22 situation. He hasnít seen your trust before. That means he doesnít know what may or may not be wrong with it. He cannot give you a fee quote on the telephone without taking the risk that more work will be needed that you already donít want to pay for.
For example, there is a substantial chance your trust is an A/B trust because it was created in the early 2000s. But most married couples no longer need A/B trusts to avoid Federal Estate Tax on their deaths because the amount that passes free of the death tax is presently $5,490,000. Similarly, there may be other parts of your trust that need to be updated that you are not aware of.
Your new lawyer canít know this without reviewing the trust first. We have had many clients who either do not fully understand or may have forgotten what their trust does. This is understandable, as most clients are not lawyers. A lawyer looking to make changes to an existing trust that he or she had no part in preparing is going to have to take time to review the trust. Taking your word that itís OK is risking legal malpractice.
In some cases, itís easier and less expensive for a lawyer to skip reviewing an existing trust and do it over from scratch, by preparing a restated trust document, which is nothing more than an amendment in full replacing the entire trust document. A restated trust is better than a brand new trust, because you wonít have to transfer assets from the old trust back into your names and then have to transfer them again into the new trust.
Can you do your own trust amendment? Now youíve put us in a Catch-22. You can, but thereís no way that we can tell you that your home-made amendment is going to do what you want it to do without reviewing the trust and your completed amendment. But we can tell you that your plan of scribbling out changes in the trust document will almost definitely not work. You need a separate instrument, a trust amendment, that spells out what paragraphs are being removed, changed, or added to the trust. And you should have your trust amendment notarized so thereís evidence that you signed the amendment yourselves rather than a crooked beneficiary having forged your signatures to give himself more of your money.
You should also understand that a lawyerís role in creating a trust amendment isnít just doing a bit of paperwork. Your lawyer and his or her staff will be available as witnesses to your true intentions and your mental capacity if someone were to challenge the validity of the amendment. This is especially important if you are changing the portions of your trust to be inherited by your children.
Len & Rosie
Dear Len & Rosie,
For 24 years I have lived with my mother. I have been her caregiver for the past 14 years. I gave up a lot of my life and personal happiness for her. I am not sorry I did this. My sister told me that she did not want to take care of mom, and that I could have the house if I did. She lives in another state and rarely visits.
Mother gave me one half of the home so that we could borrow against the property. We qualified for the loan on my salary and her equity, and spent almost $100,000 on repairs and improvements. I pay the mortgage payments, taxes and insurance. The home is now worth $400,000.
Now my sister complains that she is being cheated out of her fair share of the home when mom dies. My sister says that she feels that this is cruel and that she is being punished for ďliving her own life.Ē
I have tried to explain to my sister that I have paid for the house and cared for mom, and that the house is my retirement investment. She doesnít accept this, and I know she is going to cause trouble when my mother dies.
It is usually the children who do the least for their parents who put their hands out first and furthest when their parents die. Your sister is selfish now. Thatís not going to change when your mother dies.
Your mother has the right to leave her assets to anyone that she wants. Some people think the only fair thing to do is to leave their assets to their children in equal shares. Others believe that they should give a little more to those of their children who have not been as successful in life as the others.
Still others, such as your mother, leave assets to the children who stand by them in their time of need and care for them as they age. Which way is the most fair? All of them. If your mother wants to reward you for caring for her, she may do so. It is her right to do whatever she wishes.
After your motherís death, your sister may claim that you unduly influenced your mother and conned her into leaving everything to you. She wonít have much of a case if your mother added you to the deed to her home long ago. If she did it recently, you may have problems, as your mother is dependent on your care.
Your mother can best protect your inheritance now by reviewing her estate plan with a trusts and estates attorney, in a private meeting without you in the room. Let the attorney evaluate your motherís capacity and verify that she really wants to leave everything to you. He or she can make sure your motherís estate plan is up to date, and the attorney will also be a witness in your favor if your sister tries to sue you after your motherís death.
Len & Rosie