Sum Dum Gai
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Post by Sum Dum Gai on Jun 17, 2011 16:09:38 GMT -5
She called yesterday to tell me that she's putting me down as the sole beneficiary on her retirement and life insurance. The money isn't all for me though, she's doing it because she knows I would use it to help my brothers and sisters (and their kids) and wouldn't blow it on something stupid. Well, that's her thinking anyway. I immediately thought hookers and blow in Vegas til the money is gone... just kidding.... kind of.
Anyway, I'm pretty sure her leaving everything to me and trusting me to do the right thing with it, without really telling me what she specifically wants done with it, isn't the best idea. So, what should I tell her to do instead? I'm assuming a trust of some kind. She wants the money to be there to help her kids/grand kids go to college, or buy a first house, that sort of thing on an as needed basis. She doesn't want to just hand each person a lump sum since my sister and youngest brother would blow theirs on something stupid, and quite honestly, they "need" the money more than my two other brothers and I.
Oh, I'm pretty sure she doesn't actually have a written will at the moment. I'd get her life insurance and retirement money because I'm the designated beneficiary, but I don't know what would happen to her house.
Currently she expects me to invest the money wisely and dole it out as it's needed, or I think that's what she's picturing anyway. It was a kind of short conversation.
What should my advice to her be to get this correctly structured for legal and tax purposes, while more or less keeping the intent that she wants?
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Deleted
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Post by Deleted on Jun 17, 2011 16:13:52 GMT -5
Depends how complex she wants to make it. If she really wants to pull the puppet strings from the grave, then a trust is the only way to ensure the money is spent how she wants it to be spent. (but that is not 100% either.)
But could she start 529s instead?
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zibazinski
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Post by zibazinski on Jun 17, 2011 16:15:21 GMT -5
Why doesn't she just write down and give to you what she wants you to do?
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Sum Dum Gai
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Post by Sum Dum Gai on Jun 17, 2011 16:17:19 GMT -5
Depends how complex she wants to make it. If she really wants to pull the puppet strings from the grave, then a trust is the only way to ensure the money is spent how she wants it to be spent. (but that is not 100% either.) It's not really a desire to be controlling after she's gone... well it kind of is, but in her defense my youngest brother is facing gang related charges, posession, and got his second DUI not too long ago. It's not her being a worry wart thinking he'd blow all the money the second he got it on something stupid, it's a foregone conclusion. My sister is kind of a financial train wreck as well, but not in the same constant legal troubles as my little brother. She basically wanted me controlling the strings so that I could give them a bit here and there when they actually need it, but they couldn't access all the money at once and blow it.
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Deleted
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Post by Deleted on Jun 17, 2011 16:18:29 GMT -5
Depends how complex she wants to make it. If she really wants to pull the puppet strings from the grave, then a trust is the only way to ensure the money is spent how she wants it to be spent. (but that is not 100% either.) It's not really a desire to be controlling after she's gone... well it kind of is, but in her defense my youngest brother is facing gang related charges, posession, and got his second DUI not too long ago. It's not her being a worry wart thinking he'd blow all the money the second he got it on something stupid, it's a foregone conclusion. My sister is kind of a financial train wreck as well, but not in the same constant legal troubles as my little brother. She basically wanted me controlling the strings so that I could give them a bit here and there when they actually need it, but they couldn't access all the money at once and blow it. She could make a trust and have you be the trustee. But that is pretty much the same as just giving you the money and telling you what to do with it.
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Sum Dum Gai
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Post by Sum Dum Gai on Jun 17, 2011 16:20:13 GMT -5
Why doesn't she just write down and give to you what she wants you to do? She could, but tax wise is it really a good idea to give all the money to me and then have me gift it to my brothers, sister, and their kids later? There has to be a cleaner way to structure that. I'd also like some legal protection to keep my brother or sister from doing something stupid like suing me over not giving them part of the money immediately. Maybe I'm being paranoid, but I definitely want this whole thing in writing somewhere so I'm not the bad guy if I have to tell them no.
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Deleted
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Post by Deleted on Jun 17, 2011 16:21:45 GMT -5
Why doesn't she just write down and give to you what she wants you to do? She could, but tax wise is it really a good idea to give all the money to me and then have me gift it to my brothers, sister, and their kids later? There has to be a cleaner way to structure that. I'd also like some legal protection to keep my brother or sister from doing something stupid like suing me over not giving them part of the money immediately. Maybe I'm being paranoid, but I definitely want this whole thing in writing somewhere so I'm not the bad guy if I have to tell them no. Depends how much of an estate we are talking about. You can give quite a bit to you brother and sister tax free.
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zibazinski
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Post by zibazinski on Jun 17, 2011 16:21:48 GMT -5
IF you get a GOOD lawyer, they will tell you both how to do it.
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Post by Deleted on Jun 17, 2011 16:22:09 GMT -5
IF you get a GOOD lawyer, they will tell you both how to do it. For a price.
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Post by Deleted on Jun 17, 2011 16:22:42 GMT -5
This message has been deleted.
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Sum Dum Gai
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Post by Sum Dum Gai on Jun 17, 2011 16:25:00 GMT -5
Depends how much of an estate we are talking about. You can give quite a bit to you brother and sister tax free. Unless my mom gets amazingly lucky playing the lottery (which I'm not even sure she does) I'm thinking we're talking about probably a few hundred thousand. Of course, she's also only in her early fifties so I shouldn't have to worry about it for a long time, and it should be growing. She didn't actually give me a number yesterday. A very close friend of hers is in the hospital with congestive heart failure. I think it's freaking her out which is why she's finally thinking about this kind of planning.
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Deleted
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Post by Deleted on Jun 17, 2011 16:26:37 GMT -5
Depends how much of an estate we are talking about. You can give quite a bit to you brother and sister tax free. Unless my mom gets amazingly lucky playing the lottery (which I'm not even sure she does) I'm thinking we're talking about probably a few hundred thousand. Of course, she's also only 50 so I shouldn't have to worry about it for a long time, and it should be growing. IMHO, she should leave it all to you. Both as beneficiary of the policies and in the will. Legally it will all be yours, so your siblings could not touch it. Then she should leave written instructions to you on how she would like for you to use that money. You would not be bound by law to spend it as such, but if she trust you then she should not have an issue with that. Also, adding you as joint owners on her bank accounts would be a good idea as well.
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Sum Dum Gai
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Post by Sum Dum Gai on Jun 17, 2011 16:36:31 GMT -5
If she doesn't write an actual will, what would happen to her house and any outstanding credit card, utility bills, and that kind thing? Would it automatically go equally to her kids after paying off the bills or what?
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IPAfan
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Post by IPAfan on Jun 17, 2011 16:37:20 GMT -5
You definitely need to check with a lawyer. If his mother leaves him money with written instructions about how to use that money, there is very very likely a trust, and DH would be LEGALLY bound to spend it as such.
I don't do any estate planning, but based on my limited recollection, what you're describing quite possibly actually creates a trust.
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zibazinski
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Post by zibazinski on Jun 17, 2011 16:45:16 GMT -5
Gotta love parents that do this. Hopefully she will spend it all and it won't be an issue but funny enough, a male friend of mine was left to deal with this issue after his dad died. His mom was already dead. Dad didn't have th guts to tell the other 2 siblings that they had gotten a lot of money out of him already so he wasn't leaving them a dime, left it for my friend to tell them. After he was safely dead and buried. Both siblings expected it to be split 3 ways and were already counting the money when my friend had to tell them that Dad felt they had already gotten their inheritance. WASN'T pretty. Both threatened legal action which of course comes out of the estate so there were plenty of eager lawyers just waiting to go at it. He split the estate 3 ways.
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busymom
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Post by busymom on Jun 17, 2011 16:51:13 GMT -5
DH, definitely have her write up a will. It varies in each state how it would be divided up without one, and it sounds like right now she doesn't trust your siblings. Attorney services really aren't that expensive for a simple will.
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Post by Deleted on Jun 17, 2011 16:54:54 GMT -5
I think your mother is putting you in a very difficult position. Like zibazinski's friend, you're stuck being the bad guy. This will not make you popular with your siblings.
There's something called a generation-skipping trust that might do what your mother wants. The money will be held in the trust till each grandchild starts college. There are still hazards, though. I suppose that if a grandchild majored in drinking and partying they'd still be able to collect as long as they weren't expelled. She definitely needs to talk to a lawyer.
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Sum Dum Gai
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Post by Sum Dum Gai on Jun 17, 2011 16:58:37 GMT -5
I think your mother is putting you in a very difficult position. Like zibazinski's friend, you're stuck being the bad guy. This will not make you popular with your siblings. Oh, I don't know. I'd be the one controlling the money so they'd have to treat me somewhat decently if they wanted a share.
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resolution
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Post by resolution on Jun 17, 2011 17:05:41 GMT -5
It sounds like a good way to tear apart your relationship with your brother and sister. I would really work on her to set up a trust if I were in that situation. If she won't budge on it she should clearly explain the terms to your brother and sister so they know it is her wish and not your doing.
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Post by debtheaven on Jun 17, 2011 17:40:36 GMT -5
Anyway, I'm pretty sure her leaving everything to me and trusting me to do the right thing with it, without really telling me what she specifically wants done with it, isn't the best idea. So, what should I tell her to do instead? I'm assuming a trust of some kind. She wants the money to be there to help her kids/grand kids go to college, or buy a first house, that sort of thing on an as needed basis. She doesn't want to just hand each person a lump sum since my sister and youngest brother would blow theirs on something stupid, and quite honestly, they "need" the money more than my two other brothers and I.
Dark, she DEFINITELY needs to write a will. She also needs to explain (in writing) why she is leaving the money to you, and what her priorities for that money are. Otherwise you will be in a VERY uncomfortable position.
She could also consider leaving it directly to her grandkids, but I think they are too young for that now. But whatever she does now (and she really does need a will) remember that she should re-evaluate it every three to five years as her kids / grandkids get older.
You sound pretty close to your Mom, I'm sure she can understand that it is NOT nice to leave you in the position of inheriting a lump sum and having to "dole it out" without her having made her guidelines clear from the start about what her intentions for that money are. Ideally, she should also discuss it or at least mention it to all your siblings. I'm sure the last thing she wants is a rift between you.
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Post by debtheaven on Jun 17, 2011 17:47:07 GMT -5
I'm guessing that with no will, the house would be split five ways (five siblings, I think).
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tskeeter
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Post by tskeeter on Jun 17, 2011 17:49:58 GMT -5
Dark, the first issue to get your arms around is the size of the estate. If the estate has the potential to be sizable, it gets complicated quickly. For example (if I remember this right), in MN, an estate more than $50K is subject to probate if it is transferred via a will (remember that a will, alone, does not avoid probate). If there is not a valid will (the donor dies intestate), the estate is transferred according to the inheritance laws of the state. So if there is no will, trust, etc. your Mom's estate could be distributed in a fashion other than as she wishes. (I believe beneficiary designations would keep certain assets, such as insurance policies and financial accounts, out of probate, but valuable assets, such as houses, are not usually subject to beneficiary transfer.)
If the estate is large, making you the sole beneficiary with the intent that you will invest and re-distribute the assets raises the issue of income taxes on the inheritance earnings and the potential for gift taxes and other issues you may want to avoid.
Estate planning is really the time to use an attorney. If the estate is small and simple, it won't cost that much.
If you're thinking about a trust, consider the issue of successor trustees. My parents created an irrevocable trust (can't be changed in any way). I am the primary trustee and two of my uncles were designated successor trustees, if I am unable or unwilling to execute my duties as trustee. The trustee issue seemed pretty well covered. Unfortunately, both uncles died within 18 months. I am now the sole trustee, and the only way to appoint another trustee if anything happens to me is to go to court and ask the court to appoint a trustee. Bet that ain't going to be free!
All this estate and estate tax stuff is very complicated. It is well worth the money to get legal and tax assistance to do it right (An acquaintance told me that her grandmother's failure to get competent advice reduced the estate by $10,000,000 in estate taxes. I bet her personal stake in the estate was reduced by many thousand dollars.).
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Sum Dum Gai
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Post by Sum Dum Gai on Jun 17, 2011 17:52:22 GMT -5
You sound pretty close to your Mom, I'm sure she can understand that it is NOT nice to leave you in the position of inheriting a lump sum and having to "dole it out" without her having made her guidelines clear from the get-go. I'm going to talk to her more about it tonight or tomorrow. She called yesterday to let me know about it because she only had thirty minutes to get the paperwork turned into HR, and wanted to give me a heads up before she did. Next time I talk to her, we'll spend some time talking about what she actually wants, and put together a plan. She could also consider leaving it directly to her grandkids, but I think they are too young for that now. But whatever she does now (and she really does need a will) remember that she should re-evaluate it every three to five years as her kids / grandkids get older. The problem is not all the grand kids are here yet. One of my SILs is pregnant right now. My mom's oldest kid would be my sister, and she's only 30, the youngest is 22 right now. There's no way to know for sure how many grand kids she'll have in ten years. I think she was looking for something flexible that she won't have to modify every time a new baby comes along. She also wants to distribute the money "fairly... according to need", which makes it a bigger pain in the butt. You can argue that leaving 20% to each kid isn't really fair, but it sure is a lot easier.
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thyme4change
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Post by thyme4change on Jun 17, 2011 17:52:36 GMT -5
Your mom sucks - that is a horrible chore to throw on you. I would push back, push back - wayyy back.
She can either split up the money evenly, and if your brother blows it all and has nothing, then, too bad, so sad. Or she can see a real lawyer. But just expecting you to be judge and jury over the assets of your adult siblings simultaneously sucks and blows.
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thyme4change
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Post by thyme4change on Jun 17, 2011 17:54:30 GMT -5
Can't the will just say something like "The assets will be liquidated and split evenly between all living grandchildren on the youngests grandchild's 18th birthday."
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Post by debtheaven on Jun 17, 2011 18:01:42 GMT -5
The problem is not all the grand kids are here yet. I get that. And that's why she needs a lawyer. And it's probably why traditionally, it's easier to just leave everything to one's kids. But since she doesn't want to do that, she will have to see a lawyer and draft a will to her own specificiations. When DH and I married with a pre-nup six years ago, only one of my four kids was (barely) adult. Now, six years later, three are adults. So we recently told our lawyer we figure we need to update our wills. Six years after we originally wrote our first wills. I'm anticipating our having to do it again in five years when the youngest reaches adulthood. If Gd willing your mom lives for many more years, I'm guessing that this is something that she will probably choose to revisit in the future.
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Post by debtheaven on Jun 17, 2011 18:03:05 GMT -5
Can't the will just say something like "The assets will be liquidated and split evenly between all living grandchildren on the youngests grandchild's 18th birthday."
If somebody has an "oops" baby at some point, that is really unfair to the other, older grandchildren LOL.
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tskeeter
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Post by tskeeter on Jun 17, 2011 18:04:25 GMT -5
So how do you determine "need". Is need based on the decision to have (or as one poster's sibling did, adopt) 10 kids? Is need based on spending every cent you ever got your hands on and failing to plan for your retirement? Is need based on a history of poor decisions and a fondness for get rich quick schemes? Is need based on unwillingness to do productive work that provides you with adequate income to support yourself? Is need based on drug or alcohol addiction? Do you give the entire estate to the heir who did all of the above, because they have "needs", at the expense of the potential heir who chose a challenging, well compensated occupation, worked hard, made good decisions, spent and saved judiciously, and is able to support themselves? Which behavior does your mother wish to reward and reinforce?
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Post by debtheaven on Jun 17, 2011 18:09:02 GMT -5
Karma to tskeeter, he nailed it.
The problem is that your mom wants you to "play Gd", but she's putting all the burden on you.
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Sum Dum Gai
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Post by Sum Dum Gai on Jun 17, 2011 18:09:31 GMT -5
So how do you determine "need". You leave it up to me, because I'm the responsible one and I'll be fair.
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