Mother Desires Custodial Control Over Daughter's Inheritance
Dear Len & Rosie,
I am the custodian for a $55,000 UTMA account for my 16-year-old daughter that was given to her by her now-deceased grandparents. My daughter is supposed to use it to pay for her education. But she wants to buy a Camero and move into an apartment on her own. And no doubt party till the cows come home.
I want to move as much of this money into an account that she cannot access when she turns 18. Iíve done some research and it appears that I can use the money for expenses such as education, camp, her car, medical expenses, and even general living expenses. My plan is to keep about $10,000 to reimburse myself for the car I bought her and her medical bills, and to put the rest into a savings account in my name to distribute to her as I feel appropriate.
Are there any time limits on how far in the past I can retrieve funds for reimbursement and stay within legal boundaries of the use of this fund?
As your daughterís custodian under the Uniform Transfers to Minors Act, you owe her a fiduciary duty to hold the money and spend it for her benefit until she turns 18. From a legal perspective, youíre in the same position as a stockbroker or banker. Then you have to give her whatís left. You can pay yourself reasonable compensation for your services as custodian, but your right to compensation is not cumulative. You cannot pay yourself retroactively, and you could not really justify taking a fee of more than about one percent per year. And you cannot rightfully reimburse yourself for your own money you have already spent on her. Your daughterís inheritance does not relieve you of the duty of support you owe to your daughter as her parent.
Also, because your daughter is at least fourteen years old, she has the right to inspect the books and see what youíve done with her money. She can even petition the court to make you provide her with an accounting. What this means is that if your daughter gets mad enough at you, she will have a legal remedy against you.
On the other hand, thereís something to be said for ignoring the law and taking steps to protect your daughter from herself. There are not many people who would blame you for keeping the money if your daughter was just going to spend it on drugs. Just keep in mind that if you do this, you will be violating the law. If your daughter takes you to court to enforce her rights, you will lose. You do not have the right to withhold your daughterís inheritance, even if you believe itís in her best interests. Once sheís 18, she has an absolute right to the money.
Itís water under the bridge for you, but people creating estate plans should consider creating a sprinkling trust for grandchildren and other under-age beneficiaries. The trustee of a sprinkling trust has much more flexibility as to how and when to distribute money to young beneficiaries who may not be responsible enough to be entrusted with their own inheritance.
Len & Rosie
Dear Len & Rosie,
My parents have a revocable living trust. My father has passed away. Since then I have gone through a divorce and have had my maiden name reinstated. I believe we are OK with my fatherís passing but the trust was written in my married name. Do we need to have my name changed on the trust and if so what is the easiest, quickest and of course most economical way of doing this?
I also think it is time for me to do a trust. I am not married and have no children. Again is there a quick and easy (and cheap) way to do this?
Donít worry so much about your parentsí trust, at least with respect to your name. Shakespeare wrote, ďA rose, by any other name, would smell as sweet.Ē There is no legal reason why your motherís estate planning documents should be changed just because your name is different from what it used to be. It would be quite the racket if estate planning attorneys could charge parents up to a thousand dollars every time one of their daughters changes her name. If your mother decides to amend her trust for some other reason, then she may as well have your name changed while sheís doing it. Otherwise, she should leave it alone.
Your mother should, however, make sure that sheís done everything she needs to do with the trust as a result of your fatherís death. It isnít automatic. Your father is no longer a trustee, so his name should be removed from the trustís assets. The trust could also be an A/B trust that requires your mother to divide the trust into a revocable Survivorís trust (the A trust) and an irrevocable Bypass trust (the B trust). If your parents are well off, there could be an estate plan due. If your mother has not yet reviewed the trust with an attorney after your fatherís death, she should do so fairly soon.
With respect to your own estate planning, itís true that there are cheap and easy ways to do your own estate planning documents. You can buy forms, books, computer programs, and even do your own trust on the Internet. But you get what you pay for. And when you buy a trust by filling out a few forms, youíre not paying for or receiving any actual legal advice. There isnít a person hidden within your computer asking you questions and helping you figure out what the best estate plan is for you, and you may not know enough to ask the right questions yourself. So while you can create your own estate planning documents, thereís no way that we could guarantee that your self-made trust will work out the way you want.
Len & Rosie
Len Tillem and Rosie McNichol are elder law attorneys. Contact them at 846 Broadway, Sonoma, CA 95476, by phone at (707) 996-4505, or on the Internet at www.lentillem.com. Len also answers legal questions each weekday, noon-12:45 p.m., and Sundays, 4-7 p.m., on KGO Radio 810 AM.
Len Tillem and Rosie McNichol are elder law attorneys. Contact them at 846 Broadway, Sonoma, CA 95476, by phone at 996-4505, or on the Internet at lentillem.com. Len also answers legal questions each weekday on The Len Tillem Show, a podcast available via iTunes, Facebook, www.spreaker.com/user/lentillem and lentillem.com.