Elder Law Advocates
Dear Len & Rosie,
I have a sister who is a drug addict and is usually out of contact with us. My other sister and my stepbrother and I are the beneficiaries of my step-father’s living trust. Is there anything I can do ahead of time to ensure that we don’t have to find her when my step-father dies?
You don’t have all that much to worry about, assuming that the trust was created solely by your step-father. When an ordinary revocable trust becomes irrevocable upon the deaths of the settlors (the persons creating the trust), then the trustee is required to provide notice of the existence of the trust to certain persons, including all of the beneficiaries, other trustees, and the people who would inherit from the trust settlors had they died with no estate plan at all.
If your step-father’s trust was created by him and your mother, then your drug addicted sister is entitled to notice of the trust under California Probate Code section 16061.7. But if the trust was created by your step-father after your mother’s death, then she’s not entitled to any notice unless she’s named as a beneficiary. Step-children don’t inherit unless they are named in a will or trust. Your sister won’t have to be notified. If however, the trust was created by both your mother and her husband, the solution to your problem would be for your step-father to create a new trust of his own.
It’s difficult to deal with a drug addicted loved one in an estate plan. Frequently, it does more harm than good to leave a substantial sum of money to someone suffering from an addiction. There are generally two ways of dealing with this challenge. The easiest way is to disinherit the drug addicted child, but that can be harsh.
An alternative would be to leave an inheritance to the drug addicted beneficiary within a discretionary trust in which the trustee has the absolute right to withhold most distributions unless the beneficiary passes a drug screening test. The trust would be there to pay for drug rehabilitation, but not the drugs themselves. The problem with this alternative is that the person serving as trustee becomes his brother or sister’s keeper. The trustee is the person who has to say no to the drug-addled demands of a suffering beneficiary.
That’s why many families take the easy way out by disinheriting the drug addicted child, leaving everything to the other children, and rely on a legally unenforceable handshake promise from the family to help out the drug addicted child when it’s appropriate.
Len & Rosie
Dear Len & Rosie,
Both of my parents are now deceased, the most recent being my step-dad. Are the four of us adult children legally due to receive a financial statement of how funds were spent during my dad’s illness? Are we entitled to a copy of the trust at no charge, along with the financial statement? The lawyer hired by the trustee is charging $1,000 for a copy of the trust, if we want it, and it has been stated that no one will receive a financial statement until after all funds are dispersed at the end of a waiting period. We were told the waiting period was 120 days but are now hearing it could be six months.
As beneficiaries of an irrevocable trust, the trustee is legally obligated to provide you a copy of the entire terms of the trust, at no cost. The trustee was supposed to provide you a notice pursuant to California Probate Code section 16061.7 within 60 days of your stepfather’s death, telling you this.
Having said that, we find it hard to believe that the lawyer representing the trustee is telling you that it’ll cost you $1,000 for a copy of the trust document. This sounds more like a Stupid Trustee Trick from a trustee who thinks that he or she gets to make the rules. The trustee is a fiduciary, like the person standing behind the counter at the bank, and owes you and the other beneficiaries a duty of loyalty and competence. Our best guess is that the $1,000 is a fee quote from a lawyer the trustee consulted with for some trust administration work.
That means the trustee is required to provide an accounting to all of the beneficiaries presently entitled to distributions of trust income or principal. And by “accounting” we don’t mean a simple financial statement. We mean a formal accounting following the rules of the court which is really an exercise in double-entry bookkeeping that mere mortals don’t know how to do themselves. This accounting runs from the date-of-death to the distribution of the trust assets. Normally you are not entitled to an accounting for the period prior to your stepfather’s death, but if you suspect the trustee is up to no good, you can hire a lawyer and petition the court to compel an accounting for the entire time the trustee was in charge.
The 120-day waiting period is mentioned in that notice you were supposed to have received. Once the notice is mailed out, a 120-day countdown begins. When it ends, you will lose your right to contest the trust. By “contest the trust” we mean filing a court petition asking the court to declare that the trust document is void. You will still be able to enforce your rights as a trust beneficiary, including the right to compel the trustee to provide you with an accounting.
Once this countdown ends, there is usually nothing to prevent the trustee from distributing most of the trust assets, retaining enough to file trust income tax returns next year and to cover any potential creditor claims against the trust, as creditors have a year from the date-of-death to sue on your stepfather’s debts.
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-1 p.m. and Sundays, 4-7 p.m. on KGO Radio 810 AM.