• FreeAdvice has a new Terms of Service and Privacy Policy, effective May 25, 2018.
    By continuing to use this site, you are consenting to our Terms of Service and use of cookies.

Joint Rev Living Trust after 1st death

Accident - Bankruptcy - Criminal Law / DUI - Business - Consumer - Employment - Family - Immigration - Real Estate - Tax - Traffic - Wills   Please click a topic or scroll down for more.

n78949

Junior Member
What is the name of your state (only U.S. law)? Indiana law but I'm trying to help from TX

Dad always handled finances. Mom and dad had a Rev Liv Trust wherein both were trustors and trustees. Investments, house, cars, etc were (are) all held in the xyz and ghz revocable living trust, xya trustee, ghz named as trustees. Youngest child, one of three ultimate beneficiaries, is named successor trustee. The trust document provides for an AB trust. Trust was setup by a now deceased attorney. The assets of the atty's practice were acquired by a 'financial planning' firm. The folks had the trust reviewed periodically (most recently in Jan '10) by a rep from the planning firm that they thought was an atty. Not so; turns out he was an annuity salesman. In Jan this guy 'reviews trust and pronounces all is well. Dad dies this Sept. Shortly thereafter mom is hospitalized (unrelated). Due to circumstances and actions, mom decides youngest child (successor trustee after mom passes) was the wrong decision. Mom is feeling lost and calls for help.

I have some knowledge of finance but am very limited in my legal knowledge. Mom's finances are in good shape but the trust is largely a mystery. The guy form the 'financial planner' is called in to answer questions about the trust. That's when we learn he knows less than Mom and I about the trust.

We engage an elder law attorney. A 2 hour meeting was not helpful. First, he insisted in talking to me and ignoring Mom; second, he talked fast and mostly over my head. What we (I) learned was: (a) the rev trust became irrevocable when dad died; (b) mom needs to fund the "B" portion of the trust with dad's assets (even though all the assets were jointly held); (c) mom can not make any changes to the trust; (d) the trust document uses a lot of inapplicable 'boilerplate' that is not applicable to Indiana.

Questions:
[1] Is mom able to fund the "B" portion since before dad died there was nothing in only his name?
[2] If the "B" trust can be funded, suggestions would be appreciated as to which assets (bank accounts, investments, real estate, etc.) would be appropriate.
[3] Is the Revocable Trust now irrevocable, in whole or in part?
[4] The trust package (trust, pour-over wills, P of A's, etc) contains a durable PoA naming the youngest child concurrent with mom. Mom would like to change that PoA to a 'springing' PoA to be triggered if/when mom is unable to act in her own interest. Can she do that?
[5] The trust contains language that, when pieced together, suggests that the successor trustee will be able to operate with total freedom and will be accountable to no one. Mom wants to create a requirement that the trustee will have to furnish an accounting to the other two beneficiaries. The atty says that cannot be done. Is that correct?
[6] The trust contains an incontestability clause. The atty says that it is unenforceable in Indiana even though the trust contains language stating that the text of the trust will control in case of a conflict with Indiana law. Is that correct? Which is controlling, trust or state law?

Sorry to be so long winded. Mom knows she needs an atty that will work with her. Before hiring or meeting with the new person, she hopes to be better prepared so she can get the maximum benefit from their meeting(s).

Thanks for any and all input.What is the name of your state (only U.S. law)?What is the name of your state (only U.S. law)?What is the name of your state (only U.S. law)?
 


tranquility

Senior Member
Let me start by saying you really are not making a lot of sense. There is too much fuzziness here for any real answers. In general, there is a funding of a B trust for dad's portion of the estate per the terms of the trust. But:
[1] Is mom able to fund the "B" portion since before dad died there was nothing in only his name?
The "B" portion would be funded by the trust assets. Mom usually has beneficial use of those assets if needed. If the asset was in a person's name (other than as trustee of xyz trust) it should probably not be considered a trust asset. (But, that can change too.)

[2] If the "B" trust can be funded, suggestions would be appreciated as to which assets (bank accounts, investments, real estate, etc.) would be appropriate.
This is often a tax and/or usage question. No one but someone with all the facts can advise. Because of the more limited carry-over basis rules for deaths in 2010, the decision can be technical based on many factors.
[3] Is the Revocable Trust now irrevocable, in whole or in part?
Generally, yes. At least, 1/2 of it. But, even then, the trusts and the facts would need to be known exactly as there are many ways to 'splain things.

[4] The trust package (trust, pour-over wills, P of A's, etc) contains a durable PoA naming the youngest child concurrent with mom. Mom would like to change that PoA to a 'springing' PoA to be triggered if/when mom is unable to act in her own interest. Can she do that?
Probably, but it could depend on specific state law and case decisions and how the POA reads. (Same problem with a springing POA. How does person get power back?)
[5] The trust contains language that, when pieced together, suggests that the successor trustee will be able to operate with total freedom and will be accountable to no one. Mom wants to create a requirement that the trustee will have to furnish an accounting to the other two beneficiaries. The atty says that cannot be done. Is that correct?
She can do that for the A trust, not the B.

[6] The trust contains an incontestability clause. The atty says that it is unenforceable in Indiana even though the trust contains language stating that the text of the trust will control in case of a conflict with Indiana law. Is that correct? Which is controlling, trust or state law?
State law in certain instances. This is one of them and I'm not going to research it. The bottom line is others will always be able to challenge things. The court does not favor (but does often enforce in some states) such clauses. However, in CA, there is a "safe harbor" from a challenge if the person states he is merely seeking "clarification" under certain statutes. It's always a good idea to put one in, but, it never makes a difference if the challenger wins.
 

n78949

Junior Member
Thanks, tranquility. Believe it or not, that helps. A little clarification, please.

"The "B" portion would be funded by the trust assets. Mom usually has beneficial use of those assets if needed. If the asset was in a person's name (other than as trustee of xyz trust) it should probably not be considered a trust asset. (But, that can change too.)"

Does this mean that any trust asset can be selected to fund the "B" portion? Asked another way, a jointly owned trust asset can be moved into the "B" portion; it doesn't have to be an asset that was in the decedent's name pre-death?
 

tranquility

Senior Member
Does this mean that any trust asset can be selected to fund the "B" portion? Asked another way, a jointly owned trust asset can be moved into the "B" portion; it doesn't have to be an asset that was in the decedent's name pre-death?
This was one of the fuzzy things. A joint revocable trust between married persons tends to have both persons equal beneficiaries. The *trust* owns the asset. Since the trust is the owner and both are equal beneficiaries, I guess you can say it is a "jointly owned trust asset", but that would not really be a correct term. A jointly owned asset has to do with titling of certain assets and I would think an asset which was said to be jointly owned *would not* be a trust asset. In other words, it's either titled to the trust or to the joint owners.

Asked another way, a jointly owned trust asset can be moved into the "B" portion; it doesn't have to be an asset that was in the decedent's name pre-death?
I hope my prior answer explained why this question is problematical.
 

n78949

Junior Member
tranquility,

This was one of the fuzzy things. A joint revocable trust between married persons tends to have both persons equal beneficiaries. The *trust* owns the asset. Since the trust is the owner and both are equal beneficiaries, I guess you can say it is a "jointly owned trust asset", but that would not really be a correct term. A jointly owned asset has to do with titling of certain assets and I would think an asset which was said to be jointly owned *would not* be a trust asset. In other words, it's either titled to the trust or to the joint owners.

I understand your confusion (fuzzy) because this is what I'm having trouble wrapping my mind around. It seems to me that to include an asset in the "B" Trust it would first have to be identifiable as an individual asset; either inside or outside the 'joint' trust. I was, and am, about to conclude that there is nothing that can be included in the "B".

The thing that has really been throwing me off is the feeling that I must be overlooking something really basic. After all, the Trust was originally drawn up by an atty that oversaw the funding of the trust. This atty was recommended to my folks as a specialist in trust law and represented himself as such. Surely he must have done it right!??? Or so I thought.

I hope my prior answer explained why this question is problematical.


It did. Thanks.

Considering all the above, is my presumption that funding the "B" portion is probably moot correct? Any other suggestions?

Thanks again.
 

curb1

Senior Member
Are you sure about the "A" - "B" trust? Or, was this simply a joint revocable trust with mother now the sole trustee in control of all trust assets? What is the value of the trust assets? Could the AB part just be provisional if assets surpassed levels where estate taxes might come into play?
 

n78949

Junior Member
curb1,

I'm not positive but am reasonably certain about the A-B (I wish now I'd have copied some pertinent pages and brought them home with me - from IN to TX).

As best I recall, the documents talk about "when" not "if" or "whether" in regarding to creating the "B" portion.

The assets are just under a million.

Could the AB part just be provisional if assets surpassed levels where estate taxes might come into play?

There was nothing mentioned about provisional. The language is focused on "when".

One could argue that with 'just under a million', why bother? My bet is that Congress will lower the exemption threshold before they raise it.
 

tranquility

Senior Member
It seems to me that to include an asset in the "B" Trust it would first have to be identifiable as an individual asset; either inside or outside the 'joint' trust. I was, and am, about to conclude that there is nothing that can be included in the "B".
In the beginning, there was a trust. Let's call it the "Mom & Dad's revocable living trust." In the trust, both Mom and dad had beneficial and legal ownership of all it contained. Dad dies. The trust, usually for tax purposes, but also for purposes of when Mom and Dad have different wishes for where they want their assets to potentially go when they die (Such as in a second marriage when both have children from a prior one.), spins off trust B which we'll call "Dad's irrevocable trust". Trust A is still in existence and it is revocable, but Dad is dead and his trust can't be changed. Trust B (Dad's irrevocable trust) must now be funded with assets from Trust A (Mom & Dad's revocable living trust). Now, because Mom and Dad loved each other, Mom can often get distributions from Trust B under some ascertainable standard, but, when mom dies, the assets of Trust B will go to where dad wished them to go.

Since Mom & Dad's revocable living trust created Dad's irrevocable trust, only the assets in Trust A will be used to fund Trust B. If an asset was not titled to Mom & Dad's revocable living trust, it is not used for the funding of Dad's irrevocable trust. (We will ignore the problem of a pourover will and where it sends the assets. That is a separate [But, possibly related.] issue.)

Considering all the above, is my presumption that funding the "B" portion is probably moot correct?
Not if there are any assets in A.
 

n78949

Junior Member
tranquility,

Thank You, Thank You, Thank You!

This explanation doesn't provide me with everything I / we need to know but it is sure a big step in the right direction!
 

n78949

Junior Member
tranquility,

Two other issues: First,

Quotes:
[3] Is the Revocable Trust now irrevocable, in whole or in part?
Generally, yes. At least, 1/2 of it. But, even then, the trusts and the facts would need to be known exactly as there are many ways to 'splain things.

... spins off trust B which we'll call "Dad's irrevocable trust". Trust A is still in existence and it is revocable,
...

Mom says she and dad had been talking about, and had decided to, provide a bequest of a specific dollar amount for their two grandsons (my nephews) in the Trust. Dad died before they made the change. Mom would still like to do that. Is there a way to accomplish that?

Without being able to provide you with specific details (I don't have them), I'm guessing generically that she would first have to fund the "B" portion (dad's irrevocable 1/2 portion) and then she might be able to modify the remaining "A" portion (her still revocable 1/2 portion?) and include the grandsons that way? When she dies, then the grandkids would be provided for because, at that point, everything would be irrevocable? Sounds like turning a can of worms into a bucket full.

Second, I've been following your thread with econ101. Regarding my mother if, prior to any disclaim of assets intended for the "B" trust, she removes money from the original "Mom & Dad's ... trust" for her general living expenses, has she 'exerted control and gained benefit' and thereby blown the credit?
 

tranquility

Senior Member
Regarding my mother if, prior to any disclaim of assets intended for the "B" trust, she removes money from the original "Mom & Dad's ... trust" for her general living expenses, has she 'exerted control and gained benefit' and thereby blown the credit?
She has not "blown the credit" but, I feel she has lost her right to disclaim.

I'm guessing generically that she would first have to fund the "B" portion (dad's irrevocable 1/2 portion) and then she might be able to modify the remaining "A" portion (her still revocable 1/2 portion?) and include the grandsons that way? When she dies, then the grandkids would be provided for because, at that point, everything would be irrevocable?
That would depend on the wording of the trust or the law of the land. Mom can do what she wants with her money.
 

Find the Right Lawyer for Your Legal Issue!

Fast, Free, and Confidential
data-ad-format="auto">
Top