Irrevocable House Trust vs. Will

[NeonMoon]

NY My parents set up a will in 2015. My sibling and I are 50/50 recipients of the estate. 4.5 years ago, a house trust account (irrevocable) was set up. I am the named trustee. In the trust, the contents of the original will from 2015 was absorbed. The will spelled out that I will set up an account for my brother with proceeds of sale of house (trust account), bank accounts, IRA's, bonds, etc. The account that I was to set up is for a stipend for my brother disbursing "X" amount for "X" amount of years. The House Trust spelled out the exact same details / as to how the proceeds from the sale of the house are to be set up. My mother was pressured into changing the will by my sibling and he now get all proceeds up front via the Will but the Irrevocable Trust can't be changed and the instructions for the proceeds remain as a stipend. Which document holds the weight?

 

[doucar]

How is the house currently titled?

 

[LdiJ]

NY My parents set up a will in 2015. My sibling and I are 50/50 recipients of the estate. 4.5 years ago, a house trust account (irrevocable) was set up. I am the named trustee. In the trust, the contents of the original will from 2015 was absorbed. The will spelled out that I will set up an account for my brother with proceeds of sale of house (trust account), bank accounts, IRA's, bonds, etc. The account that I was to set up is for a stipend for my brother disbursing "X" amount for "X" amount of years. The House Trust spelled out the exact same details / as to how the proceeds from the sale of the house are to be set up. My mother was pressured into changing the will by my sibling and he now get all proceeds up front via the Will but the Irrevocable Trust can't be changed and the instructions for the proceeds remain as a stipend. Which document holds the weight?

Was the house deeded to the trust? Were the other assets transferred to the trust? Is the trust the beneficiary of the IRA?

The will is 100% irrelevant to anything that has actually been transferred or deeded to the trust since it is irrevocable. The will however is relevant to anything that has not actually been transferred to deeded to the trust.

 

[NeonMoon]

How is the house currently titled?

The deed has been redone and filed in the State of NY in my name. My mom still owns it but I own it on paper. The taxes come to me and the tax statement has my name on it.

 

[LdiJ]

The deed has been redone and filed in the State of NY in my name. My mom still owns it but I own it on paper. The taxes come to me and the tax statement has my name on it.

Then neither your mother, nor the trust owns the house. You do. What is on paper is all that matters. Therefore neither the will nor the trust applies to the house. That is unfortunate. Had the trust owned the house then it would have gotten a stepped up basis to fair market value as of the date of her death, and therefore little to no capital gains tax would have been owed on the sale. Because it was deeded to you instead, that makes it a gift to you, and your basis will be whatever your mother's basis was. The difference between that basis and the sales price will be the capital gain, and you personally will be responsible for capital gains tax on that capital gain. On top of that you would have no legal obligation to share the proceeds with your brother at all. Morally would be a different story, but legally, it's all yours. The only exception to that would be if the deed specifically states that you own it in trust for you and your brother (or words to that effect).

The other assets will depend on where those assets are. Any asset with a beneficiary will go straight to that beneficiary and won't be subject to the will or trust (unless the estate or the trust is the beneficiary). The trust will only be relevant if one or more of the assets is in the trust, or the will says to put one or more of the assets in the trust after she passes.

 

[NeonMoon]

Then neither your mother, nor the trust owns the house. You do. What is on paper is all that matters. Therefore neither the will nor the trust applies to the house. That is unfortunate. Had the trust owned the house then it would have gotten a stepped up basis to fair market value as of the date of her death, and therefore little to no capital gains tax would have been owed on the sale. Because it was deeded to you instead, that makes it a gift to you, and your basis will be whatever your mother's basis was. The difference between that basis and the sales price will be the capital gain, and you personally will be responsible for capital gains tax on that capital gain. On top of that you would have no legal obligation to share the proceeds with your brother at all. Morally would be a different story, but legally, it's all yours. The only exception to that would be if the deed specifically states that you own it in trust for you and your brother (or words to that effect).

The other assets will depend on where those assets are. Any asset with a beneficiary will go straight to that beneficiary and won't be subject to the will or trust (unless the estate or the trust is the beneficiary). The trust will only be relevant if one or more of the assets is in the trust, or the will says to put one or more of the assets in the trust after she passes.

It is a premises trust and I am the trustee. It was not a deed transfer.

 

[Zigner]

Let me ask the question plainly:

Is the house titled in your name with no other qualifiers, or is the house titled in your name "as trustee of the XYZ trust"?

 

[LdiJ]

It is a premises trust and I am the trustee. It was not a deed transfer.

You do understand that the deed and the trust are two completely separate things? Answer Zigs question. Or, in the alternative take all of your documentation, including the new will, and go talk to an attorney who can review all of the paperwork themselves.

There definitely was a deed transfer. The question is did it transfer to you as the trustee of a trust, or did it just transfer to you. That depends on what the deed says, not what the trust says.

 

[adjusterjack]

NeonMoon, you have to be looking at the deed when you answer the ownership question, not relying on memory.

 

[NeonMoon]

You do understand that the deed and the trust are two completely separate things? Answer Zigs question. Or, in the alternative take all of your documentation, including the new will, and go talk to an attorney who can review all of the paperwork themselves.

There definitely was a deed transfer. The question is did it transfer to you as the trustee of a trust, or did it just transfer to you. That depends on what the deed says, not what the trust says.

It was transferred as trustee of the trust. The lawyer explained that it is still my mom's home, she pays the taxes, she can sell at any time, etc.

 

[Zigner]

You really need to direct these questions to the attorney who is familiar with the matter.

With that said, generally, if the trust owns the house, then your mom's will has no control over the house.

 

[LdiJ]

It was transferred as trustee of the trust. The lawyer explained that it is still my mom's home, she pays the taxes, she can sell at any time, etc.

Ok, then it may not be an irrevocable trust, it might be a revocable one. That would change the answers entirely. You really need to see an attorney with ALL of the paperwork in hand. That is the only way that you are going to find out whether or not the trust is still in effect (since she changed the will) and whether or not it will have any assets for you to control.

 

[LdiJ]

You really need to direct these questions to the attorney who is familiar with the matter.

With that said, generally, if the trust owns the house, then your mom's will has no control over the house.

I agree, but if the attorney says "It's still mom's house and she can sell it whenever she wants". That is a totally different situation than what he initially described.

 

[NeonMoon]

I agree, but if the attorney says "It's still mom's house and she can sell it whenever she wants". That is a totally different situation than what he initially described.

Ok, then it may not be an irrevocable trust, it might be a revocable one. That would change the answers entirely. You really need to see an attorney with ALL of the paperwork in hand. That is the only way that you are going to find out whether or not the trust is still in effect (since she changed the will) and whether or not it will have any assets for you to control.

UPDATE: I spoke with an attorney. He's from NJ but this House is in NY. Irrevocable Trusts are the same nation wide. The attorney looked up the recorded deed in NY City. The Trust owns the House and I am the Trustee of the Trust. I was able to look it up also and saw the wording as such. I just referred to the Trust Document. I am the Trustee and I am in charge of the Trust. The Trust dictates that I sell the house and give 50% to my sibling. It goes further to dictate that I am to put it into an account and at a minimum disburse no less than 2000.00 per month to him for X amount of years. My sibling found out and coerced my mother to change the will, which she did. The will dictates that my sibling gets his 50% upfront and not stipened. The lawyer that I spoke with explained that the will and trust act as two separate documents. The will dictates xyz and I as the trustee of the trust must follow the directions set forth in the house trust document. The monies from the house get stipened to the sibling and the other assets that are not in the trust account are given to my sibling immediately upon them become liquid.

 

[NeonMoon]

You really need to direct these questions to the attorney who is familiar with the matter.

With that said, generally, if the trust owns the house, then your mom's will has no control over the house.

Exactly, a lawyer clarified that today. The trust owns the house and I'm the trustee of the house. The Trust dictates how the proceeds of the house are to be disbursed and in what manner.