Trust Administration: Gifts and Personal Possessions, Internal Family Litigation, Elder Abuse

Family dynamics can be difficult to manage in the best of times. When the assets of an inherited estate are at stake, they can be even more problematic, especially when a complex family structure that includes children from multiple marriages is thrown into the mix.

If you are administrator of a trust for a blended family with a complex structure, you may end up involved in internal family litigation to resolve the conflicts, because the deep life-long emotions of the family members prevent a negotiated compromise.

Sometimes, litigation arises because beneficiaries have legitimate concerns about another family member whose destructive patterns of behavior they know all too well.

Division of Property Can Cause Family Friction

Unfortunately, when parents dies, family members frequently fight over valuable possessions, such as jewelry, art collections, automobiles, and houses, as well as the deceased’s personal property, like clothing, furniture, and consumer electronics.

It is the trustee’s duty to provide beneficiaries with a detailed account of all of the deceased’s property. This can be difficult when some items mysteriously disappear prior to being inventoried.

If known valuable possessions cannot be accounted for, the trustee must file an insurance claim for the missing items on behalf of the estate.

To help avoid family in-fighting, we recommend you inform your beneficiaries about who is to receive specific items when you pass on. You should document and safely store a list of which specific items are to be inherited by which specific beneficiaries.

We also recommend you involve your entire family in the process of creating your estate plan, which can reveal causes for later friction, so they can be resolved before they become hurtful situations that require court intervention. The process may be uncomfortable for some family members, but uncomfortable estate planning conversations now are much better than litigation between family members later.

Easily available technology, such as photo and video cameras, make it easy to document difficult-to-describe items or to ensure there is no confusion over exactly who inherits which specific items.

Fair Distribution of Cash Assets for Family Members

The distribution of a deceased family member’s cash assets can also become a point of contention among surviving children. Parents frequently help their kids with cash gifts or down-payments on a house, but if one child receives such help and others don’t, the other siblings might feel slighted and still due their fair share of the amount distributed, which would have otherwise been part of the estate.

Part of the problem in a situation like this is that the cash that was exchanged was never formally declared as a a gift or a loan or an advance on their inheritance, which leaves the situation open to interpretation when the parents die.

A written document that states your specific intent about cash given to a child will help avoid future controversy, though it may not help soothe the hurt feelings of the other siblings.

For that reason, we recommend you involve your entire family in the process of creating your estate plan, which can reveal causes for later friction, so they can be resolved before they become hurtful situations that require court intervention.

If, for example, money provided by a parent was intended as a gift to a child, the parent can document a cash transaction to clarify the nature of the exchange.

In some cases, if the cash is used as a down-payment on a home mortgage, the lending financial institution may require the parents to sign a Gift Lender letter to document the source of legitimate source of the funds.

If you are beneficiary trying to locate documentation of a cash gift from a parent to a child, you can contact that parent’s accountant, because the may have a tax organizer document, which could indicate that a gift was in fact given and reported to the IRS.

We recommend that you have a family accountant, so one person or accounting firm can maintain a history of the family’s financial transactions and tax filings. The experience and familiarity developed during a long-term professional relationship, should naturally help an accountant provide better financial advice.

You can create an addendum to an existing estate plan to document lifetime gifts to family members and other beneficiaries.

Choose Your Trustee(s) Wisely

When you choose a trustee for your estate, you should try to designate someone who both honest and capable of making impartial and reasonable decisions, to meet the legally-obligated fiduciary responsibilities to the beneficiaries.

A complex or blended family makes it that much more difficult and important to designate an appropriate and capable trustee. In some cases, such as in a blended family, if you assign co-trustees – one from each side of the family – that can help maintain a balanced control of the estate.

Of course, no matter how much you try to prevent family discord after you are gone, your efforts may be in vain, because you have no way of knowing how a chosen trustee may behave once given control of the estate.

Trust Administration Can Be Complicated

We have encountered a situation, as an example, where a widow was both the trustee of  her late husband’s estate, as well as a beneficiary of that estate, along with the couple’s four children.

After the father died, one daughter lived rent-free with her mother, who was elderly, and helped take care of her. The mother also gave the daughter signatory power of her checking account, so the daughter could manage her day-to-day finances. The daughter also withdrew cash from the bank, with her mother’s knowledge and permission, to cover her own living expenses.

The other three children felt the free rent and unfettered living expenses were well beyond what would be considered reasonable compensation for their sister’s efforts. They also felt a conflict of interest existed, as a result of the mother being both the trustee and a beneficiary of the estate, which certainly complicated matters from a legal perspective.

A Possible Case of Elder Abuse

The other children also felt their sister might be taking advantage of their mother, to an extent that it might be considered elder abuse. They petitioned the court to determine their mother’s mental capacity and ability to make fiduciary decisions for the estate.

Notice: if you seriously suspect elder abuse and you do not have an attorney acting on behalf, you can contact your local adult protection service agency, so they can properly investigate the situation.

If the court rules, based on a psychological evaluation, that the mother is no longer capable of managing her own affairs, the judge can appoint a conservator to manage her finances, as well as require a new trustee to replace her.

Go to Radio Show Podcast ArchiveThese steps might be offensive to the mother and daughter, but the other children felt this was their only option, to prevent their sister from completely depleting the estate of its assets.

Should the siblings be forced to evict their sister from the family house and her share of the inheritance is held up by the legal process or the time it takes to sell the house, she may be able to receive a loan from a company that specializes in providing living expenses to beneficiaries who are caught in that type of rock-and-a-hard-place circumstance.

This is an example of why is it is best to prepare an estate plan in advance for children who may not be able to provide for or take of themselves when their parents are gone. This is especially important for parents of a child with special needs.

A beneficiary can also petition the court for confirmation of the deceased intent, if specific instructions were not documented in advance and a trustee’s estate management activities (or lack of) are questionable.

If you have questions or concerns about any of the topics mentioned above and would like a free consultation with Connie Yi, a California estate planning attorney, please contact us. We have four conveniently located offices around the Bay area: San Francisco, San Mateo, San Jose, and Pleasanton.

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