What are the risks of being a beneficiary with a trustee you can't trust?

Question

My partner and I are planning to marry. He has about $5 million in investments that he inherited from his father. When we marry, these will remain in his name and if he dies before I do, they will go into a trust with me as beneficiary and his sister as trustee, as he wants the money to stay in his family. We will likely not have children ourselves, rather than 'risk' my willing part of the money to my own niece and nephew. His sister is a lawyer (not an estate lawyer) and not entirely mentally stable. His niece, who would inherit after I pass, is also already in and out of mental health care institutions. Very nice people, but not a family I trust to have my best interests at heart. This sounds too risky to me - if I'm at an advanced age and suddenly have to rely on someone else to let me sell my home, take care of myself, live day to day. He doesn't seem to understand the problem, as he says I would 'have use' the money as I need, though his sister would have to sign off on things. I'm really concerned. The issue isn't wanting money, it's being subject to someone else's control. Any advice? Thank you!

Jonathan Shimberg · Answer

Frankly there is little if anything you can do other than continue to attempt to persuade your partner to name someone other than his sister as trustee.  Naming a bank will result in substantial trust fees that his sister may not be charging.  You sister would not be willing to place her law license in jeopardy by acting improperly with respect to the trust.

Frances Headley · Answer

You should discuss alternative trustees with your intended and an estate planning attorney.

Victor Waid · Answer

You are strongly advised to seek the assistance of a estate planning lawyer, for beneficiary representation, and planning your own estate. You are right to be concerned, as I would be. Do not delay, as you have valid concerns, and they may be more present then you realize or accelerated by future events over which you have no control.

James Frederick · Answer

Sounds like a mess to me. You might consider having a disinterested third party, like a bank, handle this. That would take the mental issues out of play. It would also make it more likely you will wind up with a trustee that you can deal with, let alone trust.

James Oberholtzer · Answer

You are right to be worried.  If there is not a good family member to act as trustee, you can use a friend, a professional (accountant or lawyer usually) or an institutional trustee (bank or trust company).

Dara J. Goldsmith · Answer

The trustee is a fiduciary.  If you have issues you can always petition the court for intervention.

Kathleen Delacy · Answer

The trustee owes the beneficiary a fiduciary duty so if they mis-handle or abuse that duty you do have the opportunity to have the removed and another appointed.  A trustee should be someone the trustor should be able to trust, though.

Brian Haggerty · Answer

It's a classic problem. You will be going, hat-in-hand, to sister month after month, asking to spend money she already considers hers. The quandary is exactly as you pose it, and there is no easy answer. Will you be ready to sue your sister-in-law?

David Leon · Answer

Consider a corporate trustee, such as a bank.

Norman Green · Answer

Consider an independent trustee.

Mark T. Peters · Answer

You need to take the trust document to an attorney and have it reviewed.  Typically, there are protections in place if the trustee is unable to serve and they may be there.  It will be worth the money to know where you stand.

Loren Lambert · Answer

If you have influence, then tell him to pick someone else. If he won't, he doesn't have to.

Christine James · Answer

The reality is your husband's inheritance is his and he doesn't have to provide for you at all.  That said, perhaps you can discuss with him the idea of him giving you a specific gift amount upon his death for you to take care of yourself and he can go ahead and give his fortune to his family in trust separately.  Otherwise, unless you can get him to see your perspective, you are likely stuck with what he decides since it is legally considered his separate property.  Good luck.

Jayne Sebby · Answer

You have a couple of options:  1) You can try to convince your partner to name someone other than his sister to serve as trustee, or 2) The trust document should be carefully drafted to explain exactly when and how the assets should be distributed to you (for example, X dollars transferred to your checking account on the first of every month to be used for Y expenses but not Z expenses.  Or you can refuse the assets of the trust altogether and live on your own income and/or savings.

James Maguire · Answer

These family matters always make life interesting. It is doubtful that you   could change his mind about naming the trustee, so you will probably have  to  live with that.    A trustee can be removed from office if he/she is  not abiding by the terms  of the trust. The trustee can also be  ordered to what the trust tells her  to do, but either would involve legal  proceedings, which you should avoid  if possible.   Just try to stay on good terms with the trustee, if he doesn't want to   change that designation, and hope that she can hold things together when the   time comes.

Phillip Day · Answer

Tough question and no real easy answer.  Consider your options.  You could choose not to marry and when he passes, you would be free of his family and money with no one controlling you.  The negative of that option is fairly obvious.   Option 2, is to to marry him and be subject to his sister the trustee controlling the monies as you need them.  Sounds painful but the purpose of the trustee is to protect the interests of the trustor's wishes (your partner) and not necessarily you.  You as the beneficiary get the fruits of his wishes which may come with strings.  But under option 1 there is no strings and no money.  Unless you are financially independent, you can always go for option 3, which is to ask your partner to pick a different trustee, such as a bank or if he balks, his sister and someone close to you so as to provide a balance.   You cannot blame him for wanting to accomplish two things, one, to provide for you and second to keep the reside of what you don't need within his family.  This is normal.  There is another option as well, and that is to have him buy a life insurance policy on his life, assuming he is insurable, payable to you.  This way, if he passes prematurely, he can bequeath his fortune to his family and leave you with the life insurance proceeds.  Over time, the need for insurance will go down, and the fear of the untrusting sister as trustee won't matter as much if you have insurance proceeds at your disposal.

Gerald Bagazinski · Answer

You may want to consider a prenuptial agreement. It would spell out the rights of the parties relative to inheritance or divorce.

Jeffrey Gottlieb · Answer

Only thought would be for you to openly discuss your concerns with him and any alternatives. If he wants a co-trustee with you, possibly a professional trustee, like a bank, would be a good choice. These are also issues he can discuss with his estate planning attorney who can discuss pros and cons and any alternatives.

Bruce Steiner · Answer

If his sister is not entirely mentally stable, perhaps she might not be the best choice as trustee.  Perhaps he might name one or more other persons, or a bank or trust company, or one or more other persons together with a bank or trust company, as trustee(s).  You could be one of the trustees.  He could give you the power to remove and replace the trustees (provided the replacement trustee is not a close relative or subordinate employee).  He should also make sure his Will is appropriate from an estate tax standpoint.

Bernard H. Greenberg · Answer

Yes, here is an easy fix to this issue. He should name a bank or trust company as the trustee. Additionally, he should include a provision that would permit you to replace the trustee with another bank or trust company.

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