My 80 year old sister's health is declining and she wants to update her will/trust. Problem is, her husband is extremely difficult (cunning, manipulative, narcissitic, revengeful, etc.). This is a second marriage for both. There are 5 children between them and they are to share in whatever is left upon the demise of their parents. Problem is, my sis has a condo which is in only her name. Step-son thinks he should have access to this asset as well. She bought this with her own money as she also did with the household furnishings. Because of the extreme trust issues with both my sister's husband and step-son, she thinks it best to have an irrevocable trust to protect her interests and that of her children. Does anyone have any experience with this type of situation?
They are also used as a tool to qualify for needs based programs such as Medicaid and VA's Aid & Attendance. They can prevent loss of assets. A revocable trust does not accomplish the asset protection or benefits planning goals.
Issues surrounding second marriages and heirs can be complex and contentious and it is important that the parents come to agreement as to the disposition of their assets (not the heirs) and that proper documents then be drawn to effectuate those desires.
That being said, most spouses want the surviving spouse to have use and enjoyment of the other's assets until the demise of the surviving spouse at which point assets are divided among the heirs.
Typically this is done via the creation of a revocable trust(s) the testamentary terms of which become irrevocable at the demise of the grantor. It can also be done via Wills which then fund a trust as previously mentioned.
Medicaid considerations:
Two cautions:
1. Transfers to an irrevocable trust are subject to the famed "5 year look back" with respect to Medicaid eligibility.
2. Some states do not consider a primary residence held in a revocable trust to be an exempt asset for Medicaid eligibility purposes.
Lastly, some states have stringent "Spousal Elective Share" statutes which prevent a surviving spouse from being disinherited - usually stipulating that a minimum percentage of the entire estate be available to the surviving spouse - including those held in a revocable trust.
A competent estate planning attorney will be helpful in exploring options.
I assume you know that once executed, an Irrevocable Trust cannot be changed? Is there some reason you're not considering a Revocable Trust for your sister only, addressing specifically the assets she owns individually and to whom she wants to bequeath them? Or is it because she's concerned her manipulative husband might change a Living Trust without her knowledge? If so, that can't happen if she had a Trust of her own and doesn't authorize him with any authority under it.
The step-son's desires really are irrelevant - it's your sister's house.
An attorney can draft a deed that transfers her condo to her Living Trust, with provisions in a Pour-Over Will and the Trust that specifies exactly who will inherit the condo on her passing. Assuming that your relationship is good, she could also identify you as her Successor Trustee.
And BTW, I'm assuming there's no pre-nuptial agreement in place.
What document(s) specify that the 5 children share equally? If your sister doesn't want the step-son to get the condo, those documents would have to be amended as well.
Hope this helps.