Managing an estate in a blended family

[Anonymous]

My father has a relatively high net worth, but likely less than the recently raised lifetime gift tax exemption. He recently married his long time partner who is a women with little savings and two adult children. The children make enough to support their families, but not enough to support their mom. My sister dislikes his wife mainly because she sees her as a threat to "her" inheritance. My father has recently confided in me that his assets will be placed in a trust and I will be the trustee. The trust will be designed to support his wife and upon her death would pass to my sister and I. Nothing from the trust would be left to his wife's children or be used to support her children. The trust will also allow for some support of my sister and I if need be, although we both are fairly successful (although maybe not by DCUM standards in that we would both notice an inheritance of 5M). My father and his wife are in agreement with this plan.

My father does not want to simply say his wife gets 200k (or whatever) a year. Instead, he wants the trust to provide a certain standard of living for her similar to what they have now. There is no question that the trust can support that standard of living without touching the principal and in fact it will still grow. Details of the standard of living will apparently be in his will, but the idea is she will come to me when she needs money. In their minds, this would not be a daily thing, but there would be a monthly transfer for planned expenses and then if she needs a new car (or to pay for a large medical bill) she would let me know. As far as I am concerned, it is his money and he can spend it how he wants. Further, they have been together for a long time and she deserves to maintain her lifestyle. That said, however I manage the trust is going to cause a huge fight with my sister. For example, the fact that they have driven Mercedes for the past decade and replace them every couple of years, does not mean my sister would approve. I think it is a huge waste, but if that is what they want, I wouldn't want to deny my father's wishes. My sister of course would only want me to get the wife a used Kia.

I told him that I wasn't comfortable with the first time my sister finding out about his estate planning was after his death. He told me not to tell my sister but that he would make things clear in the will. What should be in the will in order to make this work? Do I tell my sister now even though he asked me not to?

[Anonymous]

No, you don't tell your sister anything.
She sounds like a nasty control freak.

[Anonymous]

Don't allow your sister to control you anymore.

[Anonymous]

Maybe your sister needs a family therapist. I can see her point that she has to wait for your dad's wife to pass to get her portion of the estate. But to violate boundaries and tell you what to do when it's not her money? Cray Cray.

[Anonymous]

Will she have access to the details of the trust? I would plan to do a monthly distribution anyway, rather than have you dispurse money for large purchases. If you can avoid it, I wouldn’t tell your sister how the money is given out.

[Anonymous]

I would ask your father to reconsider this idea of her having to come to you to ask for money for large purchases. What if you decided you didn't like her or something happened to you?

Coming up with a set yearly distribution from the trust would make everything much simpler, and it would completely protect his wife. It shouldn't be too hard for them to determine a budget, and then have a provision that it increases with inflation. If she wants to buy a car every two years for the next 10 years figure out the approximate cost and factor it into the yearly amount. I think this would be much easier, than having individual large purchases scrutinized.

I don't know if your father needs to tell your sister all the details, but I do think he should let her know that he expects his wife to live out her life in their current standard of living and that this will be reflected in his will.

[Anonymous]

I would plan to do a monthly distribution anyway, rather than have you dispurse money for large purchases.

This. Find out how much they are spending per year and figure it out that way, including a year when they buy a Mercedes or whatever.

[Anonymous]

Good for your father for approaching his estate planning with his children in mind. That's rare.

TBH, I'd only share information with your sister on a 'need to know' basis. She doesn't need to know that you're the trustee, or that you have decision-making power over the wife's spending. Keep her in the dark and send her paper statements so she has an idea of what she can expect to receive.

And, set her expectations that settling a large estate takes 1 to 1.5 years for all the filings, etc. Wife's expectations too!

[Anonymous]

Jeez, this seems so complicated. What is his concern with just giving her a flat amount every year (possibly adjusted for inflation)? Seems vastly preferable.

[Anonymous]

I don't think its fair she has to constantly ask you for money. I think you are right and she should get a set amount each year in less its for something like nursing home care or an aide.

[Anonymous]

What you described is fairly standard in his situation. A good estate planning attorney will be able to create all of the necessary documents. The biggest thing you want to be sure of (and the attorney will go over this with your father) is that his assets are properly titled to go into the trust when he passes away. As for your sister, don't say anything. Ask your Dad to write her a letter now outlining his intentions so that it will be clear later you are following his wishes. Have the attorney keep the letter with the original signed will and trust documents. It's possible she never sees the letter and will never even know since this is all based on your father predeceasing your stepmother.

[Anonymous]

Set up a percent that she gets per month out of the total. Investments go down...she gets a little less....investments
go up she gets more due to the percent.

Don't structure it so she has to go to you for things.

Also, I'm not crazy about "surprises" ever since I'm
co-trustee of Mom's monies (alzheimer's ) affairs (along
with a lawyer) after Dad's
death. After Mom's death the monies get split
between myself and sister.

My sister and I did not know anything about this until
after Dad's death. Sister went psycho, and I mean
psycho threatening the lawyer at a meeting. She
did not have a gun but it was a level of threatening
just short of pulling a gun out.

Dad weenied out by not telling us in advance. It would
have been a lot better if Dad had told both of us in
advance.

Good on your Dad for looking out for the two of you
and his current wife. That does not always happen.

[Anonymous]

I agree with the other posters that your dad should set up the trust to pay out a certain amount each year (or month or quarter) for everyday living expenses, with other emergency expenses to be paid additionally as they occur.

I also think that your sister may try to contest the will. Your dad should add a statement to his will saying that if the will is contested then the person contesting the will shall not receive anything.

[Anonymous]

It’s nice your dad want to help his wife out financially.

But... you and your sister are his family.

Take care of her bills as your dad instructed, it does not seem complicated.

[Anonymous]

What if the dad's wife remarries? Is there a clause to cut her off then?