How a Revocable Living Trust Works

Dear Len & Rosie,

Last year my wife and I bought a revocable living trust. We own a modest home, some stocks and bonds, three bank Certificates of Deposit, and two insurance policies that are payable to the trust.

I am the only trustee, because my wife, Gloria, was never all that good with handling money. When I die, my eldest son, Josh, will be the successor trustee. He has promised to take care of his mother after I am gone.

I want to know how it is supposed to work. How does Josh become trustee when I am gone? What if I lose my mind and wind up in a Nursing Home? How do my stock broker and the banks know that Josh is supposed to be the trustee. They might think he was some punk coming in off the street to rip us off.

Reuben

Dear Reuben,

You bought your trust from a trust mill, didn't you? Most of the time when clients who already have a trust come into our office with questions such as yours, we learn that they purchased their trust from a trust mill that didn’t even bother to explain how their trust is supposed to work.

According to your letter, you are the sole trustee and your son is the successor trustee. He will become the trustee upon your death, resignation or incapacity as directed by the language of your trust. Because we do not have a copy of your trust, I cannot tell you exactly how this is supposed to happen. This, however, is the way most revocable living trusts work:

If you die or resign, Josh would become trustee automatically. All he would need to prove he was trustee is your death certificate or your letter of resignation as trustee. There will be other documents needed to transfer specific assets such as your home and accounts to Josh as trustee.

But if you become incapacitated, it can get sticky. The question is this: Who decides whether or not the trustee has become incapacitated? Many trusts are written with provisions that one or two doctors can determine that the trustee is no longer able to handle the job. Other trusts may require the successor trustee to petition the Court for a determination of incapacity. Some trusts have no provision for the removal of a trustee, which means the successor trustee or the beneficiaries of the trust may have to ask the court to intervene. In any event, your son will have to talk to doctors and lawyers if you become incapacitated.

The easiest way to handle the issue of incapacity is to avoid it. Ideally, you should resign as trustee before you become incapacitated. Or, you and your wife could amend your trust to appoint your son as co-trustee and give him the authority to act alone. This way, if anything happens to you, he already has the ability to take care of things for you and Gloria. Of course, you must really trust your son to give him that kind of power over your property while you are still alive.

What you should do is contact the trust mill that wrote the trust for you and request an explanation. If they are not much help, and they probably won’t be, then you should consult with a local elder law attorney to review your trust.

Len & Rosie

A man who represents himself has a fool for an attorney...

Dear Len & Rosie,

My wife passed away two years ago and I have been harassed by her family ever since. Everyone wanted everything back that they ever gave us. Some people get crazy over money, but my wife’s children even fought each other over who got to keep the flowers at the funeral. They make me sick. They are animals.

My wife had a will which turned out to be invalid because it was it was partially written and partially typed. Her family got themselves an attorney to steal as much as they could. After two years, a settlement has been reached between their attorney and mine.

The strange thing is, my attorney fees are twice the amount of the settlement. Can the attorney fees be deducted from her estate? I need an opinion as my attorney balked on this issue.

Larry

Dear Larry:

There is an old saying that a man who represents himself has a fool for an attorney. What people need to understand is that a homemade will that makes perfectly good sense to the average person may have a lot of problems, and may even be totally invalid. You found this out the hard way.

If a person wants a will that has dispositive provisions more complex than “I leave everything to my spouse. If she dies before me, I leave everything to our children”, then that person should see an attorney to make a will, or accept the risk that things can go horribly wrong. People in second marriages, especially those with children from a prior marriage, should always see an attorney to make a will or trust.

Let’s get to your question. You want to know if your wife’s estate should pay your legal bills. It depends. If you were appointed your wife’s Executor by the probate judge, then you have a duty to defend the estate. That means your attorney fees would normally be paid by the estate.

But, you were also fighting your wife’s family as an heir of your wife. There is an inherent conflict of interest between your duties as executor, and your interests as an heir. As an executor, your duty is to administer the estate for the benefit of all the heirs, not just yourself. There is no way of really knowing how much of the attorney fees the estate should pay. That is why your attorney will not give you an answer.

To tell you the truth, none of that really matters. You and the family of your late wife have entered into a settlement agreement to dispose of her estate. All of you agreed to forget about what the law says and cut a deal to avoid having to fight it out in court any longer. You are basically stuck with the terms of the settlement agreement you have already signed.

Len & Rosie