Delia’s parents completed a living trust many years ago, naming Delia, now 52, and her two siblings the beneficiaries of their estate. The trust also divided the assets, worth more than $600,000 two decades ago, between her parents. When Delia’s mother died, her father, by then in his 80s, inherited his late wife’s assets — and then remarried six months later. He and his new wife bought a home worth about $500,000. He then told Delia and her siblings that the trust had been dissolved, and that when he died, the new home would be their only inheritance. Pretty much everything else, including his life insurance policy, his military and career pensions, and all his retirement accounts, would go to his new wife. Delia is upset about the way her father is acting, and also concerned about paying for her daughter’s college education. "To me, it’s about what my mother would have wanted," she says. "She would have wanted her kids and grandkids to be taken care of."
The Experts Weigh In
As one of the creators of the living trust, Delia’s father had the legal right to change or revoke it. Still, a parent’s late-in-life remarriage is often hard for the first wife’s children to accept, Grubman says. If Delia’s father is not honoring his first wife’s wishes, Grubman suggests Delia talk to him. "If she finds the courage to say ‘I feel you’re betraying Mom’s memory,’ he may say, ‘I never thought of it that way. I had no idea you felt so strongly.’ " Of course, he may still leave everything to his new wife, but "at least his daughter has been able to say what she needed to, and she may feel emotional closure because of that."
"Why can’t my sister trust me for her share?"
Noreen’s mother left her house, worth about $360,000, to Noreen, 48, and her younger sister, along with some $300,000 in cash. Noreen wanted to live in the place where she’d grown up, so she hoped to buy out her sister’s share and move in. At the time, however, Noreen and her husband had more than $70,000 in credit card debt and a mortgage on their current home. So even with her share of the cash inheritance, she didn’t have enough money to buy out her sibling right away. "My sister is very concerned that if I move into the house without paying her, she will somehow be slighted," Noreen says. "She’s never come right out and said ‘I want my half up front,’ but it’s obvious she’s anxious."
The Experts Weigh In
To make the arrangement work, says Park, Noreen should move into her mother’s house, take out a mortgage worth no more than 70 to 80 percent of its value and pay off the mortgage on her current home. Then she should have enough cash to pay her sister and dispose of her credit card debt, with some to spare. But all that will take time, so she should immediately agree, in writing, to pay her sister within a specific time frame (say, one year), with interest, for her half of the house. "Otherwise," Park says, "the IRS would interpret what’s happening as her sister giving her a gift, and the sister might be taxed on it."
"My father made us give our inheritance away."
Prior to his death, Lisa’s father talked to his five children about their shares in his estate, which was worth an estimated $85 million. Their understanding was that he’d give $1.3 million to each, then split his property, and whatever else was left, among them. When he died, each child did receive $1.3 million, but to their surprise, the rest went to his second wife and to a foundation he’d created. The five children are now in charge of giving away the money — $12 million to start, and more when their father’s wife dies. "Some of us had conversations with him in which he implied that he would give a larger percentage of his wealth to his kids," Lisa, 53, says. "We made life decisions because of what he said. And then not only did we not get the money but we had to give it away to strangers. That felt like pouring salt on the wound."