Help me figure out what's going on

March 21, 2012 12:07 AM

Needing advice from an estate lawyer or someone with thorough knowledge of how trusts work.

My father passed away in December 2009 after a battle with pancreatic cancer. Because both my brother and I are under 30, he left his fiance as executer.

I just learned that the final amount of inheritance is around $160,000.00. This figure seems completely baffling to me and I would like someone to help me figure out what is going on.

Because I live outside of the country (and for whatever reason), it has been very difficult trying to get information from the lawyers and his fiance about how the money was distributed, despite numerous emails to her.

The amount in his checking account before he died was $125,000.00 alone. He also left the life insurance to his fiance with the idea that she would distribute it to both my brother and I. She is extremely well off and I see no reason why she would want to keep it for herself. He left the 401-k to my uncle with the same idea. This should have also been put into the trust. He had two properties, which were sold, and the amount put into the trust. Here are my questions:

1. When I received a notice that probate had ended, it stated that the amount in lawyer fees was $9,000.00 and the amount in accounting fees was $1,200.00. Isn't this extremely high?
2. Are there taxes or fees I am not aware of that would reduce the amount substantially?
3. What are my legal rights in this case?

The reason I am freaking out is because I am currently living on $16,000.00 a year and was just accepted into grad school. I have no savings, no assets and my father was extremely frugal in his life which allowed him to accrue a decently sized retirement (he was just 2 years away). It makes me extremely angry that his hard work just melted into nothing.

Thanks in advance.

posted by northxnorthwest to law & government (15 answers total)

He also left the life insurance to his fiance with the idea that she would distribute it to both my brother and I. He left the 401-k to my uncle with the same idea. This should have also been put into the trust.

I take it that legal title to these assets were willed to his fiance and your uncle respectively? If that's right, whether they ought to have gone into a trust for you and your brother depends on a whole bunch of things that you'd need to see a lawyer about. As for the properties, were there mortgages? If so, with the downturn in the real estate market, it wouldn't be surprising if they amounted to not much.

1) The lawyer and accounting fees may or may not be high depending on the nature of the estate. 2) There may have been taxes owing due to previous years or rollovers or whatever, but that depends on all sorts of things.
3) You need a lawyer for this, sorry. The other route is to try talking to the executor, who should have kept records, but it sounds like that's a challenge. A lawyer will do this for you, if you hire one to.
posted by smorange at 12:34 AM on March 21, 2012

He also left the life insurance to his fiance with the idea that she would distribute it to both my brother and I. She is extremely well off and I see no reason why she would want to keep it for herself. He left the 401-k to my uncle with the same idea.

One thing you need to understand here is the concept of a beneficiary. A life insurance payment is made by the company, under penalty of law, to the person (or trust) named as beneficiary -- not to the estate. If your father intended for the life insurance proceeds to end up in the trust, he would have needed to specify this in the appropriate beneficiary form for his policy.

The policy pays out on the company's schedule. It does not end up in the estate and is not really subject to the whim of the executor. It may well pay out well before probate.

It is also likely that the 401(k) plan had a similar arrangement, although the rules will vary.

IANAL but I am involved in planning my parents' estate as my father's POA. These things very frequently trip up people who don't educate themselves on the process, and are among the first things explained by seminars and attorneys speaking to laypersons.

The other concept is joint ownership. Say your dad had a car. If he and you were both on the title as joint owners, when he dies, it's still yours. Otherwise it needs to go through probate.

My answers to your questions: 1. Hard to say if the fees are high or not. Among other questions, did the attorneys handle the real estate disposition? 2. Well, there is the US estate tax, which has come back into force after several years of suspension. There may also be state taxes. 3. You have legal rights if you are a named beneficiary, a joint owner of any property, or named in the will. (Note that the trust is a legal entity to itself; you may be a beneficiary of the trust, but the trust would be the beneficiary of the will or assets.) Otherwise, you may have no legal rights. The estate is the domain of the deceased and they can cut you out in various ways, a firewall the piercing of which is notoriously difficult. Get a lawyer to sort out any questions you have. The trust, by the way, should have its own representation (with your best interest, or whatever the trust says, to be protected), and it would be helpful to know how it is managed. It may well be that you and the trust need different attorneys.
posted by dhartung at 1:55 AM on March 21, 2012

Keep in mind, also, that any and all debts he may have had should have been paid by the estate before any distribution of funds.
posted by HuronBob at 2:30 AM on March 21, 2012 [1 favorite]

There is a lot of information left out of this question. Did your father live in the U.S.? Canada?

You mention a trust and you mention probate. You mention life insurance and a 401(k) plan. You do not mention joint accounts. All of these have different rules that apply, and the law in each state can be different as well.

Distribution of a 401(k) plan is governed by Federal law. The person named as designated beneficiary succeeds to the interest of the owner, and that person has no legal obligation to pass the money on to someone else. If your uncle agrees to distribute the funds to you once he receives them and pays the tax, he is free to do that. But he is not required to do so, and he cannot simply transfer the account to you and your brother. He cannot "put it into a trust".

In general, in most states, the following applies:
- The same principle governing the 401(k) plan governs life insurance as well. The beneficiary receives the money and has no legal obligation to pass it on to another person. Even if the will directed her to do that, it would not control, because life insurance proceeds are paid to the beneficiary and not to the estate.
- If his checking account was in the joint names of himself and his fiancee, the same thing applies. It is her money now.

You need to consult with a lawyer in the location where your father lived to get sound advice. What you get here are only generalities.
posted by yclipse at 5:29 AM on March 21, 2012 [1 favorite]

You need to get a lawyer. I speak as the child of a father who fucked up by leaving the trust meant for me, his only child, in the hands of his mistress.

You need to understand if you and your brother are the named beneficiaries of the trust, what assets are in the trust, who the trustees are (your father's fiancee? your uncle? someone else entirely? a company?). You need to understand fiduciary duties. You need to understand what was in the estate, what was in the trust, why it was a trust in the first place. You guys are full grown adults, but there might have been stipulations as to when and how the trust distributes its assets to you.

LAWYER. Lawyer, lawyer, lawyer.
posted by lydhre at 5:51 AM on March 21, 2012 [1 favorite]

Yeah, I think you nailed this question in your first sentence: "Needing advice from an estate lawyer."
posted by dixiecupdrinking at 6:37 AM on March 21, 2012

I apologize for speaking in generalities, though I suppose that speaks to how ignorant I am of what's going on. I've read the will and all it states is that his assets are to be distributed equally between my brother and I.

We live in the United States, Washington State to be specific.

The executor has not gotten back to me on any of these questions and the general consensus seems to be that I should contact a lawyer to ask these questions for me. The only issue is, I don't want to disturb the relationship between my father's fiance and I. She may take it as an insult that I would be contacting a lawyer in the first place.

What kind of legal fees would I be looking at by speaking to a lawyer?
posted by northxnorthwest at 7:02 AM on March 21, 2012

My trust lawyer here in NYC runs about $450/hr. I assume anywhere else in the US it will be about half that, if not less.
posted by elizardbits at 7:15 AM on March 21, 2012

OP, when you say "trust", do you mean that the will has a trust set up, with a named trustee and distribution dates for the money in the trust and whatnot, or do you mean "the amount available to my brother and me for distribution"?

(they're two entirely different things)
posted by Lucinda at 8:19 AM on March 21, 2012

Someone mentioned debts, what about medical expenses? There certainly could have been a lot of if he had a battle with cancer.
posted by bongo_x at 10:04 AM on March 21, 2012

>What kind of legal fees would I be looking at by speaking to a lawyer?

In my area, maybe $200-250 per hour.

Speaking with a lawyer would only take 20-30 minutes. Having him do some investigation for you based on his advice may be more costly. But remember that you are doing this to defend your entitlement to very large amounts, by comparison. If it costs you $10,000 - not to say it will - it may still be an expense worth incurring.

Look at it this way: doing nothing may cost you $100,000 or more.
posted by yclipse at 8:21 PM on March 21, 2012

Bongo_x, my father's insurance covered the medical expenses.

Lucinda, I mean the will has a trust set up and my brother and I are named trustees. We will have complete ownership over the money (meaning, we won't have to go through the executor to access it) once we turn 30.
posted by northxnorthwest at 2:36 AM on March 22, 2012

Still not making sense. Are your brother and you named trust beneficiaries?
posted by yclipse at 9:14 AM on March 22, 2012

what yclipse said - the "trustee" is the person who manages and maintains the trust, *not* the people for whom the trust is created (those are the beneficiaries). Sometimes it is the same person as the executor, sometimes it is someone else, sometimes there is also a bank listed as a co-trustee. There should be a specific clause in the will stating "I name so-and-so as Trustee of any trusts created under my will."

Repeating what people have said up above -

if your father named individual people (ie., your uncle and his fiancee) as the beneficiaries of the 401(k) or the life insurance, the money will go directly to them. The life insurance company will send a check made payable to "northxnorthwest's dad's fiancee" to her. The 401(k) company will send a check made payable to "northxnorthwest's uncle" to him. It will have nothing to do with the trust because it is separate from the estate. Your dad and uncle and dad's fiancee may have had some understanding/informal agreement that the money would be put into the trust, but they are not required to by the will.

on the other hand, if your father named his estate as the beneficiary, the life insurance company and the 401(k) company will send checks payable to "the estate of northxnorthwest's dad" to the trustee and they will be deposited into the trust.

As for the properties, if there were mortgages outstanding on the properties, they need to be paid off with the proceeds from the sale, along with any realtors' fees and other standard house sale expenses.

(IANYL, IANAL but have 6+ years of estate experience as a paralegal. I am in New York state, though, so things might be different out here)
posted by Lucinda at 9:34 AM on March 22, 2012

OP, what you need to understand is that a trust splits title to assets into legal and equitable title. Legal title is what you'd call the nominal ownership of the funds, which includes management of the funds. Equitable title is the right to enjoyment or benefit of the funds. The holder of legal title is called the trustee. Sometimes this is a person; sometimes it's a corporation. That person has the right (usually, duty) to disperse funds under the conditions set out in the trust. Trustees have no right to spend the money on themselves, unless allowed in the trust instrument (probably the will, in your case) or by statute (e.g. a fee for managing the funds). The holder of equitable title, by contrast, is called the beneficiary. There can be more than one trustee or more than one beneficiary. The trust instrument should spell out all these details, with an assignment of roles, as well as the rights and responsibilities of each. It's impossible to say more without access to that instrument, and it'll be hard for you to understand your rights and responsibilities without a lawyer, even if you have the instrument.
posted by smorange at 10:38 AM on March 22, 2012