In today's set of first-world problems...
November 2, 2016 12:16 AM   Subscribe

I'm an adult, but my parents still control my revocable trust. This makes me feel weird for a number of reasons. How should I deal with this?

I'm 32. My spouse is 35. We've been married for five years. We are in good shape, financially. My spouse has a degree in finance and economics. We have never taken money to Vegas and blown it on crack and whores.

My parents are sweet and I love them dearly, but they have controlling and overprotective tendencies.

They set up a revocable trust for me when I was 22. I didn't really ask questions at the time. The amount of the trust is now about one year's income for us. We don't have an immediate need for the money, but we have future projects in mind where it would be nice to use that money. They are the trustees. They invest the money how they want, with no input from us. We pay the taxes and work around their investment strategies.

The problems here are severalfold:
1. Signing forms and paying taxes, etc., for something we have no input on is frustrating. They also have a completely different investment philosophy from us.

2. When I inquired what the money was for, they said, "If you need it." When I inquired slightly more specifically about whether they'd let us use it for something like future renovations on our house, they said, "If it comes up, we'll talk about it." This feels infantilizing and like they don't trust me to make financial decisions.

3. They have also stated in the past that they want money that my spouse can't access, despite the fact that we are married in a community property state and half of everything, including my spouse's lucrative if illiquid exercised stock in a startup (titled jointly) and our house (also titled jointly), would go to me in the event we divorced. This makes makes me feel like they don't trust my spouse, who has been an amazing, supportive partner and child-in-law.

The trust is revocable, so technically I could just revoke it. But that wouldn't go over well with my parents. Besides, I'm genuinely grateful for their love and their caring and their willingness to put aside that much money for me/us, and I wouldn't want to make them think otherwise. But the way it's set up and functioning really bothers me.

Any suggestions for discussing this with my parents in a loving but honest way? Any reframes that might help me see their side of things better?

Thanks in advance.
posted by anonymous to Human Relations (33 answers total) 3 users marked this as a favorite
"Mom, Dad, I love you, and I am grateful that you raised me to be a strong, capable, independent adult. One who is strong enough and capable enough and independent enough to discuss with you in a mature, level-headed manner exactly what in the ever-loving blue-eyed fuck you think you're doing with this trust."

Okay, maybe not the last part quite so much. But approach it from the (unstated) angle of "I am a grownup -- treat me like one." And ask yourself what you'll do if they say No.
posted by Etrigan at 12:31 AM on November 2, 2016 [3 favorites]

Maybe this set up makes them feel connected to you, i.e. it provides (psychologically at least) a mechanism by which they can actively keep 'parenting' you. If that is the case you may need to find some way of alleviating any anxiety they have - probably unconscious - around losing this position if they hand over the cash.

Can you share your plans for the cash with them? Could you ask for their help in handing the reins to you, or get them involved in the projects you're planning? This could provide them with more of a mentoring role which might be an attractive trade-off.
posted by freya_lamb at 12:56 AM on November 2, 2016 [1 favorite]

Ugh, your question triggered some trust-PSTD in me. I've been through a similar-ish situation but much worse.

Disclaimer: I am not a financial professional and any or all of the below might be totally wrong.

Why are you paying taxes on this money? It's your parents who are the grantors, right? The money in a revocable living trust is not your money, for tax purposes. Also, it's the grantor who can revoke the trust, not the beneficiary. What does the trust document say the money can be used for? Why are they even setting up a trust rather than just saying they'll give you money if you ask for it? This sounds super weird and fishy and maybe like nobody involved has a super clear understanding of how trusts work.

What I would suggest:

1. Get a handle on exactly how the trust works. Stop paying taxes and signing forms until you've gotten clear guidance from a professional expert on trusts that this is something you need to do.

2. You can try to convince your parents that this is silly, and you should try, because you'll never forgive yourself if you don't. But if you fail, I would just mentally consider the money theirs (because, in a revocable trust, it *is* theirs -- at any given point they could just go "nah, we don't want to give anonymous this money, never mind" and take the money back, which is basically the same as the money belonging to them) and forget about it.

Regarding the part about their not trusting your spouse with assets -- I wouldn't take it personally. My mom loves my boyfriend of 10+ years to bits but she had that attitude for a long time and for almost two decades would give money to me and my sisters and my nieces and nephews but would never give a dime to our boyfriends or husbands. It was easier not to take it personally, seeing that she applied the same policy to all her sons-in-law. Folks in an older generation who have seen their friends trapped in abusive relationships, or have gone through it themselves, often have that attitude. I bet you one or both of them has seen some shit and doesn't want it to happen to you -- I wouldn't take it as a personal judgement of your spouse.
posted by phoenixy at 1:42 AM on November 2, 2016 [39 favorites]

P.S. If for whatever reason you are the grantor (which would be really weird, but is the only explanation consistent with the information you've given) then yes, you should revoke the trust. Explain to your parents why you're doing it, but seriously, there is no reason for your parents to have control over what is your own money. You will feel so much better when this trust is dissolved, you have no idea. In my case I felt like a weight I had been carrying around for years was lifted.
posted by phoenixy at 1:51 AM on November 2, 2016 [3 favorites]

Did they actually sit down with a reputable attorney to set this up? Or is this some kind of packaged trust deal? It's 4am and I have a terrible head cold so I might be missing something here, but I just can't make this work out. I've run into people before in my old life doing taxes who had trusts they bought as packages from investment advisors or off the internet that did not actually do what the people thought they did, and that seems more plausible right now than any other possibility. You guys really need to sit down with an attorney and the actual trust documents and hash out what this is for, what the actual conditions are for distribution, who's supposed to be handling administrative functions like taxes, and all that.
posted by Sequence at 2:14 AM on November 2, 2016 [3 favorites]

I agree. This seems really odd, and I can't quite see an arrangement where all the facts you have given fit.

I would recommend taking all the paperwork to a reputable trusts and estates attorney and getting their advice on what this actually is.
posted by susiswimmer at 4:08 AM on November 2, 2016 [7 favorites]

Yes, something is weird about this. As the grantors of the trust, they're the ones who would be typically paying taxes on it, not you. Have you ever seen the actual paperwork for this trust? How do you know what taxes you have to pay on it every year?

I think the first step would be to say to your parents that you'd like to learn more about how the trust works, and ask them to give you a copy of all the paperwork setting up the trust. I'm almost wondering if they're going to balk at that request. If they do, that would throw up some serious red flags for me. If they give you the paperwork, take it to a lawyer and ask them to look over it. Here is the American Bar Association guide to finding a lawyer.

One thing to know if you've never dealt with lawyers before that can be sort of disconcerting: sometimes lawyers can't answer all of your questions right off the bat. If there is a clear and obvious problem with the paperwork, they may be able to tell you right away that something looks fishy. They may also be able to tell you right away that everything looks fine. But it's also quite possible that they'll tell you that they have to look into some things and they'll get back to you. That's okay. Sometimes you're basically hiring them to do your research for you because they have access to lots of sources you don't have and because they've been trained to sort through those sources and find the relevant bits.
posted by colfax at 4:39 AM on November 2, 2016 [5 favorites]

Taking at face value that they really can revoke the trust at any time and there's nothing you can do about it, all you can do—if you want to live your life as a fully-independent adult without parental control—is find a way to move forward in your life without the trust money. Very few people have trust money from their parents after all, yet most people manage. You should consider that money gone, and make no plans involving it. If you get some, then bonus! You can sock it away in a savings account, blow it on flatscreen TVs and Spam, whatever. If you don't then no loss.

If you're concerned about the forms you're being asked to sign, don't sign them. You're allowed to tell your folks "Hey, I'm not comfortable with this arrangement and don't want to be associated with this trust. You guys can just keep the money. Love you though!" It's really OK to just refuse to have anything to do with it. But the folks above are probably right that you should have a financial advisor and/or lawyer look things over before you start issuing ultimatums.
posted by Anticipation Of A New Lover's Arrival, The at 6:06 AM on November 2, 2016 [23 favorites]

People seem to be misunderstanding both the words "revokable" and "trust" here.

1/ You should not be paying taxes on this trust.

2/ This is not a trust fund. A revokable trust is an estate planning tool. During their lifetimes, they transfer whatever they want to the trust. When they die, the contents of that trust transfer to you without the need for probate. This is a huge bonus.

3/ It is "revokable" not because you can revoke it, but because they can (ie they can revoke any prior provision and make fluid changes and updates to the trust)

4/ Until they die, this is not your money and not any of your business. Like they can just leave you this trust and not tell you beforehand; they have no obligation to let you know about it; you have no power over this trust until their deaths.

Please see an estate attorney because you seem to not understand what this is or how it works, and the annual paperwork is very odd.
posted by DarlingBri at 6:22 AM on November 2, 2016 [56 favorites]

I recommend forgetting this money exists. Consider it your inheritance that won’t be yours until your parents are gone. Tell your parents that you need the tax money to come from the trust, not your current income, and then drop it.
posted by metasarah at 6:30 AM on November 2, 2016 [23 favorites]

Yeah, talk to them about the taxes and paperwork. The fact that this is constantly coming up for you understandably makes you feel like you should be getting some benefit from it. And then forget it, unless it gets to the point where you really need some help from your parents for a medical emergency or similar. It might then be less painful to ask if you knew there were funds earmarked for you already and you are not asking for their rent and food money.

Also, I agree that it's really common for parents to want to keep some money just for their direct descendants. My father wrote wills for a living, and he did this to a large extent. He had a constant mental calculus going about what would ensue if this person died or that thing changed and would call us on the phone to warn us about what might happen so that an ex brother-in-law or somebody would wind up with our money. Sometimes this has resulted in our getting into situations like you describe with our partners feeling left out. I think those are really real feelings and you don't need to wave them away by saying it's just something people do with their estates. It can actually feel hurtful to your partner; it has bothered both of my partners, despite them knowing it's something lawyers do. This is another reason not to be getting paperwork about it all the time.
posted by BibiRose at 6:55 AM on November 2, 2016

I would definitely do more research on this. See an estate attorney or a investment banker. You should not be paying taxes on anything. If anything it should be filed as part of your parents tax portfolio. If invested correctly through tax free bonds or certain IRA's there shouldn't be hardly any taxes to pay. I mean its a good thing to have this money squirreled away, and someday if the money is working for you, it would be wonderful for your retirement. I personally wouldn't want to touch it for this reason alone. However, this tax weirdness and them lording it over you needs to be addressed.
posted by PJMoore at 7:07 AM on November 2, 2016 [1 favorite]

One thought I had from the details you offered - if your spouse is in a startup with maybe-one-day stock options, they might be making below market salary now or have less job security/stability than you do. Perhaps your parents don't approve of this or don't want to subsidize spouse's below-market earning. This might be one thing that feeds into your third point. Maybe they are concerned spouse will access the money to invest to keep their company afloat or to help them get through hard times (eg everyone takes a pay cut). I'm not saying this is right, just that it might help explain their mindset about the money.
posted by handful of rain at 7:10 AM on November 2, 2016

It's not clear from your description what your parents' overall financial picture is. Are they close to retirement age? How much of a chance is there they will be asking you for support down the road? In this day and age, not having to financially support your aging parents could be seen as a significant gift in itself. But also, in the US, you really never know. I would seize the issue with the trust, its taxes and paperwork as an opportunity to bring up the question of your parents' overall financial (and literal) health and see what you might do to help keep the family financially solid.
posted by BibiRose at 7:43 AM on November 2, 2016 [1 favorite]

I really want to emphasize to you how much letting go of this money will set you free psychologically. Believe me, I know. I know how hard it is to let go of that nice, juicy money when you have these little voices like "But I work so hard" and "It would be stupid to give it up" and "what if parents are right about spouse?" and "I could do so many things with that money, like lifelong dream xyz." I know. And it suuuuucccks to have those voices.

But I promise you, I solemnly promise you you will be healthier without that money hanging over you. You really will. No amount of money is worth the price of giving away your autonomy, your adulthood, your freedom, and your self-worth. Ever. Money is just money, it comes and goes. You, and your ability to take care of yourself and bounce back, is what really matters in this life. That's what you'll need if your spouse turns on you, or if your retirement dries up or whatever. You'll need yourself and your health and the ability to work and bounce back.

A big part of that is ownership of your psychological health and putting and end to silly power games with your parents. Believe me, it will feel so good to say, "Mom, dad, you keep the money," with a big smile. It's definitely worth whatever's in that trust and then some. Your parents will still leave you money. They just won't get the silly power game anymore.
posted by stockpuppet at 8:02 AM on November 2, 2016 [10 favorites]

nthing that something is not right here, either in the way the taxes are being paid or in the terminology that is being used to describe the trust.

A revocable trust is an estate planning tool that can help lower the costs associated with settling an estate. The "revocable" part means that the settlors, in this case your parents, can change or revoke the trust at any time prior to death provided they are not mentally incapacitated. This money belongs to your parents until they die and the trust settles. You should not be paying any taxes on it. Think about it: Why should you pay taxes on a trust that your parents could revoke?

So, if it really is a revocable trust and not some other kind, the reason you may not be getting the answers and specificity you're looking for is that the trust was established to be an inheritance. But, because it is a revocable trust, they have the flexibility of modifying or revoking the trust while they are still alive in order to help you should the need arise. I'm guessing you are the sole beneficiary of the revocable trust because the money belongs to your parents (not you) until they die, and if you were to divorce it is unlikely your husband would be entitled to half of the trust.

To my thinking, you should simply consider the money a possible inheritance, respect the fact that your parents can invest it however they see fit because it is their money, understand that situations might arise in which the trust is revoked either because you need the money or because your parents need the money for themselves, and be cool about signing whatever legal forms are required to comply with regulations, etc. as the designated beneficiary of the trust. The one thing that is worth taking up with your parents is that you shouldn't be paying taxes on the trust. That's not how this is supposed to work.
posted by slkinsey at 8:56 AM on November 2, 2016 [1 favorite]

Don't pay taxes on money that is not yours. WTF, mom and dad??
posted by jbenben at 8:59 AM on November 2, 2016 [2 favorites]

[This is a followup from the asker.]
Thanks for your answers. To clarify, I am the grantor/settlor and the beneficiary on the trust, and my parents are the trustees. They gifted me the money and then set it up as a trust, on my behalf, when I was 22. Why did I sign the paperwork then? I dunno, I was 22 and in college and stupid. Lesson definitely learned!

Because the money is actually mine, in my name, I have to pay taxes on it, and walking away/giving it back to them isn't an (easy/straightforward) option.

My question is much more about the interpersonal relationships than the financial structure of the trust (though speaking to a lawyer is not a bad idea) - how do I both thank my parents for their generous gift and their love and caring for me, while gently saying "I'm an adult, I'll take it from here"?

And my spouse let me know of a very unfortunately missed opportunity for the title of this question. Clearly, it *should* have been "I'm a trust fund baby, you can trust me" :)
posted by cortex (staff) at 9:09 AM on November 2, 2016 [1 favorite]

"Dear parents, thank you so much for taking such good care of me and doing all the work on this. From here on out, for financial simplicity and to lessen your load, I will be taking over the handling of this money. I love you both very much, and will be sending the paperwork over shortly."
posted by Vaike at 9:19 AM on November 2, 2016 [2 favorites]

how do I both thank my parents for their generous gift and their love and caring for me, while gently saying "I'm an adult, I'll take it from here"?

"Thank you for your generous gift when I was 22 and for all the love you have shown me and guidance you have given me. I'm going to take it from here." Have this conversation after you talk to a lawyer about, at a minimum, changing the trust so that you are the trustee, and perhaps even completely dissolving the trust if it makes no sense to keep it.

Think of it this way - if they had given this money to you as a gift at the age of 22, and then came back to you now, 10 years later, and asked you to give the money back to them for them to manage for you, would you agree? This is legally and ethically your money, not your parents. They could have chosen to set up this trust in a different way so that it remained their money, or as a completely separate asset with you as the beneficiary, but they didn't.
posted by muddgirl at 9:26 AM on November 2, 2016 [3 favorites]

Yeah, but the problem is that as long as your parents are trustees, their literal job is to invest the money for you as they best see fit and make their own decisions on your behalf. You are sending mixed messages if you are telling them to respect your autonomy while retaining them as trustees. If you want to take it from here as an adult, you need to revoke the trust.
posted by phoenixy at 9:26 AM on November 2, 2016 [5 favorites]

It's unclear to me that it's possible for the same person to be the sole settlor and sole beneficiary of a trust. In that case the legal and equitable title would merge and there would be no purpose for the trust.

If I were you I would first get my ducks in a row by going over all the terms and conditions of the trust with an attorney to figure out what my options were. For example: Are there other settlors or other beneficiaries? What are the requirements to modify or revoke the trust? Is it possible to replace your parents as trustees? If you explain to the attorney what your issues and objectives are, the attorney should be able to advise you in a way that will help contextualize your future communications with your parents. Once you have that in formation, and depending on what your rights and abilities as a settlor/beneficiary of the trust may be, I would simply thank your parents for their kind gift and their services as trusees but then explain to them that, as an adult who is the legal and tax-paying owner of the trust's property, you are no longer comfortable with them managing the trust and being vague about what/when/why you can use trust funds and therefore you are going to [take whatever action your attorney advises you that you are legally entitled to take].
posted by slkinsey at 9:53 AM on November 2, 2016 [5 favorites]

Could the parents be both the trustee and the beneficiary? That seems pretty suspect since there's a conflict of interest there for a revocable trust, but I'm not a lawyer.
posted by muddgirl at 9:56 AM on November 2, 2016

This is not a trust fund. A revokable trust is an estate planning tool. During their lifetimes, they transfer whatever they want to the trust. When they die, the contents of that trust transfer to you without the need for probate. This is a huge bonus.

The problem with the information as provided is that it's really hard to tell how this was all intended to work. It would be weird for it to be set up with the child as the grantor, but it's weird no matter which way this is sliced. The tax part of this is not at all consistent with this kind of living trust, nor is the fact that it seems to be funded only with money intended to be a gift to you. The usual living trust arrangement would include, like, their house, their cars, you'd KNOW it wasn't intended to go to you during their lifetimes, and they'd be paying taxes on it like usual. It would be very normal for your parents to have this kind of living trust, but it's not consistent with the description provided in more ways than just who's paying the taxes, so I don't think that's the only problem here.
posted by Sequence at 9:57 AM on November 2, 2016 [2 favorites]

I honestly think that the first step to dealing with the interpersonal stuff is to go talk to a lawyer, because from what I understand about trusts, your parents have set up a really screwy arrangement.

What I mean is: usually the grantor/settlor/trustor/trustmaker is the person who actually sets up the trust using their own money, and the trustee is the one who oversees and takes care of that money. Often the trustmaker and the trustee are the same person. But it sounds like your parents have set up the paperwork so it's as if you started the trust with your own money (which you didn't really do) and then set themselves up to be the trustees of that money. It is also my understanding, although I could be wrong, that a revocable trust is usually set up to distribute the trustor's assets to the beneficiaries after the trustor's death.

All of which means that your parents did something weird with the paperwork either on purpose or by accident. It's weird that they gifted you the money first instead of just putting it directly into the trust, and I think you should ask them why they did it that way. The way they've set it up also sounds to me like it might not be that easy for you to actually get the money that your parents have been holding over your head and making you pay taxes on, because it's possible that they've gotten themselves into such a tangle that they've set up a trust that will only formally transfer the money to you (the beneficiary) after you (the trustor) die.

So I would maybe stop feeling so burdened with gratitude towards them and instead go talk to a lawyer and find out what sort of legal hassle you're in the middle of. Then make some decisions from there. I also recommend talking to a lawyer because as long as the set-up of the trust is a mess, it's going to continually put you in a position where your boundaries are being stomped on. That's the hammer you're getting hit with all the time and if you can't solve that basic problem, then us giving you advice for how to deal with the headaches isn't going to help much in the long run.
posted by colfax at 10:00 AM on November 2, 2016 [17 favorites]

What colfax said.
posted by Gray Skies at 10:38 AM on November 2, 2016 [2 favorites]

As far as I know, this is a normal trust setup. It's used by the settlor to shelter assets from legal settlements, community property, etc. The settlor and the beneficiary don't "merge." The settlor grants the legal rights to the trustee and the equitable rights to the beneficiary. There's no reason a settlor can't grant themselves equitable rights.
posted by Rock 'em Sock 'em at 11:00 AM on November 2, 2016 [1 favorite]

Rock 'em Sock 'em, my understanding is that *irrevocable* trusts can be used in that way, but as far as I can tell, a revocable trust does not provide shelter for the grantor's assets.
posted by phoenixy at 12:54 PM on November 2, 2016 [1 favorite]

Right, and it might not work, but that could still be the intent. States vary on this question IIRC.

It also seems like the issue of sheltering pre-marital assets in a revocable trust would be very different from the issue of sheltering assets from, say, creditors. There might be a factual question about whether or not the beneficiary exerted control over the trust's assets, or similar.

My main point is that having the settlor and the beneficiary as the same person is not necessarily a sign of total shadiness. It's within the range of normal trust founding behavior (which sometimes is ineffective or pointless, but I digress).

But before we get too far in the weeds on this, the point is that you should get an attorney to look at this, and if you can revoke (I imagine you can) you should do so, I think.
posted by Rock 'em Sock 'em at 1:34 PM on November 2, 2016 [1 favorite]

I think if your parents intend for this to be fuck off money later in life, it's important to see if this asset can be set aside from the community property, as it is not something that was earned/aquired during the marriage. So, lawyer up.

Otherwise, I think a conversation about whether your parents see you as fiscally responsible is in order, but ultimately you need to state clearly that you intend to make some changes and it's not open for negotiation.
posted by vignettist at 1:57 PM on November 2, 2016

I'm a lawyer, but not your lawyer, and I really think you need to talk to an attorney.

But on the human relations question, I think people here tend to say things in exactly the right way when they're trying to ask how to say them. Which in this case would be pretty much: "Thank you for your generous gift and your love and caring for me. I'm an adult now, so I'll take it from here."
posted by J. Wilson at 3:16 PM on November 2, 2016 [3 favorites]

I'd go see a lawyer. Then I'd tell your parents that your lawyer has recommended dissolving the trust (and because the lawyer works for you, you can ask the lawyer to recommend this and recommend best practices for doing it), and ask your parents whether they'd prefer that you work with the lawyer to find a way to give the money back to them, or whether they want you to keep the money and use the lawyer to dissolve the limitations on it. Let that be their choice. If they want the money back, give it back to them, and take the expenses from doing so off the top. (And if your parents really do want you to have a nest egg in case your marriage doesn't work out, they can always put it aside for you in a way that doesn't cast this shadow over your life. That's a choice they can make if they want to. And if they really care about you, they'll be there for you any way they can in tough times regardless of whether this trust exists.)

You can't make your parents not get upset. If what they want is to have control over a big chunk of your financial life, there is no way that you can tell them that they can't have what they want and not risk them getting upset about it. But right now, you're upset about it, and it's not wrong to prefer that they be upset over a loss of control over their adult child than that you be upset over not having control over your own life. Just like they shouldn't be trying to control you via the trust, you shouldn't be trying to control them via managing their feelings. Be kind, be compassionate, be honest, be firm in your resolve to end this arrangement one way or another. Their response to that is out of your control.
posted by decathecting at 9:54 PM on November 2, 2016 [4 favorites]

I missed the followup when posted earlier and then went off and had the rest of my day, so to respond to that part:

You know your family better than I do, but my guess would be that there is really not a way that you turn this into home improvement money without it souring basically all your other family interactions indefinitely. Legally, the money is yours, because they intended to and did give you legal control over it. Practically, the money is not really yours, because they did not intend to and did not give you practical control over it. You're probably going to have the choice of which option you want, here, but... unless, when you try to give it back, they tell you to keep it to do what you like with it? I wouldn't take that option. They might still get cranky about you not wanting to do this the way they wanted to do it, but not in a way that's apt to generate long-term hard feelings, because they're still free to find another way to solve the problem they wanted to solve with this money.
posted by Sequence at 10:17 PM on November 2, 2016

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