How to manage financial help for an estranged relative
December 2, 2021 5:11 AM Subscribe
An elderly relative has asked me for help in supporting another, younger relative. The issue is that I am in another country and even if I weren't, I cannot/will not have a relationship directly with this younger relative. More details within.
Elderly relative is in their late 80s and mentally competent, but disabled and in an assisted living home. They have been thinking about a previously estranged younger relative (the older relative's estranged grandchild) lately and has asked for my help in contacting them and offering financial support.
The younger relative is also my relative but due to many reasons that I won't bore you with, I will not be maintaining a relationship with them. I'm willing to talk to them briefly to establish factual information and to initially facilitate the support, but not willing to have an ongoing relationship beyond that. If there was an attorney or some other representative between us, I would be willing to communicate with them as needed, but I will not be able to just, for example, manage the trust myself and write the relative a check every month - I don't want even this level of involvement in their life (and they wouldn't like it either) and it would also be a huge hassle to manage from another country.
The younger relative has a traumatic brain injury (our relationship breakdown happened before that) which means that they are unlikely to be able to manage a direct payment of the entire sum money- they have previously been taken advantage of and had their money taken by others, for example, and before the TBI they had serious drug problems, though that seems to be less of an issue now. Their facebook is open and as far as I can tell, currently, they are living with a partner in the partner's parents' crowded home, but also sometimes living in their truck, and working a food service job. Surviving, but not thriving.
The money that is available would be enough to buy a small house and to pay the property tax and bills for a long time where they live (a medium-sized town in Missouri) which is my first thought of the best way to proceed, but there is every risk that they would borrow against it and lose it, or that other people would take advantage of them and either damage or take over the house. If there was some permanent way to protect against that, it would be ideal.
The other option I thought of was some kind of unbreakable trust that pays out enough each month to ensure that the relative isn't hungry or homeless, but doesn't allow access to the principal, and would somehow prevent the younger relative from borrowing against it and losing access to the payments.
I believe that both of these options would require legal representation and ongoing management that could eat up a big portion of the money available - which is $400,000
I am fully prepared to be told that this isn't enough money to set up any kind of unbreakable protected trust because of legal fees and administration, or that it is impossible to give someone a house or income without also setting up the risk of them losing it or borrowing against it, or that it wouldn't be possible without me re-establishing a relationship with younger relative, but I thought I would ask and see if there's something I've not thought of.
Elderly relative is in their late 80s and mentally competent, but disabled and in an assisted living home. They have been thinking about a previously estranged younger relative (the older relative's estranged grandchild) lately and has asked for my help in contacting them and offering financial support.
The younger relative is also my relative but due to many reasons that I won't bore you with, I will not be maintaining a relationship with them. I'm willing to talk to them briefly to establish factual information and to initially facilitate the support, but not willing to have an ongoing relationship beyond that. If there was an attorney or some other representative between us, I would be willing to communicate with them as needed, but I will not be able to just, for example, manage the trust myself and write the relative a check every month - I don't want even this level of involvement in their life (and they wouldn't like it either) and it would also be a huge hassle to manage from another country.
The younger relative has a traumatic brain injury (our relationship breakdown happened before that) which means that they are unlikely to be able to manage a direct payment of the entire sum money- they have previously been taken advantage of and had their money taken by others, for example, and before the TBI they had serious drug problems, though that seems to be less of an issue now. Their facebook is open and as far as I can tell, currently, they are living with a partner in the partner's parents' crowded home, but also sometimes living in their truck, and working a food service job. Surviving, but not thriving.
The money that is available would be enough to buy a small house and to pay the property tax and bills for a long time where they live (a medium-sized town in Missouri) which is my first thought of the best way to proceed, but there is every risk that they would borrow against it and lose it, or that other people would take advantage of them and either damage or take over the house. If there was some permanent way to protect against that, it would be ideal.
The other option I thought of was some kind of unbreakable trust that pays out enough each month to ensure that the relative isn't hungry or homeless, but doesn't allow access to the principal, and would somehow prevent the younger relative from borrowing against it and losing access to the payments.
I believe that both of these options would require legal representation and ongoing management that could eat up a big portion of the money available - which is $400,000
I am fully prepared to be told that this isn't enough money to set up any kind of unbreakable protected trust because of legal fees and administration, or that it is impossible to give someone a house or income without also setting up the risk of them losing it or borrowing against it, or that it wouldn't be possible without me re-establishing a relationship with younger relative, but I thought I would ask and see if there's something I've not thought of.
Special Needs trusts are designed for this kind of thing. An elder law attorney should be able to set it up using mostly boiler plate language so setting it up shouldn't be super expensive. Can probably get a bank to oversee but that is definitely something to talk to a lawyer about.
posted by leslies at 6:55 AM on December 2, 2021 [7 favorites]
posted by leslies at 6:55 AM on December 2, 2021 [7 favorites]
IAAL, IANYL, and probably not a lawyer in the jurisdiction of the beneficiary:
that it is impossible to give someone a house or income without also setting up the risk of them losing it or borrowing against it,
In my jurisdiction, trusts can be set up to own real estate where it's hard to impossible for a beneficiary to borrow from a bank against the value of a house owned by a trust, because the beneficiary doesn't have the legal right to sign mortgages. Instead, that right (and the right to make decisions about the principal) is held by a trustee. It is also possible to have the trustee hire a law firm or bank to handle mailing out checks for property taxes, property insurance, etc. It may also be possible to have those set on auto-pay.
An additional consideration: you may also want to talk to a competent lawyer barred in the right jurisdiction about how a gift this might affect eligibility for government programs, like if the person with the brain injury ever ends up (or is currently on) some kind of public assistance. There are special ways to set up trusts so that they do not affect eligibility for that.
And yeah, in my jurisdiction, none of this really goes to the issue of informal lending arrangements or situations where the person gets taken advantage of by somebody moving in and not paying rent/wrecking the house, etc. But those are hard things to guard against in any case.
posted by joyceanmachine at 7:01 AM on December 2, 2021 [1 favorite]
that it is impossible to give someone a house or income without also setting up the risk of them losing it or borrowing against it,
In my jurisdiction, trusts can be set up to own real estate where it's hard to impossible for a beneficiary to borrow from a bank against the value of a house owned by a trust, because the beneficiary doesn't have the legal right to sign mortgages. Instead, that right (and the right to make decisions about the principal) is held by a trustee. It is also possible to have the trustee hire a law firm or bank to handle mailing out checks for property taxes, property insurance, etc. It may also be possible to have those set on auto-pay.
An additional consideration: you may also want to talk to a competent lawyer barred in the right jurisdiction about how a gift this might affect eligibility for government programs, like if the person with the brain injury ever ends up (or is currently on) some kind of public assistance. There are special ways to set up trusts so that they do not affect eligibility for that.
And yeah, in my jurisdiction, none of this really goes to the issue of informal lending arrangements or situations where the person gets taken advantage of by somebody moving in and not paying rent/wrecking the house, etc. But those are hard things to guard against in any case.
posted by joyceanmachine at 7:01 AM on December 2, 2021 [1 favorite]
Assuming this is in the US, a special needs trust would seem likely to fit the situation. There can be some legal costs to get things set up, and someone (volunteer or paid professional) has to do the ongoing management, like disbursing funds for authorized expenses, keeping records, paying taxes, etc. There are restrictions on what a special needs trust can and can't pay for that need to be followed, so your relative will need to assess whether or not this option can be used to support the person in the ways they envision.
A kind thing on your part might be to help the elderly relative connect with a lawyer with expertise in special needs trusts, and then you can step back from the situation since you will not be able to assist in the management of the trust.
posted by Dip Flash at 7:02 AM on December 2, 2021 [4 favorites]
A kind thing on your part might be to help the elderly relative connect with a lawyer with expertise in special needs trusts, and then you can step back from the situation since you will not be able to assist in the management of the trust.
posted by Dip Flash at 7:02 AM on December 2, 2021 [4 favorites]
Having worked for an elder law attorney some years ago, there are likely factors to consider, such as SSDI, but you are on the right track with the trust. Find someone reputable in the grand nephew’s home state to field these questions. You want someone who has experience with young adults with disabilities, which doesn’t sound like “elder” but a lot of parents make provisions for disabled and um, thoughtless?, adult family members.
posted by childofTethys at 7:03 AM on December 2, 2021 [1 favorite]
posted by childofTethys at 7:03 AM on December 2, 2021 [1 favorite]
I believe that both of these options would require legal representation and ongoing management that could eat up a big portion of the money available - which is $400,000
My mother set up a smaller trust for my (non-special needs) foster brother in a similar fashion to what you are looking at. I agree with others, that a special needs trust is probably what you want and it's 100% ok that you are not the person who manages this. But I'd also chime in with what other people are saying. If that amount of money is invested, it will also be making money and in many cases, depending on the market and blabla, that can help pay with some of the fees which are maybe not as onerous as you are thinking. Like maybe a trust sets up a quarterly distribution, that's like four times a year that some paralegal-level person moves some money around, and someone had to gdt the taxes done. Not too terrible.
The other good thing about paying someone for this is then you (or another family member) are not the person who gets hassled for money from someone who may have bad boundaries about this kind of thing. My mother was someone's representative payee (for SSDI) who was someone living with a TBI and some mental health challenges. Lovely guy, but they had an unhealthy dynamic where when he needed extra money he'd just hit her up for it. She was okay with this but when she died we became those people and that was less great.
A trust can do things like pay bills directly (like a cell phone, or home internet or whatever) and also not necessarily count as assets which might not be the same thing as a house that this person might have. In any case, I am just giving anecdata but there are good lawyers who specialize in setting these kinds of things up and not only are they good at what they do, they are often compassionate and have seen a lots of these "I have a problematic family member" situations and have good advice.
posted by jessamyn at 4:23 PM on December 2, 2021 [2 favorites]
My mother set up a smaller trust for my (non-special needs) foster brother in a similar fashion to what you are looking at. I agree with others, that a special needs trust is probably what you want and it's 100% ok that you are not the person who manages this. But I'd also chime in with what other people are saying. If that amount of money is invested, it will also be making money and in many cases, depending on the market and blabla, that can help pay with some of the fees which are maybe not as onerous as you are thinking. Like maybe a trust sets up a quarterly distribution, that's like four times a year that some paralegal-level person moves some money around, and someone had to gdt the taxes done. Not too terrible.
The other good thing about paying someone for this is then you (or another family member) are not the person who gets hassled for money from someone who may have bad boundaries about this kind of thing. My mother was someone's representative payee (for SSDI) who was someone living with a TBI and some mental health challenges. Lovely guy, but they had an unhealthy dynamic where when he needed extra money he'd just hit her up for it. She was okay with this but when she died we became those people and that was less great.
A trust can do things like pay bills directly (like a cell phone, or home internet or whatever) and also not necessarily count as assets which might not be the same thing as a house that this person might have. In any case, I am just giving anecdata but there are good lawyers who specialize in setting these kinds of things up and not only are they good at what they do, they are often compassionate and have seen a lots of these "I have a problematic family member" situations and have good advice.
posted by jessamyn at 4:23 PM on December 2, 2021 [2 favorites]
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posted by mskyle at 6:53 AM on December 2, 2021 [1 favorite]