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Dear Moneyist,
I am the only son of parents who divorced when I was 4 years old. My father remarried soon after that, but had no more children.
Though he and I had some conflicts over the years, in the last several decades of his life we got closer and had a good relationship. Dad died in 2014. In the years before his death, he told me on several occasions — with great delight — that I would inherit a substantial amount of money.
The last time he said this was in the presence of my wife and my stepmother. He said I would get $1 million, and that I should not worry about my stepmom.
She did not say a word, but she was clearly not in agreement. I am sure Dad was aware of this, but he felt he had things well under control in the family trust he had set up.
I was able to visit Dad a few weeks before he died. He had had a leg amputated and was aware that he was likely to go soon, but he was still in reasonably good spirits.
At that point, Dad had suddenly changed and became upset. My father desperately begged me, “Son, get a lawyer. That woman is going to take away your inheritance!” My stepmother was nearby at the time, and I am sure she heard every word.
I tried to calm Dad down, briefly thinking that he might be raving. Time was short, and I had to leave.
He died a couple of weeks later without my being able to speak to him again.
‘Dad was right’
I would eventually learn that Dad was right. In the trust, he had somehow named his wife as “settlor,” which my lawyer tells me meant she had complete control of the trust after he died. She simply rewrote it to her liking, which meant that not a dime came to me. I believe that Dad’s sudden change of mood and his warning to me were because my stepmother had told him about this change.
Unfortunately, I did not follow Dad’s advice, preferring the soft touch. I simply could not believe my stepmother would betray my dad’s plans and cut me off without provocation. And my relationship with her, while never warm, was quite friendly — or so I thought. I received nothing after Dad’s death but a small IRA and a small insurance policy of $6,000.
I did check with the county clerk, where I found a copy of Dad’s will. It left everything to the trust. I made a special effort to keep relations cordial, phoning my stepmom every Sunday evening. Finally, after six years of naïvely pretending that things were as I hoped, my stepmother started mentioning in our phone conversations how she was spending large amounts of money.
She took first-class plane flights, inviting her family (siblings and nieces and nephews) on vacation, and set up $10,000 scholarships at the local community college for nurses and firemen. My stepmother said her lawyer would modify “her” trust. (I now believe her lawyer had told her to keep mum until the statute of limitations for fraud — six years in Oregon — had passed.)
‘She was clearly provoking me’
She was clearly provoking me, and I finally asked her point-blank if I was going to inherit anything. She said, “Yes, but not much,” and that she was going to leave a lot to “her” family. I finally hired a lawyer. He suggested asking her for a copy of the trust as it had been at the end of Dad’s life, to see if it was true that he had intended for me to inherit a lot of money.
When I did this, she told me it was “none of my business” and that she could do “whatever she pleased” with the money. This was exactly what I had been fearing. I felt like the worst kind of fool. I threatened to sue my stepmother for access to the trust documents, and eventually her lawyer sent an affidavit affirming that my stepmother was “settlor” of the trust.
My own lawyer told me that if it was true, she would have no responsibility to comply with my dad’s wishes, and I had no case. He also said it was extremely unlikely that her lawyer would lie in the affidavit, as it would mean professional suicide if found out.
If I continued my case, I would probably lose and have to pay her legal fees and court costs. My lawyer also suggested writing her a conciliatory email, as I still might inherit something (possibly based on an unofficial hint her lawyer gave him).
I did write the email, and since then I have neither heard from her, nor have I tried to contact her. I would find it very difficult to speak to her now in a civil manner.
The Stepson
Dear Stepson,
I’m sorry you went through this, and that you lost an inheritance your late father had intended for you. He may not have fully understood his and his wife’s role in setting up a trust, and made several major mistakes — among them effectively handing over the trust to your stepmother who, as your father realized late in the day, had no intention of fulfilling his wishes. A trustee manages a trust and carries out the terms of the trust. But your stepmother was in a far more central — and powerful — position.
“What is unusual about these facts is that the father appears to have left his property to a trust of which the stepmother was the ‘settlor,’” says Neil V. Carbone, trusts and estates partner at Farrell Fritz PC. “The settlor of a trust is the person who creates it and is also, in most cases, the one who funds it. One would have to review the specific trust agreement to see whether the father was also a settlor of the trust and whether there were any limitations or restrictions on the stepmother’s power to modify the trust after the father’s death.”
Believing the best in people is not an estate plan. People are notoriously unpredictable, never more so in the aftermath of a death and when there are large sums of money involved. In fact, people can be equally capricious and untrustworthy when there are small sums of money involved. As well as being motivated by greed, they are also motivated by hidden resentments and their own belief that they are entitled to the entire kit and kaboodle.
Missed opportunities to take action
It’s critical to act decisively and early. “There appear to be missed opportunities to take action,” Carbone says. “First, when the father discussed the son’s anticipated inheritance during his lifetime — especially when the son detected that his stepmother was ‘clearly not in agreement’ — the son could have suggested that they all review the documents and the plan together to make sure that it reflected the father’s wishes and would be carried out as written.”
“Then, when the father was in the hospital and begged the son to get a lawyer, the son could have made arrangements for the father’s lawyer to meet with the father alone, even if the meeting had to take place in the hospital,” he adds. “If the father was concerned that the stepmother would not administer the trust according to his wishes, he could have made a new plan. The fact that several weeks went by without this happening is truly unfortunate.”
Yours is a cautionary tale. “The son could have obtained a copy of the trust agreement itself (not just an affidavit from an attorney) to see what his rights may be and to consider his options to enforce those rights,” Carbone says. “For example, he may have been entitled to an accounting of the trustee’s actions in administering the trust. He also may have had equitable remedies available to him such as, for example, the imposition of a ‘constructive trust.’”
What can we learn from these unfortunate events? Sometimes, these issues are best ironed out in a prenuptial agreement, especially when there are children involved. Your father was either misguided or bamboozled by his wife when he attempted to set up a trust for you. It may have been that he felt unable to stand up to the demands of his second wife, and belatedly alerted you to his anguish that his wishes would not be upheld after his death.
As you point out in your letter, the statute of limitations in your state appears to have passed, and the law does vary from state to state. Your story may help others out there in similar situations, and points to the perils of managing an estate when there is a second marriage. I urge you to seek a second opinion from an independent estate attorney. He or she may merely repeat what you have already been told, but it will at least settle the matter once and for all.
You can email The Moneyist with any financial and ethical questions related to coronavirus at qfottrell@marketwatch.com, and follow Quentin Fottrell on Twitter.
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