Stepdaughter Has a Right to See Living Trust, but Tact Is Called For
Q: My father recently passed away. I had a copy of a will he created in 1994, but upon questioning, my stepmother reluctantly told me that they had replaced the will with a living trust. She refuses to let me see a copy of the trust or to answer any questions about it. Her attorney told me that I am the successor trustee and that I will be managing the distribution of my dad’s estate when my stepmother dies. She is in terrible physical health, and I’m honestly concerned about her ability to manage her financial affairs. Is there anything I can do?
*
A: A California law that took effect last year requires trustees to give a copy of the living trust to all beneficiaries and heirs-at-law within 60 days of the trust creator’s death.
Beneficiaries are people who stand to inherit something from the trust; heirs-at-law are people who would inherit, based on state law, if there were no will or trust, says Cheryl Barrett, an Irvine estate-planning attorney. Heirs-at-law typically include spouses, children or parents.
Before you go marching off to your stepmother, however, let discretion be your guide.
Perhaps the attorney can gently bring this new law to your stepmother’s attention and offer to send out the proper notices for her. Understand that she is probably still in mourning and shock, with the added burden of her own health problems.
She also may find it distasteful and downright morbid to discuss money matters surrounding an estate. She may even feel, however wrongly, that you are circling like a vulture, waiting for her to die so you can swoop in on the goodies.
In the best of all possible worlds, you would be able to talk honestly and openly with your stepmother about your concerns. Together, you would be able to make arrangements for you or another responsible person to take over in case she is not able to manage her affairs.
A lawyer could help her draw up powers of attorney, documents that would appoint someone to manage her finances and to be her advocate in health matters in the event she becomes incapacitated.
You’re right to want to know as much as you can in advance, since you will be responsible for distributing the estate and perhaps for helping with her future health care. The worst time to deal with these matters is in the crisis and confusion that usually surrounds final illness and death.
On the other hand, she has a right to control as much of her destiny as possible. If she doesn’t want to talk to you after the trust document is distributed, it would be hard to force her. Your absolute last resort would be to talk to an attorney about a conservatorship--basically, a court procedure that appoints you to take charge of your stepmother’s financial affairs. Make this the last arrow in your quiver, however, since you may not be successful and you would almost certainly poison the relationship the two of you have.
Not the Place for Variable Annuity
Q: I read your Feb. 14 column with great interest. You stated that variable annuities are often inappropriately sold. My question: Is a variable annuity a reasonable investment for a tax-deferred plan such as a 401(k), 403(b) or an IRA? I work for a very large company that offers variable annuities as an investment option.
It seems the fees of these variable annuities are double those charged by mutual funds. If a variable annuity is not a good deal on a non-tax-deferred investment, then I would assume that it is also not a good deal in a tax-deferred plan. Am I right?
*
A: There are some situations in which a variable annuity can make sense. A tax-deferred account is not one of them. The main reason to pay higher fees for a variable annuity is to get the tax deferral. You’ve already got that tax deferral in an IRA, 401(k) or 403(b).
Some insurance salespeople push annuities for tax-deferred plans by playing on people’s fears and ignorance. They tout a variable annuity’s “death benefit”--the guarantee that if the investor dies prematurely, her heirs will get out at least as much as she put in.
The chances are pretty remote that you would happen to die while the market was down--and you can buy life insurance directly without all that annuity hoo-ha. Meanwhile, the extra fees cut into the investor’s overall return.
Unfortunately, thousands of teachers and other public employees have little or no other choice in their workplace retirement savings plans, because the government agencies that employ them refuse to give them access to mutual fund options. Employees who are stuck in this situation should agitate for change.
*
Liz Pulliam is a personal finance writer for The Times and a graduate of the certified financial planner training program at UC Irvine. She will answer questions submitted--or inspired--by readers on a variety of financial issues in this column. She regrets that she cannot respond personally to queries. Questions can be sent to her at liz.pulliam@latimes.com or mailed to her in care of Money Talk, Business Section, Los Angeles Times, Times Mirror Square, Los Angeles, CA 90053.
