Ideas needed for setting up a trust to avoid financial darwinism

[umarider]

I apologize for how long this is...

DH has a neice who is a complete mess. She has an on-going history of drug use, has stolen tens of thousands of dollars worth of family heirlooms and hocked them (Grandmother refused to press charges), has had 5-6 cars purchased for her (all wrecked) and has never held a job for longer than 4-6 months because (shocker!) employers expect things like showing up for work and doing as you're told! MIL has repeatedly shelled out thousands of dollars to bail this kid out of messes like tickets and warrants.

This is someone I use as an example to my kids as how not to live their lives. Dangerously, she is as slippery as a politician and can wrap her grandmother around her little finger and convince her that someone else is to blame for all her screw-ups. Being around her is like wandering into the poppy field in the Wizard of Oz... even we start to get foggy and hesitate in our opinions of her being completely untrustworthy... fortunately, we can take a step back and see her for what she is. If I hadn't been part of this family for so long and seen this all first hand, I wouldn't believe things like this could happen.

MIL for years has had plans to set up a trust fund to provide stability/support for this neice after MIL dies. Basically, MIL and FIL have been scimping so they don't have to touch a sizable chunk of $ that MIL has from a settlement. That is the $ that would fund the trustfund. DH and I have tried to convince her to do something else w/ the $, but she is insistant and we've finally given up. So, how does she set up a trustfund that neice/grandaughter can't blow through (those "It's your money, get it now!" places are what come to mind)? Is it possible to set up a fool-proof trust? If so, who would we get to help set this up?

The one idea I'd come up w/ was to set up a trustfund that then purchased and maintained ownership of a residence to be used by neice. Neice would have no power to sell/mortgage the residence. The trust would hopefully be able to provide housing and perhaps basic utilities for her lifetime (she is in mid-twenties).

Can anyone think of any options or what help we would need in setting this up? As of now, I don't think MIL has anything set up. Her health is not the best (due in large part to the stress her granddaughter brings to her life). A small voice says to do nothing, but when MIL dies, this neice is going to turn to the only other source of $ and that will be DH. It will get ugly at that point because DH says he'll have nothing to do with her after MIL passes away and this kid doesn't give up if she thinks you "owe her".

[Like2Plan]

So, how does she set up a trustfund that neice/grandaughter can't blow through (those "It's your money, get it now!" places are what come to mind)? Is it possible to set up a fool-proof trust? If so, who would we get to help set this up?

The one idea I'd come up w/ was to set up a trustfund that then purchased and maintained ownership of a residence to be used by neice. Neice would have no power to sell/mortgage the residence. The trust would hopefully be able to provide housing and perhaps basic utilities for her lifetime (she is in mid-twenties).

Your MIL needs to see an estate planning attorney. She can specify a trust be set up in her will and funded upon her death or she could set one up and fund it now (if she did it now, the assets in the trust would not go through probate). The attorney will be able to provide all the details on the best way to accomplish this. One thing about a trust is that it requires a trustee. Your MIL can be trustee while she is living, but when she passes on there will need to be a new trustee. I am assuming your DH would not want to take on that role? The attorney can help with some ideas for the trustee. A bank can be a trustee, but the bank gets paid to fulfill this role so it will cost more.

[snshijuptr]

I hope you MIL is leaving a comperable amount to your children. Sorry the situation gets me more mad than helpful. I agree to see an attorney and explain the situation. Be prepared to be delicate but clear if you MIL is in the room.

[umarider]

I know that DH is not willing to be trustee. He wants to have no connection to his neice if possible. Guess that leaves paying someone to do the job. MIL lives in a pretty rual/small town area. There are local lawyers, but I think they're more general law rather than specializing in estate law. Do you think it'd be worth the time/hassle to travel to see a true estate lawyer?

Also, no, there is no comparable amt for our kids. MIL announced years ago that our kids "didn't need her help" since we are repsonsible parents. Any family heirlooms that they were due to get have been stolen/hocked by this neice, so there is probably nothing much coming their way. We'd rather not saddle our kids w/ a legacy of having to deal with this family member, which is why I am willing to assist MIL w/ setting up a trust.

[creditcardfree]

I would advise seeing more than one estate planner. Maybe one local and a least one more specialized in a nearby town.

The trust will specify whatever your mother in law wants. I think a dollar limit in funds per year would be a good idea. It should specify who funds go to if neice dies. Your children or any children she might have.

Good luck!

[jIM_Ohio]

find an attorney

a trust has a trustee which manages the trust... so as long as the niece is not the trustee, and the trust has the right stipulations built in, then niece has a stream of income, but not access to all the money at once.

Any estate planning attorney should be able to give you the details

[jpg7n16]

Some other specifics that might help you.

I think it's called a spendthrift trust. And use a 3rd party as trustee with independent discretion for giving out money. You absolutely need to see an estate attorney like pointed out above (not just any attorney - not divorce, not tax - estate). That attorney will be able to tell you what provisions you need, what type of trust, who to select as trustee, etc.

And trusts are not structured settlements. So no worries about J.G. Wentworth He only buys things with structured payouts (structured settlements, annuities, etc.) - ie. predictable cashflows. You can't predict cashflows when the trustee has independent discretion.

[snafu]

OP, a house purchase comes with another set of possible problems like a grow-op, or rented and ruined or destroyed out of frustration. Perhaps estate lawyer can include a codicil that demands treatment for drug addiction for access to funds

[cschin4]

How about requiring her to go to rehab before she can access the money? Could that be a clause? The housing plan is a bad idea in my opinion. Who is going to maintain the residence? She will just destroy it if she is that out of control. The best bet is for her to rent and just have a monthly stipend and she will blow it how she sees fit. On food, rent or drugs.
But, she is adult. If it becomes her money, it is her money. You cannot force another adult to spend how you see fit.
However, where are the child's parents? It is one of your DH's sibs? Why is money being directed toward the neice instead of the sibs? And, why would your DH want "nothing to do with her" after MIL dies? This is your family. I could never walk away from my siblings children. That doesnt' mean I would let them use or endanger me or my finances, but I would not walk away from them as if they dont' matter. And, she is out of control and needs help. I would still try to help her to get some professional help. She might not want to or whatever, but I would still try even if I had to call the police and report her and have her taken in and admitted to the mental health system.

[umarider]

How about requiring her to go to rehab before she can access the money? Could that be a clause? The housing plan is a bad idea in my opinion. Who is going to maintain the residence? She will just destroy it if she is that out of control. The best bet is for her to rent and just have a monthly stipend and she will blow it how she sees fit. On food, rent or drugs.
But, she is adult. If it becomes her money, it is her money. You cannot force another adult to spend how you see fit.
However, where are the child's parents? It is one of your DH's sibs? Why is money being directed toward the neice instead of the sibs? And, why would your DH want "nothing to do with her" after MIL dies? This is your family. I could never walk away from my siblings children. That doesnt' mean I would let them use or endanger me or my finances, but I would not walk away from them as if they dont' matter. And, she is out of control and needs help. I would still try to help her to get some professional help. She might not want to or whatever, but I would still try even if I had to call the police and report her and have her taken in and admitted to the mental health system.

I'd figured on having a property mgmt company handle the maintenance, etc. I suppose another idea would be to have the trust pay directly for a rental apt. This neice has a young child, so if she blows the $ and has no place to live, it isn't just her life that's getting trashed. SIL has plenty of issues of her own and MIL plans to set up a trust to support her as well. MIL refuses to admit there's a drug problem, so she'd never be willing to have drug treatment as a stipulation for receiving $.

As far as DH's attitude... this neice has been abusive to our kids since they were very young, including hiding prescription drugs in our 4-year old's toys which were found and taste-tested by dd! Fortunately, dd didn't like the taste and came to me to tell me about these things she'd found in her room. Those things on top of how she's treated her grandmother (DH's mother) and the lying, stealing, etc. put her so far down on DH's list that he will barely speak to her even in his mother's presence. MIL would never forgive him if he turned in his neice, but it may come to that some day.