MW 'I'm very cynical': My stepmother, 85, makes bizarre requests for money from my father's $10M trust. Should I be concerned?

By Quentin Fottrell

'He used a crappy lawyer to set up a very boilerplate trust agreement'

Dear Quentin,

My father left a life estate for my 85-year-old stepmother. The current market value is about $10 million. He used a crappy lawyer to set up a very boilerplate trust agreement and, because the families have not gotten along, my father appointed a bank as the trustee.

As a future beneficiary, I see the monthly statements. The trust reads that my stepmother is entitled to all the income and, from time to time, money can be taken out of the principal as necessary for health, maintenance, education, support, etc. The income alone is plenty; the funds are heavily invested in stocks, so it's providing more money than my stepmother can spend.

She can absolutely live on the income!

If she asks the trustee for more money for bizarre, random things, will they reply "OK, sure?" Does the bank mean it when they say they have a fiduciary responsibility to all beneficiaries, including future beneficiaries? And why would the cover sheet of the monthly statement say "no investment responsibility" as the primary goal of the account if the bank/trustee is taking fees?

I wish someone could analyze what the trustee is doing because I'm not that smart with decoding their language or deciphering each "disbursement to the beneficiary." Plus, I'm very cynical and I don't believe that there will be one red cent left after what has gone on.

The Stepson

Related: My dying cousin 'fell in love' with his hospice nurse after 4 months. She inherited his entire estate. What can I do?

Dear Stepson,

You have 10 million reasons to rest easy.

If your stepmother is 85 and the bank is the trustee, I don't see how they can do an awful lot of damage to your inheritance - particularly if any disbursements must be used for specific purposes - medical expenses, education, etc. You may not approve of your father's lawyer, but appointing an objective third party is key to fair oversight.

If you are a named beneficiary after your stepmother passes away and/or an interested party, you may have the right to ask for more details about how the trust is being administered. You can do this without prejudice or rancor. Just because you disagree with how your father set up his estate plan does not mean that your stepmother is bleeding the trust dry.

Given her age, it makes sense to incorporate provisions for distributions. "Everyone achieves emotional maturity at a different pace," according to U.S. Bank's $(USB)$ wealth management division. What's more, not all beneficiaries are set up emotionally or fiscally to handle a large amount of money, it adds. That goes for you and your stepmother.

Distributions based on needs and age are not so uncommon. Your dad's lawyer was likely acting on his instructions. "For that reason, age-based distribution provisions are fairly common in trust funds. In this situation, you could distribute funds in a timed cadence to allow beneficiaries to learn how to handle their newfound wealth gradually," U.S. Bank adds.

Not all requests are acts of vengeance

Your father could have been more proactive in expressing his wishes, not only to the trustee, but to his beneficiaries. That way, you could have been more prepared for your stepmother's ad-hoc requests from the trustee, even if they were within the boundaries of the trust. Not every request should be seen as an act of vengeance.

Estate planning gets complicated for blended families, but this plan is not out of the ordinary, says Neil V. Carbone, trusts and estates partner at Farrell Fritz PC. "In general, a spouse will want to provide for the survivor for life, as was done here. For a trust to qualify for the estate tax marital deduction, it must require that the survivor gets all of the income."

"It is also common for the trust to allow distributions of principal to the survivor, either in the discretion of the trustee or pursuant to an ascertainable standard, such as health, education, maintenance and support, as was done here," he adds. "On the death of the survivor, the remaining trust assets will go to the next generation."

Most states, including New York, have adopted the Prudent Investor Act. "Under the Prudent Investor Act, a trustee is required to invest trust assets for total return under modern portfolio theory, which requires diversification of assets that will provide for both income and growth of principal," Carbone adds.

"This is in contrast to the prior rule, known as the 'Prudent Man Rule,' which focused on the need to preserve assets, leading to very conservative investments that may have provided income from did not allow for growth of the trust principal," he says. The focus on stocks, in this case, is designed to benefit the remaining beneficiaries.

The pros of corporate trustees

"While some people reflexively shy away from corporate trustees out of concern that the relationship will not be as personal and that fees may be higher, corporate trustees can bring a lot to the table," Carbone says. "They are in the business of serving as trustee so they are well aware of the various fiduciary duties owed to the beneficiaries."

There should be transparency and accountability. The trustee will, in theory, scrutinize large or regular invasions of principal that will diminish the interest of the remainder beneficiaries. "They understand the need to communicate with beneficiaries and keep them informed, as is being done here by providing Stepson with copies of account statements," he adds.

As triggering as it might be for you to see these disbursements on a record of your father's trust, it must be equally difficult for your stepmother if she knows that you are going through these statements, and judging whether or not she needs - for example -- an extra $1,000 for her dentist or $5,000 to insulate her house. No one likes to be micro-managed.

Plus, if you had spoken to your dad, it may have helped you accept the fact that you will need to wait for your own disbursements. He did this for your stepmother's protection and for your own. Sometimes, people need to be shielded from the impulses and questionable intentions of others, especially in blended families. And they also need to be protected from themselves.

Related: 'My wife and I are very grateful': Our son wants to pay off our mortgage before we retire. Will this backfire?

You can email The Moneyist with any financial and ethical questions at qfottrell@marketwatch.com.

Check out the Moneyist private Facebook group, where we look for answers to life's thorniest money issues. Post your questions, tell me what you want to know more about, or weigh in on the latest Moneyist columns.

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Previous columns by Quentin Fottrell:

'She acted as a mother to me growing up': My stepmother remarried after my father died. How can I claim my inheritance?

'I believe myself to be an honorable person': Do I have the right to ask my husband if I'll inherit his house after he dies?

'Is this ethical?' I want to leave my home to my children from my first marriage - and not to my second husband.

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-Quentin Fottrell

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April 27, 2025 11:21 ET (15:21 GMT)

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