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  1. #1
    Join Date
    Apr 2013
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    3

    Default After Separation Can You Exclude Your Spouse from an Irrevocable Trust You Create

    My question involves estate proceedings in the state of: Missouri

    In June of 2005, my father moved out, essentially abandoning my mother and her then-minor children. My mother and father have been living separately, in separate household, ever since. For personal reasons, my mother does not want to divorce my father; however, in the event of her death, she does not want him to benefit from her property.

    The only possessions she has are household items and two vehicles that she owns jointly with me. I'm going to have her gift her portion of the vehicles to me, then, if the trust mentioned below is created, the TOD will be the trust.

    She has no other property; no house in her name, nothing.

    In the course of my employment, I've been researching estate planning, and I believe that whenever possible non-probate transfers are the best way (IMO) to settle an estate when a person dies.

    To provide for her wishes, I *think* an irrevocable trust is what she would need (she is a Medicaid recipient, so to provide for any possible future initiation of the look-back period irrevocable is the way she would go if she chooses to create a trust).

    My questions:
    1. Legally, can she create an irrevocable trust without my father's involvement and without naming him as a beneficiary?

    2. If she creates said trust, can she fund it with ALL of her personal possessions?

    3. If the trustee of the trust were to purchase, for example, a house, and that house was NEVER titled in my mother's name but rather was purchased by and titled in the name of the trust, would it ever be considered marital property and/or property that my father might be somehow entitled to? (Common sense tells me it would not, as the trust cannot be "married" and therefore what it contains/owns cannot be subjected to marital property law [unless the property is first owned by a married person, in theory], but I'm not a lawyer and I could be wrong)

    4. RSMo defines marital property as everything obtained subsequent to marriage with a few exceptions that do not apply to my mother's property. Therefore:
    A) Does that mean my father has a 50/50 right to the property, or do they share (again, in theory) 100/100 rights? Meaning, for example, she has just as much right to sell/give away all of the property as he does?
    B) If the former (50/50) applies, does that mean she is only entitled to transferring 50% of her property into the trust?
    C) If the latter (100/100) applies, does that mean she has the right to gift/transfer all of her property to the trust? (Most likely a "duh" question, but I'm asking anyway!)
    D) Also, if the former (50/50) applies, does that mean my mother doesn't have the right, while she is living, to give her children more than half of what she owns, even if the property consists of things that are just hers? (clothes, etc)

    5. To summarize the above questions:
    A) can my mother create an irrevocable trust under which my father is NOT a beneficiary; and, if so
    B) will future transfers directly made to the trust be excluded as marital property; AND
    C) can she fund it with ALL of her personal property; OR
    D) is she required to fund it with only 50% of her personal property?

    I apologize if this is somewhat repetitive, but I'm trying to be thorough. Her property doesn't consist of a lot, maybe a few thousand *if that*, but I want to make sure we do whatever we can to avoid probate and provide for any future things she may acquire. Thank you!

    P.S. I chose this forum for my question as it does deal with heirs and beneficiaries, albeit through a trust rather than probate, so if I've posted in the wrong place please let me know. My apologies in advance if that is the case!

    P.P.S.: I know trusts are usually expensive and that technically, because my mother owns nothing that would absolutely *have* to be probated, we might be able to sneak by without probate and therefore avoid trust drafting costs; however, I will be preparing the trust myself. I understand that trusts are complicated, and that I should consult with an attorney (which I will do: after the trust is prepared, I will submit it to an attorney for review, but I cannot afford to pay $1500+ for the actual drafting).

  2. #2
    Join Date
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    Default Re: After Separation Can You Exclude Your Spouse from an Irrevocable Trust You Create

    Creating an irrevocable trust isn't really a DIY project. Putting assets into an irrevocable trust can create enormous difficulty for the trustor, and putting personal property into an irrevocable trust can create an incredible burden on even the most basic of actions. Further, merely making a trust irrevocable does not mean that you eliminate the potential claims of creditors who otherwise have a lawful claim against the assets. If the trust is a mere alter ego, a court is likely to disregard the trust as an entity - save for purposes of fraudulent conveyance analysis and the application of exemptions from the claims of creditors, in which context the transfer of assets to the trust could result in the loss of the exemption. The trust is also a separate legal entity, which must file a tax return each year, and placing the assets in a trust can potentially increase tax exposure in relation to subsequent transactions. I don't suggest taking this path and, if mom insists, I suggest that she retain an estate planning lawyer to talk her out of it... I mean, to minimize the potential risk and cost while maximizing the potential benefit.

    It would likely cost you more to have a lawyer review and correct your home-brewed trust (perhaps to the point of telling you that it belongs in the circular file) as compared to having a lawyer create an estate plan in the first place.

  3. #3
    Join Date
    Apr 2013
    Posts
    3

    Default Re: After Separation Can You Exclude Your Spouse from an Irrevocable Trust You Create

    Thank you for the reply! However, my questions remain unanswered. Can my mother put all of her property into a IT, or just half of it because she is married as detailed below and in my OP?

    ~~~

    A) can my mother create an irrevocable trust under which my father is NOT a beneficiary; and, if so
    B) will future transfers directly made to the trust be excluded as marital property; AND
    C) can she fund it with ALL of her personal property; OR
    D) is she required to fund it with only 50% of her personal property?

  4. #4
    Join Date
    Sep 2005
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    Default Re: After Separation Can You Exclude Your Spouse from an Irrevocable Trust You Create

    Your mother can make whomever she wants the beneficiaries of a trust she creates - it's her trust.

    The rest of your questions were directly or implicitly answered. The lack of understanding you're demonstrating makes you a patent danger to your mother's future financial well being. Stop trying to play lawyer for her.

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