Sample Case:

Your Mother has a Living Trust. She is very detail oriented and has made sure she got a well-drafted Living Trust and either (a) placed all her assets in the name of the living trust or (b) set up beneficiary designations on her accounts to cause them to pass consistently with her trust on her death.

Mother loves her family very much and did this work with her Living Trust to ease the administrative burden for her children after her death and so they could avoid the expense and delay of the probate process after her death.

Your Mother sells her home and moves into a retirement community. Mother chooses the payment option where she makes a large deposit (e.g., $300,000 from the sale of her house) in exchange for lower monthly maintenance payments. The retirement community contract says that when Mother dies, 90% of her deposit is refunded to her estate.

Mother dies a year later. You are the Trustee (signer) for Mother’s Trust and you tell the retirement community that they should make the refund payment to you so you can pay out the money according to Mother’s wishes in her trust. You provide the retirement community a copy of Mother’s death certificate and trust.

The retirement community says the refund payment is not covered by the trust because there is no paperwork on file that says the refund payment goes to the trust after Mother dies. The retirement community says their hands are tied and they can only write a check for the refund to the duly appointed Executor of Mother’s Estate.

The retirement community tells you that the only way to become Executor for Mother’s estate is to go through the probate court process where a judge signs a court order declaring that Mother’s Will is valid and stating that you are Executor under the Will with authority to sign for any assets in Mother’s name.

Is the retirement community right or wrong? Why?

Answer:

I have tried to set up this example to show that the retirement community is right in this case.

In this example, there are no instructions on file with the retirement community instructing them that Mother’s refund payment should be paid to the Trustee of her Trust.

The retirement community is right to be careful with such a large refund payment and is not in the business of determining whether a Will (or Trust!) is genuine or fake. Fraudsters nowadays have access to powerful editing software and fancy color printers that make forgeries very convincing.

The retirement community may not know us from Cain so they are concerned that if they make a large payment to the wrong person, the RIGHT person could show up 6 months later demanding payment forcing the retirement community to make TWO payments!

Solution?

Make sure Mother has instructions on file with retirement community that cause her refund payment to be payable according to the instructions in her trust.

The retirement communities I’ve worked with in the Lakeway area typically have a standard form that would let Mother describe her Trust and give identifying information for her Trustees so the nursing home knows they are OK to make the refund payment to certain named individuals after her death.

As a bit of paranoia, I also tell my clients to check with the retirement community’s back office to make sure they have the payment instructions on file, say, once a year! If your refund payment instructions are old it doesn’t hurt to see what’s on file!

I hope this has been helpful! If you have other estate planning, trust administration, or probate questions, please feel free to contact our office for a consultation or call!