How to annuitize inheritance for 63 yr old son with no assets

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mdshumaker
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How to annuitize inheritance for 63 yr old son with no assets

Post by mdshumaker »

My 92 yr old Father will be leaving me and my 3 siblings approximately $250k each when he passes. One brother (63 yr old) has no assets, no 401k, minimum social security, and spends any money he receives. He is NOT disabled, no dependents - he has a spending addiction- and lives off what friends and some family gives him. I am trustee and POA for my Dad's estate. I told my Dad that it might be a good idea to set up a monthly amount that can go to my brother, in addition to a small lump sum of his inheritance when my Father passes. My Dad is worried that my brother will spend everything in a few years and really have nothing. He agrees but neither of us have knowledge of what might be best. Should an annuity be bought for him or could his inheritance be set up through a bank/Vanguard/Schwab to just automatically distribute a certain amount monthly until a certain age ? Any ideas would be greatly appreciated!
Goal33
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Re: How to annuitize inheritance for 63 yr old son with no assets

Post by Goal33 »

63 years old? I'd recommend giving him his share the same as the rest. It's spendthrift brother's problem. You said no dependents but I wasn't sure if that means there are no grandkids on that side. Another idea is to just skip entirely and leave that money to his kids.
adamthesmythe
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Re: How to annuitize inheritance for 63 yr old son with no assets

Post by adamthesmythe »

I don't know if an annuity is a sure thing because there are companies that advertise they will exchange a cash settlement for an annuity. (Don't know how this works, but it is something to be aware of).
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Re: How to annuitize inheritance for 63 yr old son with no assets

Post by nhs76 »

I'm not an expert, so take this with a grain of salt. But could your father (1) leave each of you the same annuity so it's even-handed among the four of you, or (2) set up some kind of trust that splits income four ways and then dissolves and distributes when the youngest hits Full Retirement Age, or 70 (max SocSec), or their first IRA RMD age, something like that?
simplextableau
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Re: How to annuitize inheritance for 63 yr old son with no assets

Post by simplextableau »

adamthesmythe wrote: Wed May 31, 2023 4:24 pm I don't know if an annuity is a sure thing because there are companies that advertise they will exchange a cash settlement for an annuity. (Don't know how this works, but it is something to be aware of).
That's why instead of an annuity you'd do a trust, but someone is going to have to be the trustee--either an expensive corporate trustee or a family member that will lead the brother to resent the trustee for managing his affairs.
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Re: How to annuitize inheritance for 63 yr old son with no assets

Post by Jack FFR1846 »

DW and I have thought about SPIAs for our kids. Why? No suitable trustees and corporate fees could be as much as $100k per year. The wild card vs a trust is that we don't know when we'll go and plan to keep the money for our use while we're alive. We ended up with as talked about above, just leaving the lump sum. It's in our will which is all we're doing.
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Re: How to annuitize inheritance for 63 yr old son with no assets

Post by windaar »

There's no good answer when you're trying to protect a grown adult from themselves. Just have it split 4 ways. When the 63 year old spends it all, he will come to you and your other siblings for more and will be furious when you say no. Be prepared for that. That happened with me and one of my siblings after an inheritance and I saw it all coming a mile away.
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Re: How to annuitize inheritance for 63 yr old son with no assets

Post by mrgeeze »

windaar wrote: Wed May 31, 2023 5:02 pm There's no good answer when you're trying to protect a grown adult from themselves. Just have it split 4 ways. When the 63 year old spends it all, he will come to you and your other siblings for more and will be furious when you say no. Be prepared for that. That happened with me and one of my siblings after an inheritance and I saw it all coming a mile away.
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Re: How to annuitize inheritance for 63 yr old son with no assets

Post by 260chrisb »

mdshumaker wrote: Wed May 31, 2023 3:59 pm My 92 yr old Father will be leaving me and my 3 siblings approximately $250k each when he passes. One brother (63 yr old) has no assets, no 401k, minimum social security, and spends any money he receives. He is NOT disabled, no dependents - he has a spending addiction- and lives off what friends and some family gives him. I am trustee and POA for my Dad's estate. I told my Dad that it might be a good idea to set up a monthly amount that can go to my brother, in addition to a small lump sum of his inheritance when my Father passes. My Dad is worried that my brother will spend everything in a few years and really have nothing. He agrees but neither of us have knowledge of what might be best. Should an annuity be bought for him or could his inheritance be set up through a bank/Vanguard/Schwab to just automatically distribute a certain amount monthly until a certain age ? Any ideas would be greatly appreciated!
So have your dad set up an account somewhere with the 250K, have 15K a year transferred to your brothers account each January until it's gone. You're the trustee acting upon your fathers request who was acting and thinking in the best interests of your brother and move on. Giving him a lump sum will not do him any good as he'll likely be broke in a few years. If he currently lives off of what family and friends give him he'll be getting a nice raise and will have money coming in at least into his 80s and will keep him from coming to the other siblings for money after his lump sum is gone.
Hypersion
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Re: How to annuitize inheritance for 63 yr old son with no assets

Post by Hypersion »

An annuity will not keep him from spending the money right away since he can always just sell the annuity.
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Re: How to annuitize inheritance for 63 yr old son with no assets

Post by JBTX »

simplextableau wrote: Wed May 31, 2023 4:34 pm
adamthesmythe wrote: Wed May 31, 2023 4:24 pm I don't know if an annuity is a sure thing because there are companies that advertise they will exchange a cash settlement for an annuity. (Don't know how this works, but it is something to be aware of).
That's why instead of an annuity you'd do a trust, but someone is going to have to be the trustee--either an expensive corporate trustee or a family member that will lead the brother to resent the trustee for managing his affairs.
I have a rate sheet for a local corporate trustee, and the minimum annual fee is $4,000 until you get to 1.2% of assets.

While $4000k of $250k is nearly 2% which is far more than a typical Boglehead would want to pay, it may be better than giving it all to a spendthrift that will tear through it in short order.
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Re: How to annuitize inheritance for 63 yr old son with no assets

Post by Stinky »

windaar wrote: Wed May 31, 2023 5:02 pm There's no good answer when you're trying to protect a grown adult from themselves. Just have it split 4 ways. When the 63 year old spends it all, he will come to you and your other siblings for more and will be furious when you say no. Be prepared for that. That happened with me and one of my siblings after an inheritance and I saw it all coming a mile away.
I agree with this.

He’s getting by now. I expect that he’ll get by after he goes through the inheritance.
Last edited by Stinky on Wed May 31, 2023 7:15 pm, edited 1 time in total.
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Re: How to annuitize inheritance for 63 yr old son with no assets

Post by Carefreeap »

windaar wrote: Wed May 31, 2023 5:02 pm There's no good answer when you're trying to protect a grown adult from themselves. Just have it split 4 ways. When the 63 year old spends it all, he will come to you and your other siblings for more and will be furious when you say no. Be prepared for that. That happened with me and one of my siblings after an inheritance and I saw it all coming a mile away.
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David Jay
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Re: How to annuitize inheritance for 63 yr old son with no assets

Post by David Jay »

As others have said above, there appear to be (3) ways to achieve your goal:

1. If a non-assignable annuity (i.e. one that can't be sold) is available - I doubt that it is - then have the estate (by will or trust) buy a lifetime annuity for him.

2. Pay a professional trustee to pay out a defined amount each year, at the cost of the professional trustee.

3. Have a sibling be the trustee and pay out a defined amount each year, with the sibling fully prepared to take the slings and arrows of the brother.
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Re: How to annuitize inheritance for 63 yr old son with no assets

Post by bsteiner »

A trust is more flexible and a corporate trustee is probably less expensive. But an annuity guarantees that the money won’t run out.
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Re: How to annuitize inheritance for 63 yr old son with no assets

Post by CRC_Volunteer »

David Jay wrote: Wed May 31, 2023 6:44 pm As others have said above, there appear to be (3) ways to achieve your goal:

1. If a non-assignable annuity (i.e. one that can't be sold) is available - I doubt that it is - then have the estate (by will or trust) buy a lifetime annuity for him.
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Re: How to annuitize inheritance for 63 yr old son with no assets

Post by Mike83 »

Dad could set up a revocable trust to be activated upon his passing, becoming irrevocable. The amount of assets are too small to engage professional management. However, if the distribution was well defined it would not be too onerous to manage. After opening a low cost brokerage account, annual tax filings are the greatest burden. You should use a CPA but do not need a professional advisor if the trust investment policy is well defined, eg 50/50 balanced fund of US companies.

Trust rules could ...
  • define an annual percentage distribution of x% to be made every May 1 after taxes and fees are paid. The percentage could be fixed (eg 4%) or matched to current IRS RMD tables by age.

    payout any residual assets at brothers's death, after final expenses, to surviving relatives (siblings or their children)

    As a sibling, you would likely want a successor trustee, and hopefully could name a child or nephew/neice.
This is not that complicated as long as you hire someone to do the annual tax filing. After that, you write one check a year. Nieces and nephews should see the benefit because there will be residuals if the RMD distribution process is followed.
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Re: How to annuitize inheritance for 63 yr old son with no assets

Post by David Jay »

CRC_Volunteer wrote: Wed May 31, 2023 6:57 pm
David Jay wrote: Wed May 31, 2023 6:44 pm As others have said above, there appear to be (3) ways to achieve your goal:

1. If a non-assignable annuity (i.e. one that can't be sold) is available - I doubt that it is - then have the estate (by will or trust) buy a lifetime annuity for him.
https://attorney.elderlawanswers.com/no ... sset-12371
Looks hopeful...
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Re: How to annuitize inheritance for 63 yr old son with no assets

Post by fundseeker »

Would an option be for your father to have a discussion with him about this once in a lifetime windfall possibly come to him someday, and maybe explaining how, if he handles it right, he’d be better off. And maybe your father could request, or require that he attend a financial planning class, or read a book, or watch YouTubes to learn how to handle the lump sum. Or maybe you could also talk to him about an annuity, etc. Good luck!
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Re: How to annuitize inheritance for 63 yr old son with no assets

Post by volleyballer »

When the time comes, could you sell the sibling on a meeting with a vanguard personal adviser, making it sound like everyone in the family is doing it? Then he could say he has "a guy" who does his investments, and then there's some washing of hands on your part. They would set up a safe withdrawal rate and allocate the investments accordingly. Then it's the adviser dispensing advice on how to use the assets, not a sibling. The 0.3% aum fee would be worth it in that case imo.
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Re: How to annuitize inheritance for 63 yr old son with no assets

Post by rob »

I hate to say it but someone at 63 with no money and no hope of keeping money... It might be better to exclude him entirely so it does not affect any benefits he can get when he gets to 65 or older.
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Re: How to annuitize inheritance for 63 yr old son with no assets

Post by bsteiner »

Mike83 wrote: Wed May 31, 2023 7:06 pm Dad could set up a revocable trust to be activated upon his passing, becoming irrevocable. …
Or he could create the trust in his Will.
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Re: How to annuitize inheritance for 63 yr old son with no assets

Post by petulant »

rob wrote: Wed May 31, 2023 7:25 pm I hate to say it but someone at 63 with no money and no hope of keeping money... It might be better to exclude him entirely so it does not affect any benefits he can get when he gets to 65 or older.
Sadly I think this is a good point.
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Re: How to annuitize inheritance for 63 yr old son with no assets

Post by DIYtrixie »

petulant wrote: Wed May 31, 2023 7:50 pm
rob wrote: Wed May 31, 2023 7:25 pm I hate to say it but someone at 63 with no money and no hope of keeping money... It might be better to exclude him entirely so it does not affect any benefits he can get when he gets to 65 or older.
Sadly I think this is a good point.
+1
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Re: How to annuitize inheritance for 63 yr old son with no assets

Post by brian91480 »

mdshumaker wrote: Wed May 31, 2023 3:59 pm Any ideas would be greatly appreciated!
If this were me:

I'd have my dad set up the trust with me being the executor... with an annual payment going to my sibling.

After dad passes away.... I'd spend a few hundred dollars (one time only) for a lawyer to sit with me and all the siblings. The lawyer can explain to everyone in the room that the executor (me) must follow the Trust instructions down to the letter.... otherwise the executor (me) can get into big legal trouble.

After the meeting ends... none of the siblings could ever say one word to pressure me.... or putting me into a guilt trip.

--- Brian
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Re: How to annuitize inheritance for 63 yr old son with no assets

Post by arcticpineapplecorp. »

you can set up a spendthrift trust for $250k or less. met life gives an example with a $100k estate. I'm not recommending met life, but just saying it's possible to set it up for $250k.
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Re: How to annuitize inheritance for 63 yr old son with no assets

Post by simplextableau »

brian91480 wrote: Wed May 31, 2023 8:01 pm
mdshumaker wrote: Wed May 31, 2023 3:59 pm Any ideas would be greatly appreciated!
If this were me:

I'd have my dad set up the trust with me being the executor... with an annual payment going to my sibling.

After dad passes away.... I'd spend a few hundred dollars (one time only) for a lawyer to sit with me and all the siblings. The lawyer can explain to everyone in the room that the executor (me) must follow the Trust instructions down to the letter.... otherwise the executor (me) can get into big legal trouble.

After the meeting ends... none of the siblings could ever say one word to pressure me.... or putting me into a guilt trip.

--- Brian
You are presuming a level of rationality that frequently does not exist in the individual at issue. I assure you lack of knowledge of how a trust operates is not the cause of family conflicts in these situations.
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Re: How to annuitize inheritance for 63 yr old son with no assets

Post by 123 »

Since the desire of the dad is to provide for some level of lifetime support for the 63 year old son without any financial discipline the best way of achieving that is likely some kind of spendthrift trust using a corporate trustee. The desire to provide lifetime support seems to be a "showstopper" criteria. Acknowledging that, the higher costs of a corporate trustee are likely justified. Any other mechanism is likely to cause family difficulties or otherwise fail to meet the objective.

The dad has to appreciate that the cumulative costs of that corporate trustee over perhaps 25 years might easily cost $100K - $150K+ and that is simply part of the cost of the inheritance grant. Perhaps the 63 year old son gets a larger inheritance through a trust to fund a corporate trustee and that trust gets divided among the other brothers upon the passing of the 63 year old.
Last edited by 123 on Wed May 31, 2023 9:55 pm, edited 1 time in total.
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Re: How to annuitize inheritance for 63 yr old son with no assets

Post by brian91480 »

simplextableau wrote: Wed May 31, 2023 8:29 pm
brian91480 wrote: Wed May 31, 2023 8:01 pm
mdshumaker wrote: Wed May 31, 2023 3:59 pm Any ideas would be greatly appreciated!
If this were me:

I'd have my dad set up the trust with me being the executor... with an annual payment going to my sibling.

After dad passes away.... I'd spend a few hundred dollars (one time only) for a lawyer to sit with me and all the siblings. The lawyer can explain to everyone in the room that the executor (me) must follow the Trust instructions down to the letter.... otherwise the executor (me) can get into big legal trouble.

After the meeting ends... none of the siblings could ever say one word to pressure me.... or putting me into a guilt trip.

--- Brian
You are presuming a level of rationality that frequently does not exist in the individual at issue. I assure you lack of knowledge of how a trust operates is not the cause of family conflicts in these situations.
Sorry... I'm not buying that argument.

If a sibling asked you to break the law... after explicitly being advised by a third party lawyer not to break this exact law in a personal presentation... you
/ anyone else could 100% guilt-free tell the sibling to get lost.

And even if it was brought up one time after to test the waters... it wouldn't keep getting brought up. Let the sibling blame the law -- and not the O.P.

--- Brian
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Re: How to annuitize inheritance for 63 yr old son with no assets

Post by smectym »

Goal33 wrote: Wed May 31, 2023 4:18 pm 63 years old? I'd recommend giving him his share the same as the rest. It's spendthrift brother's problem. You said no dependents but I wasn't sure if that means there are no grandkids on that side. Another idea is to just skip entirely and leave that money to his kids.
Well, yes it is his money, but if he were amenable to having it managed for him, that’s the better course.
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Re: How to annuitize inheritance for 63 yr old son with no assets

Post by sailaway »

brian91480 wrote: Wed May 31, 2023 9:42 pm
simplextableau wrote: Wed May 31, 2023 8:29 pm
brian91480 wrote: Wed May 31, 2023 8:01 pm
mdshumaker wrote: Wed May 31, 2023 3:59 pm Any ideas would be greatly appreciated!
If this were me:

I'd have my dad set up the trust with me being the executor... with an annual payment going to my sibling.

After dad passes away.... I'd spend a few hundred dollars (one time only) for a lawyer to sit with me and all the siblings. The lawyer can explain to everyone in the room that the executor (me) must follow the Trust instructions down to the letter.... otherwise the executor (me) can get into big legal trouble.

After the meeting ends... none of the siblings could ever say one word to pressure me.... or putting me into a guilt trip.

--- Brian
You are presuming a level of rationality that frequently does not exist in the individual at issue. I assure you lack of knowledge of how a trust operates is not the cause of family conflicts in these situations.
Sorry... I'm not buying that argument.

If a sibling asked you to break the law... after explicitly being advised by a third party lawyer not to break this exact law in a personal presentation... you
/ anyone else could 100% guilt-free tell the sibling to get lost.

And even if it was brought up one time after to test the waters... it wouldn't keep getting brought up. Let the sibling blame the law -- and not the O.P.

--- Brian

You haven't spent much time around irrational spendthrifts, have you?
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Re: How to annuitize inheritance for 63 yr old son with no assets

Post by erishera »

Depending on the amount and its form of distribution it may impact his current/future benefits eligibility like ACA, Medicaid, Food stamps, rent assistance, etc.
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Re: How to annuitize inheritance for 63 yr old son with no assets

Post by GreendaleCC »

simplextableau wrote: Wed May 31, 2023 8:29 pm
brian91480 wrote: Wed May 31, 2023 8:01 pm
mdshumaker wrote: Wed May 31, 2023 3:59 pm Any ideas would be greatly appreciated!
If this were me:

I'd have my dad set up the trust with me being the executor... with an annual payment going to my sibling.

After dad passes away.... I'd spend a few hundred dollars (one time only) for a lawyer to sit with me and all the siblings. The lawyer can explain to everyone in the room that the executor (me) must follow the Trust instructions down to the letter.... otherwise the executor (me) can get into big legal trouble.

After the meeting ends... none of the siblings could ever say one word to pressure me.... or putting me into a guilt trip.

--- Brian
You are presuming a level of rationality that frequently does not exist in the individual at issue. I assure you lack of knowledge of how a trust operates is not the cause of family conflicts in these situations.
This was my thought, too. Outside bogleheads.org, logic and reason aren’t always the way of the world.
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Re: How to annuitize inheritance for 63 yr old son with no assets

Post by SteveinVanvcouverWA »

fundseeker wrote: Wed May 31, 2023 7:16 pm Would an option be for your father to have a discussion with him about this once in a lifetime windfall possibly come to him someday, and maybe explaining how, if he handles it right, he’d be better off. And maybe your father could request, or require that he attend a financial planning class, or read a book, or watch YouTubes to learn how to handle the lump sum. Or maybe you could also talk to him about an annuity, etc. Good luck!
I don't think the problem the 63 y old brother has is a lack of knowledge.
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Re: How to annuitize inheritance for 63 yr old son with no assets

Post by idc »

Every situation is unique. I recently read a great book: Beyond the Grave by Jeffrey L. Condon.
Found it at my local library, recommended from this forum.

The book gives excellent insights from a compassionate estate lawyer, who covers more on the actual long term consequences and twists of such situations in the legal context. There is a lot of wisdom in that book and you might end up being inspired by it to find some acceptable outcome or at least understand your options.

After that, perhaps find a good local estate lawyer that can help you design and implement a plan your dad would be content about. Good luck, these situations are never easy.
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Re: How to annuitize inheritance for 63 yr old son with no assets

Post by TomatoTomahto »

We had an “informal trust” arrangement with a relative with money issues. We provided a fixed monthly amount from an inheritance to bridge the gap between income and monthly expenses. I am happy to say that they “got it together” and we stopped making the payments (and gave the remaining balance).

Of course, it required the cooperation of the relative. We had agreed that additional payments could be made based on HEMS (Health, Education, Maintenance, Support), which IIRC was used once.
I get the FI part but not the RE part of FIRE.
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Re: How to annuitize inheritance for 63 yr old son with no assets

Post by fundseeker »

SteveinVanvcouverWA wrote: Wed May 31, 2023 11:13 pm
fundseeker wrote: Wed May 31, 2023 7:16 pm Would an option be for your father to have a discussion with him about this once in a lifetime windfall possibly come to him someday, and maybe explaining how, if he handles it right, he’d be better off. And maybe your father could request, or require that he attend a financial planning class, or read a book, or watch YouTubes to learn how to handle the lump sum. Or maybe you could also talk to him about an annuity, etc. Good luck!
I don't think the problem the 63 y old brother has is a lack of knowledge.
You may be correct, but all the OP said was that his brother has a spending addiction. He did not say that his brother was already well-informed about handling finances and the things he could responsibly do with his possible windfall. But even if he is, someone could take another swing at connecting with him and maybe this time something clicks, and he handles the money well.
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Re: How to annuitize inheritance for 63 yr old son with no assets

Post by brian91480 »

sailaway wrote: Wed May 31, 2023 10:31 pm You haven't spent much time around irrational spendthrifts, have you?

Everyone has. My former "work wife" was 55 years old with ZERO saved for retirement.

It's easy to make general comments that my offered strategy won't work. Get back to me after you've actually tried it first.

--- Brian
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Re: How to annuitize inheritance for 63 yr old son with no assets

Post by michaeljc70 »

It's his money (upon his father's death) so let him have it. If he blows it that is his business. I'd be clear that you won't be giving him any more money when that is gone. Whether he blows it quickly or slowly I don't see much difference. It seems people have enabled this behavior his whole life.
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Re: How to annuitize inheritance for 63 yr old son with no assets

Post by pennywise »

simplextableau wrote: Wed May 31, 2023 4:34 pm
adamthesmythe wrote: Wed May 31, 2023 4:24 pm I don't know if an annuity is a sure thing because there are companies that advertise they will exchange a cash settlement for an annuity. (Don't know how this works, but it is something to be aware of).
That's why instead of an annuity you'd do a trust, but someone is going to have to be the trustee--either an expensive corporate trustee or a family member that will lead the brother to resent the trustee for managing his affairs.
This was the path chosen by a relative through marriage, who was basically the exact same profile OP describes: 4 siblings including one who while able had been supported by parents, and then his widowed mother all his life.

At the mother’s death she left his portion of the inheritance as a sum that was to be invested then managed by one of the siblings as a trustee. Mom also set up her estate so that her apartment, in which she and freeloading son had both been living, was to go to him with the other siblings receiving an increased share of assets. Apartment expenses were to be also managed by the sibling trustee.

Her intent was that he would always have a place to live that he could not sell or fritter away, and some level of income to meet his basic needs.

As far as I know, it is a functional situation. The trustee sibling manages the account and disperses money each month, although he does get constant aggravating requests from the spendthrift brother, because brother will for example receive his small Social Security check (only money he gets directly) and then spend it completely within a few days – in his case, there’s a gambling issue.

So trustee sib gets phone calls pleading that spendthrift has no money for food, needs to buy medical supplies, etc. meanwhile, he is fielding those calls while monitoring an investment account and taking care of all the ongoing financial costs and responsibility of his now 70-something brother’s living situation.

Personally, I would find myself more than resentful of being saddled with the responsibility of taking care of someone who is able to do for themselves, but simply has become used to, and in fact has had their life structured such that they never have to
petulant
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Re: How to annuitize inheritance for 63 yr old son with no assets

Post by petulant »

TomatoTomahto wrote: Thu Jun 01, 2023 6:19 am We had an “informal trust” arrangement with a relative with money issues. We provided a fixed monthly amount from an inheritance to bridge the gap between income and monthly expenses. I am happy to say that they “got it together” and we stopped making the payments (and gave the remaining balance).

Of course, it required the cooperation of the relative. We had agreed that additional payments could be made based on HEMS (Health, Education, Maintenance, Support), which IIRC was used once.
I wonder if OP's father sets up a trust, the whole thing should be HEMS with no guaranteed payments. That is harder to mess with for Medicaid, tax, etc.
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Re: How to annuitize inheritance for 63 yr old son with no assets

Post by TomatoTomahto »

petulant wrote: Thu Jun 01, 2023 7:33 am
TomatoTomahto wrote: Thu Jun 01, 2023 6:19 am We had an “informal trust” arrangement with a relative with money issues. We provided a fixed monthly amount from an inheritance to bridge the gap between income and monthly expenses. I am happy to say that they “got it together” and we stopped making the payments (and gave the remaining balance).

Of course, it required the cooperation of the relative. We had agreed that additional payments could be made based on HEMS (Health, Education, Maintenance, Support), which IIRC was used once.
I wonder if OP's father sets up a trust, the whole thing should be HEMS with no guaranteed payments. That is harder to mess with for Medicaid, tax, etc.
Trusts can cost money to set up and run. I’m not sure that $250k makes it worthwhile. The informal trust, if it can be agreed by the parties, has the advantage of costing a lot less. In our case, we had an account in our name, that was handled on our tax returns. Since our marginal rates were higher than the “beneficiary,” we just ate the tax hit, but could probably have “charged” them for the tax impact.
I get the FI part but not the RE part of FIRE.
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Re: How to annuitize inheritance for 63 yr old son with no assets

Post by TomatoTomahto »

pennywise wrote: Thu Jun 01, 2023 7:19 am
Personally, I would find myself more than resentful of being saddled with the responsibility of taking care of someone who is able to do for themselves, but simply has become used to, and in fact has had their life structured such that they never have to
It’s human nature to resent it, and we sometimes did, but we’d always come back to the question: “would you willingly trade places?” The answer returned us to being grateful that we were in a different place.
I get the FI part but not the RE part of FIRE.
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Re: How to annuitize inheritance for 63 yr old son with no assets

Post by w5000 »

OP - to avoid the hassle of a spendthrift brother asking/demanding more money from a trust because he feels singled out in his inheritance treatment, you could have the same arrangement for you and all your siblings. Perhaps there could even be efficiencies in setting up a single $1M trust that would make an annual distribution to the 4 of you. That trust could invest and distribute its principal, or maybe it could buy an annuity for the 4 of you (if there is such a thing). Trustees could be the 4 of you, acting with majority consent.
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Re: How to annuitize inheritance for 63 yr old son with no assets

Post by Goal33 »

smectym wrote: Wed May 31, 2023 9:52 pm
Goal33 wrote: Wed May 31, 2023 4:18 pm 63 years old? I'd recommend giving him his share the same as the rest. It's spendthrift brother's problem. You said no dependents but I wasn't sure if that means there are no grandkids on that side. Another idea is to just skip entirely and leave that money to his kids.
Well, yes it is his money, but if he were amenable to having it managed for him, that’s the better course.
If he was amenable to it, I missed that. Sounds unrealistic to me. This is just going to create drama.
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Re: How to annuitize inheritance for 63 yr old son with no assets

Post by ncbill »

michaeljc70 wrote: Thu Jun 01, 2023 7:15 am It's his money (upon his father's death) so let him have it. If he blows it that is his business. I'd be clear that you won't be giving him any more money when that is gone. Whether he blows it quickly or slowly I don't see much difference. It seems people have enabled this behavior his whole life.
Yep, no point in losing $100k+ of only a $250k inheritance to corporate trustee fees over 20+ years.

Appointing a sibling as trustee in this type of situation is insane, unless the OP hates that sibling, e.g.:

"It's MY money, dad left it to me, whadda ya mean I only get a pittance every year? I'll sue!"

Tell dad he needs to distribute it outright, so the other kids can walk away, & let the spendthrift face the consequences of his own choices.
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Re: How to annuitize inheritance for 63 yr old son with no assets

Post by miket29 »

ncbill wrote: Thu Jun 01, 2023 8:38 am Tell dad he needs to distribute it outright, so the other kids can walk away, & let the spendthrift face the consequences of his own choices.
That might be hard to do. I imagine the dad still loves his son in spite of the poor choices he makes and wants to protect his son from ending up in dire straits or homeless. If managed properly the $250K could go a long way towards ensuring this.
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Re: How to annuitize inheritance for 63 yr old son with no assets

Post by michaeljc70 »

miket29 wrote: Thu Jun 01, 2023 12:31 pm
ncbill wrote: Thu Jun 01, 2023 8:38 am Tell dad he needs to distribute it outright, so the other kids can walk away, & let the spendthrift face the consequences of his own choices.
That might be hard to do. I imagine the dad still loves his son in spite of the poor choices he makes and wants to protect his son from ending up in dire straits or homeless. If managed properly the $250K could go a long way towards ensuring this.
If the son is as bad as it sounds, knowing he will get X dollars per month/year he may just spend it before he gets it using credit or whatever other means is necessary until he cannot borrow anymore. I've seen many people spend their expected inheritance before they got it. Some never wound up even getting the inheritance.
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Re: How to annuitize inheritance for 63 yr old son with no assets

Post by petulant »

michaeljc70 wrote: Thu Jun 01, 2023 12:37 pm
miket29 wrote: Thu Jun 01, 2023 12:31 pm
ncbill wrote: Thu Jun 01, 2023 8:38 am Tell dad he needs to distribute it outright, so the other kids can walk away, & let the spendthrift face the consequences of his own choices.
That might be hard to do. I imagine the dad still loves his son in spite of the poor choices he makes and wants to protect his son from ending up in dire straits or homeless. If managed properly the $250K could go a long way towards ensuring this.
If the son is as bad as it sounds, knowing he will get X dollars per month/year he may just spend it before he gets it using credit or whatever other means is necessary until he cannot borrow anymore. I've seen many people spend their expected inheritance before they got it. Some never wound up even getting the inheritance.
Hence my suggestion to just make the whole thing a HEMS trust of some kind.
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Re: How to annuitize inheritance for 63 yr old son with no assets

Post by bsteiner »

petulant wrote: Thu Jun 01, 2023 7:33 am I wonder if OP's father sets up a trust, the whole thing should be HEMS with no guaranteed payments. That is harder to mess with for Medicaid, tax, etc.
While there's favorable case law in New York in the Medicaid context where the trustee's discretion was limited by an ascertainable standard, a fully discretionary trust is safer. It eliminates the argument that by enumerating permissible purposes for distributions, the beneficiary may have an entitlement to distributions for those purposes, at least to the extent needed.
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