“My father remarried at the age of 65. He kept his house in the revocable trust where he had control of his assets.”
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“My brother is named executor, and he also has the sign-in passwords to all our father’s investment accounts.”
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“She flipped the title on his car, sold all his furniture and told us that our dad didn’t leave me or my sister anything.”
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My dad recently told me he wants to marry his girlfriend soon and I am concerned he is rushing his estate planning, particularly as it relates to his children’s inheritance. My dad is 48 years old, and his wife from his second marriage passed away from cancer three years ago.
He was devastated, and I am happy he has found someone who makes him happy. His girlfriend is 49 and they have been dating for 1.5 years. I think it is wonderful they want to get married; however, I want my dad and my family to be financially prepared and protected.
My family was very tight-knit. My grandfather owned two large companies as well as significant real estate, and my parents, aunts and uncles all worked for him. We had weekly family dinners, spent the holidays together and all went on family vacations.
My grandfather and grandmother both passed away from cancer in their mid-50s. My dad and his siblings got a significant inheritance, but distributing the trust completely tore him and his siblings apart. The siblings no longer talk to each other or have any part in each other’s lives.
It was completely devastating to lose our family dynamic, and has been for years since. The last thing I ever want to happen is for something similar to happen again. When my dad told me he wanted to marry I felt like I needed to have an uncomfortable conversation about his estate.
Not an ‘early’ marriage
He is very private about his finances, so it is an uncomfortable thing to bring up. He told me he has a trust that owns everything — real estate and investment accounts — except for a few personal cars. He feels he is protected without a prenuptial agreement.
I am only 23 and would like some advice on having this conversation with my dad. When he sells the business or any of his properties, is it technically the trust selling them? If they were to ever be divorced, would she be entitled to any of it?
If he were to pass away before her, what would happen if she was not a beneficiary of the trust? What are other questions I should ask? Where is the line between wanting to be prepared, and also respecting his privacy? I want to protect my family for the future.
I do not think his girlfriend has any ill intentions. However, my siblings and I are all grown and I don’t think she should be entitled to his estate in the same way as an early marriage. I see her as my dad’s partner and I am very thankful he has that.
I do not see her and her children as deeply integrated into our family as a stepmother, and I don’t regard her children as my siblings. Thank you for any advice you have for me, and for all that I have learned reading your column.
The Daughter
Also see: My partner is against marriage. I’m not on the deed to his home, but he set up a revocable trust in case he dies first. Is this risky?
“He may regard your questions as casting a skeptical shadow over his fiancée, assuming they are in the first flush or romance.”
MarketWatch illustration
Dear Daughter,
Think very carefully before you speak. It’s a very delicate subject.
First, the good news: Your feelings about your future stepmother and her children may change, and you may welcome them into your family as warm personalities who have a lot to offer. Now, the bad news: The terms of your father’s trust and last will and testament can change too.
That’s why it’s important for you to proceed cautiously if and/or when you decide to inquire about his estate, and how he intends to structure a will or trust. He may regard your questions as casting a skeptical shadow over his fiancée, assuming they are in the first flush or romance.
It’s a sensitive and special time for your father. The nature of romance — the early days, months and even years of a relationship — often means that one often idealizes their partner, and sees them apart from the harsh realities of everyday life. It may also lead him to be overprotective.
Leave your feelings about your father’s partner and her kids out of the loop. Obviously, he loves her and it’s immaterial whether you regard this as an “early” marriage or not, and see it in a different light. At 23, 49 may seem old. But they could have four decades together.
Stick to the facts, don’t make any personal comments, and be honest about what happened to your father and his siblings. It’s not an uncommon concern; some $16 trillion will be passed from older family members to millennials and Generation X-ers over the next decade.
“Assets in a trust are not subject to equitable distribution unless they contain marital property,” says Jewell Law. “Any money paid from a trust to a beneficiary-spouse remains separate property provided it is maintained in a separate account and not commingled with marital funds.”
Prenups add protections
Remember, no one is entitled to anything. Start the conversation on the right foot by saying a prenup can help your future “stepmother” as much as it could help your father, and outline how it can act as a complement to a revocable trust, laying out other financial issues in greater detail.
Your father has already taken steps to set up a revocable trust for his children, which should protect those assets from any claims from his third wife if they divorce. Unlike a prenuptial agreement, he does not need his girlfriend’s signature to do this.
That said, I favor both a trust and a prenup. A prenup should be created before the wedding day with an attorney. It can also address issues that a trust cannot. These include documenting your premarital assets and liabilities, and how they will be divided in the event of a divorce.
Prenups are useful for alimony and child support. They can also lay out what happens to property if, say, your father dies. He could decide to give her a tenancy for life — that is, live in the house for the rest of her life. Some states even allow for “no-cheating” clauses.
He should update the beneficiaries on his 401(k) and IRA, and on other accounts he wishes to avoid probate, the public accounting of his assets and liabilities. However, some experts advise putting brokerage accounts in a trust to avoid triggering any probate threshold in your state.
It’s possible to be encouraging and pragmatic, assertive and sensitive, practical and helpful. Your father has been through a lot, and you are also getting used to having these new people in your family, but ultimately it’s your father’s life, so know when to give your dad his space.
You can email The Moneyist with any financial and ethical questions at qfottrell@marketwatch.com, and follow Quentin Fottrell on X, the platform formerly known as Twitter.
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.
The Moneyist regrets he cannot reply to questions individually.
Previous columns by Quentin Fottrell:
My wife and I sold our home to her son at a $100,000 discount. He’s now selling at a $250,000 profit. Do I ask for a cut?
My employer hires exclusively white managers and promotes people of ‘questionable expertise.’ Is this a good or bad time to jump ship?
My late father was under the impression that he and my stepmother had an irrevocable trust set up. He was wrong. He passed away in September and now we have learned it is actually a revocable trust. It was a mistake. My stepmom is letting her son handle things for her, and has talked her into changing the trust so that he will get everything when she passes, so he can help take care of her sister who has mental-health issues.
This will effectively cut me and my siblings out of any part of my father’s estate. Everything, including their home was supposed to go into the trust, and when both my father and stepmother ended up passing, the home was supposed to be sold and all proceeds split evenly between all of their beneficiaries, including my siblings and me. Is there anything we can do to assure my father’s wishes are granted?
Daughter/Stepdaughter
Related: My estate is worth millions of dollars. How do I stop my daughters’ husbands from getting their hands on it?
“Many obstacles lie ahead. The burden of proof lies on your doorstep, and you should be cognizant of the statute of limitations in your state.”
MarketWatch illustration
Dear Daughter,
It is stories such as this that give all the wonderful stepmothers out there a bad rap.
There are a few possibilities here: 1) Your father set up a revocable trust by accident and did not properly understand the difference between the two trusts; 2) he set up a joint trust where only his portion of the assets became irrevocable upon his death; or 3) he at some point changed his mind and set up a revocable trust, and left his assets for his second wife to distribute to his respective heirs. Even if #1 occurred, it would be up to you to prove this in a court of law, with the help of an attorney, in the event you contested the terms of this trust. Keep in mind, there are many variables that go into creating a trust, so it highly depends on the terms laid out.
But many obstacles lie ahead. The burden of proof lies on your doorstep, and you should be cognizant of the statute of limitations in your state. “Trust contests must be brought within a certain period following the grantor’s death,” says Brian Liberis, senior estate planner at EP Wealth Advisors, based in Boston, Mass. “So if a court action is necessary, it should be undertaken as soon as possible. In addition, you would likely have the burden to prove that the trust did not reflect your father’s intentions and that a mistake was indeed made.”
“However, some revocable trusts are drafted so that they continue to be revocable until the death of the second spouse,” Liberis told MarketWatch. “If that were the case here, then your stepmother would likely have the authority to change the entire trust and redirect the assets to her children. If that is how this trust was drafted, then your only recourse would be to contest the trust in court, on the grounds that it should be modified/reformed due to a ‘mistake.’ That is, the trust as drafted did not reflect your father’s intentions.”
Principles of fairness
Obtain a copy of the trust, so your attorney can review the terms, and see if there was any evidence that it was poorly constructed and/or if only a share of the assets are revocable. “You would be asking the court to modify/reform the trust on principles of ‘equity,’ or fairness,” Liberis adds. “If, at the time it was executed, it was intended that, upon the death of the second spouse, the property passed 50/50 to the children of each spouse, then principles of fairness would dictate that the trust be reformed to ensure that result — or, at least, so you would argue.”
Your stepmother appears to be intent on ensuring the assets in the revocable trust — or the part of the trust that is revocable — will be inherited by her son. That may be an expensive lesson for you and your father; the surviving spouse will not always adhere to their late partner’s wishes. Whether it’s a large or a small amount of money, the second wife or husband can come to believe that they deserve or are entitled to their late partner’s entire estate. We could argue about the ethics of cutting you out of the picture, but your focus should be her legal entitlement.
If you are successful in your endeavors, be aware that assets deposited in a revocable trust typically receive a step-up in basis, so any capital gains are effectively wiped out. That would, of course, benefit your stepmother. So if he left a $1 million home that was originally purchased for $500,000, any capital gains would be calculated on the home’s value at the time of your father’s death, thus saving her money if she sold it. However, assets in an irrevocable trust may not receive a step-up in basis if they were not included in your father’s taxable estate.
If men were more likely to outlive their wives — women tend to outlive men by about six years, a gap that could narrow or widen depending on the age gap between a couple — step children would be writing more letters about their stepfather. In this column, letters about stepmother’s emptying bank accounts are more prevalent than stepfather’s doing the same thing. But children are also likely to disagree with their father’s wishes, if they believe he has been too generous to his second wife. In the meantime, I wish you a painless resolution to your trust debacle.
You can email The Moneyist with any financial and ethical questions at qfottrell@marketwatch.com, and follow Quentin Fottrell on X, the platform formerly known as Twitter.
The Moneyist regrets he cannot reply to questions individually.
Previous columns by Quentin Fottrell:
‘I grew up pretty poor’: I got an annual bonus. After I pay off my credit cards, I’ll have $10,000. What should I do with it?
‘I received an insurance-claim check for $22,000’: Why on earth does it take five days for my check to clear?
‘I want to protect my family’: My wealthy father, 49, is marrying his third wife. How do I broach the subject of my inheritance?
Check out the Moneyist private Facebook group, where we look for answers to life’s thorniest money issues. Post your questions, or weigh in on the latest Moneyist columns.
By emailing your questions to the Moneyist or posting your dilemmas on the Moneyist Facebook group, you agree to have them published anonymously on MarketWatch.
By submitting your story to Dow Jones & Co., the publisher of MarketWatch, you understand and agree that we may use your story, or versions of it, in all media and platforms, including via third parties.
I am a 56-year-old man living in my family home with my father, 93, who has Type 2 diabetes and a pacemaker and is legally blind. My mom passed away five years ago. He is in good health otherwise, and well taken care of. Because of his blindness, he needs round-the-clock care. My girlfriend of 10 years lives with me, and she helps. We are his caregivers.
I also have a sister, whom I just set up with an apartment for which people wait years to even get on the waitlist. I was able to get her in based on my connections with the management. She is a spendthrift and has not worked for years, and while living with my father prior to my taking over, she spent thousands of dollars of his money.
Last April, my sister racked up $20,000 on our father’s credit cards, and tried to take upwards of $13,000 from his bank account. She wrote two checks — one for $8,000 and one for $5,000. Luckily, the bank did not cash the check for $8,000. What we want is for him to quitclaim his home to me to help my sister and me. My father will live here until he passes.
Upon his quitclaiming the house to me, I would own it outright and get an immediate home-equity loan. I plan to purchase a lump-sum annuity for $200,000 with a 20-year time period, which would give my sister approximately $1,400 a month in addition to her Social Security Disability Insurance. We would then split the balance of my father’s estate — $100,000 each.
Here are my questions regarding my father’s house: What is the best way to go about this? I own my own business, and I can’t get a home-equity loan until I take over my father’s house. I’m looking for some expert advice on how to get this done. Thank you in advance for any help and/or advice you can provide.
The Son
Related: I want my son to inherit my $1.2 million house. Should I leave it to my second husband in my will? He promised to pass it on.
“Choosing to do your own version of a reverse mortgage by leveraging the equity in your father’s house to provide income for you and your sister today seems opportunistic and foolhardy at best.”
MarketWatch illustration
Dear Son,
This is a terrible idea. It’s a terrible idea for you, for your sister and for your father.
Say your father quitclaims this home to you now, while he is still alive, and you sell the home. You will have to pay long-term capital-gains tax on the property, if or when you sell it, on the price he paid for the home rather than on the value of the home when you inherit it. This is called a “step-up in basis,” and you will lose that tax advantage by quitclaiming now.
If your father quitclaimed his house to you and it was worth $1 million upon his death, an appreciation of 100% on the purchase price, you would be required to pay capital-gains tax on the original purchase price ($500,000) to the Internal Revenue Service, if you sold the property. With a step-up in basis, you’d pay capital-gains tax only on appreciation above $1 million.
Furthermore, you are proposing taking out a home-equity loan on a property in order to purchase a $200,000 lump-sum annuity over 20 years. With interest rates hovering at over 6%, you are facing at least $1,200 a month in repayments. You’re putting yourself into debt to buy this annuity, effectively robbing Peter to pay Paul.
Research has shown that people don’t always act prudently when they take out a lump-sum annuity. Some analysts refer to this as the “lottery effect.” According to this survey by MetLife, one in five retirement-plan participants who selected a lump sum from either a defined-benefit or defined-contribution plan say they depleted it, and ran through their money in 5.5 years on average.
The price of your father’s care
Another problem: Your sister has proven herself to be untrustworthy, by your telling — someone who will fritter away money given to her and ask for more. Or, assuming what you say is true, she might just take what she wants, regardless of the consequences. Why are you going through these financial gymnastics? Is it for her? Or for yourself?
The other issue casting a shadow over your desire to plunder your father’s house for money even while he still lives there: your business. Carefully examine your motivations for making such an extraordinary move while your father is still alive. What if you fall on hard times and the bank forecloses on the house? Where will your father live then?
Children usually inherit their parents’ property after their last parent has passed away; choosing to do your own version of a reverse mortgage by leveraging the equity in your father’s house to provide income for you and your sister today seems opportunistic and foolhardy at best. Let your father live the remaining years of his life in peace.
Your father has been fortunate to have you and your girlfriend taking care of him these past few years, given his multiple health issues, but what is the price of this care? What if you can no longer take care of him and he needs to be admitted to a long-term-care facility, or he requires professional medical assistance?
His house is his one source of income and stability. Please don’t take that away from him.
You can email The Moneyist with any financial and ethical questions at qfottrell@marketwatch.com, and follow Quentin Fottrell on X, the platform formerly known as Twitter.
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.
The Moneyist regrets he cannot reply to questions individually.
Previous columns by Quentin Fottrell:
My parents want to pay off my $200,000 mortgage, and move into my rental. They say I’ll owe my sister $100,000. Is this fair?
‘I hate the 9-to-5 grind’: I want more time with my newborn son. Should I give up my job and dip into my six-figure trust fund?
My father, 75, died without a will. At the time, he was divorced from his fifth wife and had a fiancée. He left behind three children: Me, the oldest at 57, from his first marriage, and a son and daughter, 29 and 32, from his fifth marriage. He was quite well off, being part owner of a business — at least, a “minor” multimillionaire.
However, his fiancée would only give us some of his possessions, and his three cars at the time of his death. She wouldn’t give us any of his legal and financial paperwork. We are pretty sure he didn’t have a will, but we believe he had a life-insurance policy, a 401(k) plan, and other investments. His fiancée swears that she is the beneficiary of his life insurance, but she hasn’t produced any proof.
We have had his mail forwarded to my brother to try and find out who his lawyer is or insurance company is or any paperwork regarding his personal business.
I have several questions:
1. How do we go about finding out if he had life insurance or a will without any paper trail?
2. How do we find out about his checking and savings accounts, and 401(k) without paperwork?
3. We do believe he died intestate and that his assets will have to go through probate court; however, my half brother has taken control of the situation, including having him cremated and sent to him for burial. He gets along great with his sister, but since I’m 25 years older and from the first marriage we were never close, and I feel like they’re “teaming up” with their mother (his most recent ex-wife) to take things from his estate, and not letting me know what’s going on.
My other questions:
4. How do we get to the point of his estate going through probate and how is a third party appointed to oversee that? Can my brother legally just take over? I want to make sure his estate is split evenly between the three of us, and I don’t know how to make that happen when my half brother won’t even communicate with me and my half-sister keeps telling me “he’s handling it.”
5. Also, if he and my sister are listed as beneficiaries on any life insurance policies or 401(k) policy, do I have a legal right to any of it if I’m not listed?
Thank you in advance for your help.
The Eldest Son
Also see: I want to blow the whistle on my former employer’s ‘shady practices,’ but I signed an nondisclosure agreement. Can I break my NDA?
“All of his possessions, everything from his wristwatch to his car and home, should go through probate when an administrator is appointed by the surrogate’s court or county courthouse.”
MarketWatch illustration
Dear Eldest,
Your late father’s fiancée has the most to lose, which is why she is likely using this time to batten down the hatches with an information blackout. All of his possessions, everything from his wristwatch to his car and home, should go through probate when an administrator is appointed by the surrogate’s court or county courthouse. You should be able to apply to be the administrator of your father’s estate. It’s a lot of work, and even includes filing his taxes.
With that said, I can answer your last two questions (No. 4 and 5) first. No, you don’t have any legal right to your father’s life-insurance policy or 401(k) plan, assuming that they do indeed exist and have your siblings (or anyone else, for that matter) listed as beneficiaries. If there are no listed beneficiaries, these accounts would become part of your father’s overall estate, and go through probate with his bank accounts, house, pension and all his other assets.
Your father’s bank account, broker and lawyer should be able to start the fact-finding process. It’s a good lesson for everyone to get their paperwork in order, and leave a copy in a safe deposit box and/or with a trusted lawyer. Assuming your father died intestate — without a will — his fiancée is not a legal heir and, therefore, would walk away with nothing, unless she was a co-owner of his bank account or listed as a beneficiary on his other accounts.
However, any 11th-hour changes to your father’s listed beneficiaries could raise a red flag. Typically, a person must be of sound mind and not under or subject to duress, restraint, fraud or undue influence to sign a will, a power of attorney document, or other legal and financial documents. A person must understand what they are signing, and have testamentary capacity — that is, he would need to know what he was signing and why, and how much was at stake.
After a person is appointed by the court to speak for the estate, you can then identify insurance payments through transactions on his bank account, and file for a change of address for all of your father’s mail, says Hubert Klein, partner and forensic accountant at EisnerAmper. As for your half brother and sister, Klein says, “What authority did he have to rush the process? Was he [or she] appointed the executor or administrator? You need to ask.”
State law controls the probate process. “Many states have this information online on how the process works — who can file paperwork, who can be appointed as the estate representative, and who can effectuate transactions on behalf of the estate,” he says. “Hidden or non-disclosed assets and accounts can be found, but someone has to speak for the estate in order ensure a proper accounting of all the estate’s assets, and that liabilities are documented for the court.”
The probate process is public, the legal equivalent of washing your dirty linen in the front yard; that will leave little room for siblings or ex-wives or fiancées to muddy the waters. In addition to an administrator/executor, you will need a trust and estate attorney to navigate the process. No one has the right to hijack this process, and the sooner you embark on a fact-finding mission with the help of your father’s bank, and the legal wheels start turning, the better.
More from Quentin Fottrell:
My father has dementia and ‘forgave’ my brother’s $200,000 house loan. The nursing-home notary said he was of sound mind. What can we do?
My husband bought our house with an inheritance. I signed a quitclaim. He said I could live there after he dies, but changed his mind. What now?
Low-paying jobs are the economy’s way of saying you should get a better job’: I’ve decided to stop tipping, except at restaurants. Am I wrong?
You can email The Moneyist with any financial and ethical questions at qfottrell@marketwatch.com, and follow Quentin Fottrell on X, the platform formerly known as Twitter. The Moneyist regrets he cannot reply to questions individually.
Check out the Moneyist private Facebook group, where we look for answers to life’s thorniest money issues. Readers write to me with all sorts of dilemmas. Post your questions, or weigh in on the latest Moneyist columns.
By emailing your questions to the Moneyist or posting your dilemmas on the Moneyist Facebook group, you agree to have them published anonymously on MarketWatch.
By submitting your story to Dow Jones & Co., the publisher of MarketWatch, you understand and agree that we may use your story, or versions of it, in all media and platforms, including via third parties.
My father lent my brother the funds to purchase a house in 2006. The loan was formal and registered in the county. The interest was 4%, and it was a 30-year loan for $300,000. It was bought as an investment property for my brother. It is in a very rural area.
My parents made many improvements, replacing windows, siding and fencing. They paid all taxes and insurance — although, according to the loan, my brother should have paid them. They managed the farm, including cattle and hay, and improved the fields.
They also signed a document in 2016, indicating they would pay “rent” toward the loan for use of the property. My brother paid $150,000 at the beginning of the loan, then nothing. He said he would pay it off when our parents died and he got his inheritance.
My dad, who is in his late 90s, has early dementia and delirium induced by a urinary-tract infection. My brother had him sign a deed that he had paid off the loan. I have power of attorney for my father, and am his estate’s executor and trustee. I looked at the loan terms. My brother owed $205,000. I hit the ceiling.
The state was ready to investigate for financial exploitation. I believe the nursing home that supplied the notary was in the wrong by ruling my father was of sound mind, given that they knew I had power of attorney and was concerned about my father’s cognitive health.
Dad said he would give the other siblings the same amount over time. My brother went ballistic and said our siblings should not get cash gifts. The property has more than doubled in value, but he still feels cheated. I’ve consulted an attorney, who agrees the written documents should prevail.
What can I do?
Betrayed Brother
“Your father fell into a trap.”
MarketWatch illustration
Dear Betrayed,
If your father leaves his other children $205,000, and deducts that sum from this brother’s inheritance, that would seem like the path of least resistance. It would be cheaper and easier than challenging the notary’s assessment of your father’s competence in court.
Giving you $205,000 over a number of years will be a more difficult proposition, given your father’s failing health. The annual exclusion, or the amount you can give a third party without using your annual gift- or estate-tax exemption, is $17,000 in 2023 for a single person or $34,000 for a married couple. Otherwise, you must file a gift-tax return with the Internal Revenue Service.
For 2023, the lifetime gift- and estate-tax exemption is $12.92 million for a single person, or $25.84 million for a married couple. Those rates will sunset at the end of 2025 if Congress doesn’t act, reverting to their levels prior to the Tax Cuts and Jobs Act, which went into effect in 2018.
The notarization process has flaws
“Notarization is excellent proof of some things, but less reliable for others,” says Mike Fiffik, a LegalShield partner attorney in Pittsburgh. “But in all cases, notarized documents can be challenged.”
A notarized document suggests a signer acted without duress and understood what they were signing. But there are flaws. “In practice, notaries have little to no training or experience assessing a signer’s mental capacity,” Fiffik says. “Notaries may look for ‘red flags,’ such as the signer communicating incoherently, in obvious physical duress [or] overly medicated.”
“If there is other evidence to cast doubt on the signer’s mental capacity at the time the document was signed, the fact that it was notarized would not prevent the document from being challenged,” Fiffik adds. “The notary will certainly be a witness in a court proceeding.”
The perils of lending to a family member
Your father fell into a trap: giving one child preferential treatment over the others. That can work out if the child in question is trustworthy, but can also lead to unwise terms. In this case, your parents lent your brother money to buy a house and paid rent on the property. Bad combo.
In a recent survey of more than 2,000 adults by CreditCards.com, nearly 60% of people who had loaned money to family members said that the loan was not a good idea. What’s more, 42% never got their money back, and 10% said their credit score suffered.
Never loan more than you can afford to lose, and know that having a friend or family member indebted to you can alter the nature of the relationship, create an unequal balance of power, and ultimately do irreparable damage to that relationship.
You do, however, have options. Weigh the risks and proceed with caution.
More from Quentin Fottrell:
Is it OK for my new boyfriend to ask me to split the bill? ‘I don’t want him to get used to me paying for my own meals.’
My stepdaughter is executor to her late father’s will, and believes she’s now on the deed to my home. Is that possible?
I inherited $246,000 from my late mother and used $142,000 to pay off our mortgage. If we divorce, can I claim this money?
You can email The Moneyist with any financial and ethical questions at qfottrell@marketwatch.com, and follow Quentin Fottrell on X, the platform formerly known as Twitter. The Moneyist regrets he cannot reply to questions individually.
Check out the Moneyist private Facebook group, where we look for answers to life’s thorniest money issues. Readers write to me with all sorts of dilemmas. Post your questions, or weigh in on the latest Moneyist columns.
By emailing your questions to the Moneyist or posting your dilemmas on the Moneyist Facebook group, you agree to have them published anonymously on MarketWatch.
I’m in my 40s and recently learned my father has been lying about his finances. He owes a lot of money to many people whom he borrowed from over the years, and he has no source of income to pay them back with.
He does own several properties, but they’re not selling given how terrible the housing market is at the moment and, even if they do sell, they won’t be enough to cover what he owes. He’s also older and not very healthy.
My siblings and I are worried about the burden on my mother if something were to happen to him. They’re still married.
To what extent would she be responsible for his debts?
Concerned Son
Related: ‘He implied he was financially secure’: My husband was always hesitant about his finances. Now I know why.
“It’s not a one-size-fits-all answer, I’m afraid. But nor should your mother roll over if your father dies, and get out her checkbook for every debt collector that comes calling.”
MarketWatch illustration
Dear Concerned,
Financial infidelity, by some accounts, can be as devastating as any other kind of infidelity. It can threaten not only a couple’s marriage, but also their home, peace of mind, financial independence, reputation, credit score and even their ability to retire. It’s devastating to put someone’s future in jeopardy by keeping secrets like this. Nearly one-third of people have said they’ve committed financial infidelity — that is, deliberately keeping secrets about money from their partner — but over half have said they have financial secrets, like a secret bank account.
The Federal Trade Commission and Consumer Financial Protection Bureau say that a surviving spouse is not liable for credit-card debt, student debt or other kinds of debt owed by a partner who dies. The contract is between your father and the credit-card company. However, in a community-property state, your mother may be liable for certain debts, such as medical debt, from jointly held assets. There are nine community-property states: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin.
What kind of debt your mother may be on the hook for will depend on whether she lives in one of those community-property states, the nature of the debt and the laws in her particular state. “The debt of a deceased person is paid from their estate, which is simply the sum of all the assets they owned at death,” Experian says. “If [the] spouse had a will, the executor they named in the will uses the estate to pay off creditors. If [the] spouse didn’t have a will, a probate court judge will decide how to distribute their estate and will choose an administrator.”
Related: ‘I’m afraid to tell my spouse’: I maxed out my credit cards and racked up $100,000 in debt due to my gambling addiction. Can you help?
If your mother was a co-signer on those debts, she certainly would have liability, says Gary Botwinick, a co-managing partner of Einhorn Barbarito, which has offices in New Jersey. If they got divorced, she may also be on the hook for his debts — if the judge ruled that she benefited from those debts. “Typically, certain inheritances are not subject to debts,” he says. “If they own a home via tenants by entirety, that would typically not be subject to the debts. A life-insurance death benefit and retirement assets — they too would not typically be subject to those debts.”
When your father dies, your mother can also tell any debt collector how and when to contact her. She should not be bullied or cajoled into paying debts that are not her responsibility and, even if they were her debts, there are rules as to how debt collectors must conduct their business. The days of being psychologically beaten into submission are over. “If you receive a validation notice and dispute the debt in writing within 30 days, the debt collector must stop contacting you until they validate the debt in writing,” the Consumer Financial Protection Bureau says.
Both partners should always have access to bank accounts and know where money is being spent and why. If one partner has a gambling problem, it’s better that it’s discovered before the bank accounts are drained and the person attempts to refinance the house. That begs the question: How did your father get into such debt? Does he have a gambling problem? Is he an over-spender? Or has he been the victim of an elder financial scam? Will he continue to rack up debts, even though the extent of his financial folly has been revealed?
Meanwhile, interest rates won’t stay near 8% forever, and the housing market will eventually pick up when more people feel comfortable about buying. Potential sellers, who need to buy another home with a mortgage, obviously don’t want to trade their low rates for a rate that is currently at a 20-year high. Some economists expect rates to fall and demand to rise in 2024, but some also predicted rates would have hit 5% by now. It’s a shame to have to unload these investments and/but your parents’ long-term financial security is paramount.
If your father should die before your mother, she should not simply roll over and get out her checkbook for every debt collector that comes calling. She will likely be scared and vulnerable, so she will need both legal and moral support if that time comes and your father’s estate goes through probate. For what it’s worth, there are certain assets that won’t go through probate: assets jointly held by both spouses, assuming these properties are in both your parents’ names, along with trusts and life-insurance policies.
It’s not a one-size-fits-all answer, I’m afraid. It will depend on the nature of your father’s debts and where they live, but it’s best to prepare now.
You can email The Moneyist with any financial and ethical questions at qfottrell@marketwatch.com, and follow Quentin Fottrell on X, the platform formerly known as Twitter.
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:
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My family is dealing with a significant shock. My brother, my sister and I have just found out that our elderly father secretly married his caregiver five years ago and never told us. We have a thriving family-owned business, and our father’s wealth is in the hundreds of millions of dollars.
This caregiver is 40 years younger than my father. Her visa was already invalid, as she never went to school and she stayed in the United States well beyond when she was scheduled to leave. She has lived with my father for eight years, five of them while married.
My father has now told us he has a serious degenerative disease, and we aren’t sure how long he has to live.
Now that we know he’s married, it’s come to our attention that the state we live in has a statute that says if a spouse dies, the partner can choose either to accept the conditions of a will or get 30% of the spouse’s estate. If they divorce, his wife would get about 30% of his estate, which is worth $80 million.
“‘We are all comfortable financially, but we are very upset that this woman should get so much money for only eight years together.’”
We’ve always had a good relationship with our father, and we all live within a few miles of one another. We get together for many family events and always include my father’s wife. We are all comfortable financially, but we are very upset that this woman should get so much money for only eight years together.
To complicate things, my father now is very worried that she might harm him to get money. We don’t think she would, but my father refuses to leave his house, and her lawyer has advised her not to leave. We’ve offered to rent or buy him another house or condo, but he refuses to leave. We’ve hired round-the-clock caregivers, but his wife makes it difficult for them to tend to my father.
There was a prenuptial agreement, but our lawyers said it was poorly written and would never hold up in court. Can you give us direction on where to turn to reduce this woman’s part of the estate? We understand she will probably receive millions of dollars, but we honestly don’t believe she deserves 30% of everything.
Reluctant Stepdaughter in Florida
Dear Stepdaughter,
There are many moving parts and questions surrounding your father’s marriage and estate. Florida is an equitable-distribution state, meaning that his assets will be distributed fairly or equitably whether they are worth $10 or $100 million. Anything earned before his marriage will typically be regarded as separate property. From your letter, it sounds like he has either not worked during his five-year marriage, or that at least those have not been his peak earning years.
In Florida, a prenuptial agreement must be signed by both parties without undue influence or fraud, and it must not be unfair. On that last point, I spoke to family-law attorney Patrick Baghdaserians, who is based in California but who litigates and creates premarital agreements. “If you have a spousal-support provision that is too onerous and too aggressive, unconscionable at the time of enforcement, it’s going to be unenforceable,” he says.
A premarital agreement would have helped your father protect separate property and outline the division of community property during the marriage in the event of a divorce. But Baghdaserians notes: “If you get married, and you’re already wealthy prior to marriage, whether you have a premarital agreement or not, those assets are already separate property.” In your father’s case, that’s likely relatively easy to prove, especially given the short amount of time he has been married.
Any efforts he expends during the marriage are considered community efforts, Baghdaserians adds. “If you continue to work in the business, it can now develop into quasi-community property,” he says. “A premarital agreement can outline what happens with that portion of the business.” But from your letter, he says, it sounds like the lion’s share of your father’s business would be deemed separate property should he decide to divorce his wife.
Undue influence
Undue influence, duress and pressure on an individual who has lack of capacity could constitute elder abuse. The National Center on Elder Abuse, a government agency affiliated with the U.S. Administration on Aging, and the nonprofit National Adult Protective Services Association have resources and can provide help with the steps you can take to report alleged abuse. You can also contact your father’s primary physician for a review of his health.
Elder abuse affects an estimated 5 million Americans every year, according to the National Council on Aging, and multiple agencies say that number is both increasing and underreported. If your father has a degenerative disease and he also has cognitive impairment, it may be that he lacks the capacity to make decisions about his estate, or that he could be under some kind of undue influence or duress.
A typical scenario is when a person is isolated by a partner or an adult child, friend, neighbor or caregiver, as allegedly happened with this Malibu doctor worth an estimated $60 million. “Undue influence is a psychological process that may be used against an older person as a means of committing two forms of elder abuse: financial exploitation or sexual abuse,” says the National Center on Law & Elder Rights. “Undue influence is also a legal concept.”
Is there a bad actor in this story? The “evil stepmother” could be an easy target. I want to leave room for the possibility that your father’s illness could have led to cognitive decline and fear or paranoia about his own safety. Try not to allow the fact that he married his caregiver in secret create an atmosphere of distrust. Don’t allow your frustration over the fact that this woman will share in your father’s estate to demonize her without due cause.
Remaining questions
It may be that his wife is doing her best to take care of him. Patrick Hicks, lead counsel at Trust & Will, an estate planning platform firm in San Diego, Calif., says there are some valuable takeaways for you and your father. “How does he want the family business to be run once he passes? How does he want his inheritances distributed? It seems there is a lot of blame and focus being put on the wife, and not enough attention to the actual details of their father’s plan,” he says
“It is interesting but also a very common concept that marriage bestows certain obligations to care for a spouse,” Hicks says. “Your ability to disinherit a spouse is often limited and, in many states, the spouse has the option to take a share or take under the will. And with divorce it varies, but some equitable division is common. Foremost, it is crucial to understand that your father has the right to make his own estate plan and dispose of his assets as he sees fit.”
Although it may be difficult to come to terms with that, Hicks says, you need to respect his autonomy and his decisions. “You may also want to consult with an attorney to review the prenuptial agreement and ensure your father understands the consequences of the decisions he is making,” he notes.
In other words, just because you don’t want your father’s wife to inherit a portion of his estate does not mean that she is a gold digger or a bad person, or that she is a threat to your father’s well-being. You can be upset that his estate will be divided among his children and his wife, and she can still be a good person. Those two things are not mutually exclusive. By all means, do your due diligence with doctors and an estate- or family-law attorney, and put your father’s health first.
You can email The Moneyist with any financial and ethical questions at qfottrell@marketwatch.com, and follow Quentin Fottrell on Twitter.
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.
The Moneyist regrets he cannot reply to questions individually.
More from Quentin Fottrell:
‘She is a grifter’: My father set up a $500,000 trust for my troubled sister, and asked me to be trustee. What are the risks involved in being a trustee?
‘We live in purgatory’: My wife has a trust fund, but my mother-in-law controls it. We earn $400,000 and spend beyond our means. What’s our next move?
I’m afraid to tell my spouse’: I maxed out my credit cards and racked up $100,000 in debt due to my gambling addiction. Can you help?