Dear Mr. Premack: My mother was widowed for many years. During that time, she created a revocable trust to hold her property. A few years later, she got married and eventually changed the trust to give some money to her husband’s children if she were to die. That marriage ended in divorce, but she remained close to one of her stepdaughters (but not the other stepchildren). Now mother is in a nursing home and we fear she may die in the next year. My question is: are all the stepchildren, even the ones she grew to dislike, going to receive the money she specified in the trust amendment? She wouldn’t mind the stepdaughter still getting money, but she would like the others to get nothing. – R.Q.
When a person creates a revocable trust, control of the trust’s objectives remains with that person until death or until that person is mentally incapable of controlling the trust. Your mother is in a nursing home, but you do not say whether her mental facilities remain sharp. If she is capable of understanding the actions that must be taken, she should see the lawyer who helped write the trust. A new amendment should be drafted to accommodate her current instructions about distribution of her estate.
If your mother has lost the mental capacity to understand the actions that must be taken, then she can no longer modify her trust. Her desires are to 1) include the favored stepdaughter for a gift, and 2) exclude the disfavored stepchildren from receiving gifts. Her trust currently includes all of them, at least on its face.
Texas law, however, includes a statute which automatically modified the terms of her trust when she divorced her second husband (the father of those stepchildren). According to law, any gift in the trust to the former spouse was revoked by law when the divorce decree was signed (unless the court, in the decree, ordered that the gift should remain intact). Likewise, any gift in the trust to a relative of the former spouse, who is not in some other way related to your mother, was revoked by law when the divorce decree was signed (unless, again, the court ordered the gift to remain intact).
The law, then, voids her instructions to give gifts to all the stepchildren. Her wish to exclude the disfavored stepchildren is fulfilled by law, but her wish to continue to include the favored stepdaughter is defeated by law. If she is mentally competent, she could make a new trust amendment to achieve both of her goals. If she is not mentally competent, then all the stepchildren will be excluded from receiving gifts under the trust when she dies.
What happens to the money that was supposed to go to those stepchildren? The law says that it will pass as though the stepchildren had disclaimed the interest. That means that it passes to any other alternate your mother specified in the trust who is related to your mother. It is possible that she did not specify alternates, and that the oversight could necessitate probate of her Will. It is also possible that she specified that all lapsed gifts should pass with the residuary of her trust estate. To know for sure, read the specific wording in her trust agreement.
As always, the best results are obtained when prompt action is taken. Your mother should have modified her trust either during the pendency of the divorce or right after the divorce was final. At that time she was mentally competent and could specify her exact wishes. The fact that she delayed and is now in a nursing home may mean her wishes will not be fulfilled. The rule to follow: whenever there is a major life change (like divorce) you should review and modify your estate plan to accommodate your new situation.
Paul Premack is a Certified Elder Law Attorney and a Five Star Wealth Manager (Texas Monthly Magazine 2009-2012) practicing estate planning and probate law in San Antonio.
Original Publication: San Antonio Express News, April 29, 2013