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intercst's last post prompted this thought on an annuity:

background: i am 60, my sister is 50. she works, but has no retirement savings to speak of. currently i take care of some of her financial affairs through a trust created and funded by my mother before her death. when i die, my sister herself becomes the trustee of the trust, and at that point i foresee the remaining principal going very quickly, including most probably that she loses the house she lives in. although i have the power to specify that someone else becomes the trustee on my death, i am not willing to inflict that responsibility on my children, and there is no one else in the family who could/is willing to take it on. since the main principal of the trust is the house in which my sister lives, a paid trustee doesn't seem like a good option, as there is limited cash in the trust.

question: i would like to specify something in my will to benefit my sister. a financial advisor suggested considering an annuity, specifically, specifying that an annuity of a specified amount be bought for my sister from my estate at the time of my death, for the purposes of providing her some amount of income.

is this a good idea? do you have a better one?

thanks in advance,

c.
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Be aware that an annuity can be sold for pennies on the dollar, so if your sister has issues with controlling spending, you may want to look into something controlled, like a trust.

You are a good brother.

IP
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Be aware that an annuity can be sold for pennies on the dollar, so if your sister has issues with controlling spending, you may want to look into something controlled, like a trust.

good information! thanks very much, ip.

You are a good brother.

i'm actually a sister, but thanks :-)

c.
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Unless you are certain the Trust is unchangeable, you might want to have an attorney look at it. My wife and I have a Trust set up is a way that it can be changed by Trustees - today we are the Trustees. However when one of us dies the survivor will select a new/replacement Trustee. Again at that point in time the Trustees can change the trust. Such changes include how funds are invested, who is a Trustee, etc. I am thinking such an arrangement might be a way for someone to assist/protect your sister.
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Perhaps some form of a spendthrift trust is in order.
Trustees can be hired, banks, lawyers offer such services. They tend to be expensive and very conservative, like all assets in US T-bills conservative. But they may be better the best of worst choices.
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I started my life again at 50 years old.
I got a good job and kept putting money into a 457b.
19 years later I am going to retire and be really comfortable thanks to my savings.

Not sure what I am saying.
50 years is nowhere near the end unless there are other mitigating factors like health or mental.
Or lazyness.
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Annuities of this type are often referred to as a "poor man's/woman's trust" because they accomplish much the same thing as an irrevocable trust without all the cost associated with it.
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Unless you are certain the Trust is unchangeable, you might want to have an attorney look at it. My wife and I have a Trust set up is a way that it can be changed by Trustees - today we are the Trustees. However when one of us dies the survivor will select a new/replacement Trustee. Again at that point in time the Trustees can change the trust. Such changes include how funds are invested, who is a Trustee, etc. I am thinking such an arrangement might be a way for someone to assist/protect your sister.

i have quite a bit of leeway as the trustee, however, when i am gone there is no one to take over the duties of the trustee except my sister herself, as i am unwilling to put that burden on my children. i would do almost anything for my sister, but not that. i guess i'll just have to outlive her, despite the age difference in her favor.

c.
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Perhaps some form of a spendthrift trust is in order.

that sounds interesting. i will investigate further.

thanks very much,

c.
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I started my life again at 50 years old.
I got a good job and kept putting money into a 457b.
19 years later I am going to retire and be really comfortable thanks to my savings.


good for you! that is encouraging to hear, and i really hope that something similar is in my sister's future.

50 years is nowhere near the end unless there are other mitigating factors like health or mental.

indeed there are multiple mitigating factors, hence the trust. still one can hope.

c.
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Annuities of this type are often referred to as a "poor man's/woman's trust" because they accomplish much the same thing as an irrevocable trust without all the cost associated with it.

interesting. this seems to contradict inparadise's warning that annuities can be sold for pennies on the dollar. i will investigate more.

thanks,

c.
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indeed there are multiple mitigating factors, hence the trust. still one can hope.

Understood.
Hang in there. You are a good sister.
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Annuities of this type are often referred to as a "poor man's/woman's trust" because they accomplish much the same thing as an irrevocable trust without all the cost associated with it.

interesting. this seems to contradict inparadise's warning that annuities can be sold for pennies on the dollar. i will investigate more.


https://www.google.com/search?q=can+i+sell+my+annuity+now&am...

Ditto for mortgages, life insurance, just about anything that can be collected down the road. Of course, they pay very little for it.

We once held a private mortgage for a house we sold. I would constantly get people calling to offer me 15 cents on the dollar.

IP
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Ditto for mortgages, life insurance, just about anything that can be collected down the road. Of course, they pay very little for it.

good information. i once made a very expensive (to my sister) mistake by trying to protect her. one year she owed several tens of thousands of dollars in taxes due to a large distribution to her that year. (tax wise it was not a good move, but there were other reasons to give her such a large lump sum distribution.)

anyhow, i certainly did not trust her to make the payment, so i paid the irs directly in her name. my mistake was that, wanting to avoid penalties, i did not wait until she called to tell me she owed a lot of money. so - does anyone see it coming? - she did not declare the large lump sum on her taxes, and therefore got everything that i paid in her name back as a refund. by the time the irs caught up with her by reconciling the k-1 i filed with the trust taxes vs. the lack of a k-1 declared by her, the money was long gone. she ended up having her wages garnished for years to pay it back.

so i am very aware that there are many ways to screw things up, both from my end and from hers.

thanks again for the info.

c.
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so i am very aware that there are many ways to screw things up, both from my end and from hers.

Bless you.

IP
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An annuity sounds like a reasonable choice. I'm wondering, however, if there's a way to set it where your sister would not be able to cash it out. Try speaking with a fiduciary financial planner who sells insurance -- I'm sure if there's a way to structure it so that your sister gets income for the rest of her life without being allowed to cash it all out, the agent will find a way to make that happen.

And yes, you are a wonderful sister. (Wish I had one!)

Warm regards,

Barbara
Home Fool
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I'm sure if there's a way to structure it so that your sister gets income for the rest of her life without being allowed to cash it all out

One problem is that is not the only way to cash the policy. Companies will offer cash payment for sister to sign a contract redirecting the annuity payments to them.

If she is legally able to sign a contract, that is difficult to prevent. Of course, a court order establishing she is mentally disabled, might allow appointment of a guardian to prevent same.
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An annuity sounds like a reasonable choice. I'm wondering, however, if there's a way to set it where your sister would not be able to cash it out.

i'm wondering too. will investigate.

And yes, you are a wonderful sister.

thank you. anyone who has been in my position can guess that my sister herself does not think so (i am seen as the evil sister who won't let her have her money). so this is nice to hear.

c.
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One problem is that is not the only way to cash the policy. Companies will offer cash payment for sister to sign a contract redirecting the annuity payments to them.

good information, thanks. i am slowly absorbing the full meaning of what inparadise said about an annuity and other non-trust financial instruments.

If she is legally able to sign a contract, that is difficult to prevent.

got it.

Of course, a court order establishing she is mentally disabled, might allow appointment of a guardian to prevent same.

she is not mentally disabled. that would have made things much simpler.

thanks again,

c.
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Of course, a court order establishing she is mentally disabled, might allow appointment of a guardian to prevent same.
...
she is not mentally disabled. that would have made things much simpler.


If Sis is in the US, pretty much all she needs to do to pass a competency hearing is tell what year it is and who is the POTUS. Extremely low bar. Even with the early stages of Alzheimers won't succeed with an incompetence hearing if they are having a good day. At least this is your sister, not your mom, and you don't live in the USA so filial responsibility laws don't make you responsible for her debt.

I know you don't want to put this on one of your kids, who I assume are adults now, but have you asked them if they would be willing to do so, talked with them about the issue? Since she is so much older than they it should be of limited duration, and could be set up as something like paying bills directly, so they did not have to deal with requests for money.

I do get it. We had to deal with a lot with Mom and Dad and Eldest Bro, who had issues beyond his control which kept him from being able to deal with the real world, but we could not convince him to go for disability until his late 50's. I am glad our kids will not have to deal with that for them and am resolute about finding a way they don't have to deal with us if I get the family curse, but I am still honestly clueless about how I will do that. Fortunately there should be decades ahead before it might become and issue and I am doing all I can now to avoid it. On the other hand, they are also at risk for Alzheimers so seeing what it is like up front and personal may be motivating.

Never easy.

IP
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and you don't live in the USA so filial responsibility laws don't make you responsible for her debt.

just learned another new thing. small mercies, i guess.

have you asked them if they would be willing to do so, talked with them about the issue?

not going to happen, see below.

could be set up as something like paying bills directly, so they did not have to deal with requests for money.

there are requests for money, all the time. mostly from my sister, who reminds me when her distribution is due, even though i have never ever forgotten to make one. and occasionally from a lawyer who finds my name as trustee on the deed to the house where she lives, googles me, and sends me a demand for payment. usually it's by email, but once i got an actual letter. that was weird.

resolute about finding a way they don't have to deal with us if I get the family curse, but I am still honestly clueless about how I will do that.

me too. although i'm not sure it's doable. from experience, most estate attorneys are focused on tax issues, and have a fairly naive view of what it means to protect someone who needs protection from themselves.

c.
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... there should be decades ahead before it might become and issue and I am doing all I can now to avoid it. On the other hand, they are also at risk for Alzheimers so seeing what it is like up front and personal may be motivating.

If swallowing 500 sleeping pills would be too hard to manage, there's a funny comedy bit I saw many years ago.
The comedienne goes up to the sporting goods counter at a Walmart, points to a rifle and says, "I'll take that one." As the clerk is writing up the sale he says, "Would you like to buy a couple of boxes of ammo, too?"
Her: "No, just one."
Clerk plops a box of ammo on the counter.
Her: "No not a whole box, just one bullet."

Last scene of the skit, he tears up the paperwork and puts the rifle back in the locked case.
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