Dear Moneyist,
My brother is getting on in years and has started to think about how he wants his assets distributed upon his death. But there is an issue. He is opposed to the Mormon religion because of its stand against the lesbian and gay community, and wants absolutely no money or assets going to the church.
Also see: My father’s ex-wife stole his life insurance, breaking the terms of their divorce decree
Our sister is a devoted member of the church and is likely to observe church recommendations on contributing a percentage of any gains to the church. He had considered issuing a transfer-on-death deed to her for the house he owns and rents to her, but now he is having second thoughts.
Is there some way he can benefit our sister without benefiting the church? Or at least minimize any potential contribution?
CC
Dear CC,
At some point in life — or, in this case, death — we must relinquish some control. That requires letting go of the wheel of fortune and allowing it to spin without our interference. It takes faith, but it also requires relinquishing all that willfulness that perhaps got us to where we are today. Self-will is important up to a point. Then it can become a liability.
Your brother could set up an irrevocable trust with an income for your sister, sell the house and place money in the trust or place the house itself in a trust, and then stipulate that funds are not used for religious purposes. But that would be complicated and, frankly, impossible to control. She would save money on rent, and likely pay a tithe to the church anyway.
And there’s another issue. “Because the trust will be irrevocable, contributions to the trust are not allowed,” says Jim Todd, a client adviser with Mercer Advisors in Boulder, Colo. “That means that property taxes and maintenance costs on the home must come from trust assets not from funds outside the trust. Ongoing administration costs for tax preparation would also need to be paid from the trust.”
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If your brother transfers the house to his sister, she could do whatever she wishes with it. She could give the entire house to the church. Or she could continue living in it and give a larger portion of her disposable income to her church. If he tries to control how she spends her inheritance, he would essentially be playing a game of whack-a-mole from beyond the grave.
One other option: “A life estate allows a person to use, possess and enjoy an asset without actually owning it,” Todd says. “In this case, the brother would leave the sister a life estate on the home. She would be responsible for maintenance, taxes, etc. and would have the right to live in the home as long as she lives. She is not allowed to sell the home as it is not legally hers.”
Once she dies, the house would go to a named beneficiary. Assuming your brother is without children, would his sister’s children inherit the home? Or would the house be split between all of your brother’s nephews and nieces? What are their religious beliefs? In that case, your brother would, in all likelihood, have to play this never-ending, posthumous game all over again.
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