Author Topic: Settling MIL's Trust - Seeking answers and advice  (Read 2875 times)

Lookilu

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Settling MIL's Trust - Seeking answers and advice
« on: February 23, 2015, 09:26:12 AM »
I have a dilemma and wish to consult the collective knowledge of the Mustache community.

My MIL recently passed, leaving my husband’s sister as executor and trustee. Her actions have caused a collective raising of eyebrows and blood pressure.

Example: Selling MIL’s house: “The sign will go up March 1st. The price will be $399,000, as is. But the realtor says we probably won’t get more than $375,000.”
The house does need quite a bit of cosmetic work.
A few days later: “The house sold for $365,000.”

The realtor’s and SIL’s kids are apparently in high school band together.
The realtor evidently sold the house to her own father.

SIL has reported that the amount due on the reverse mortgage has grown to $306,000 due to ‘closing costs.’ When my husband last saw a statement on this—a few months ago—the amount was $287,000. To my knowledge, any closing costs are built in to the front end of reverse mortgage loans, but I am not sure about this. The remaining equity in the house is the only asset remaining in the trust.

My husband has requested copies of the statement showing the balance due on the reverse mortgage as well as signed copies of the real estate contracts and appraisal. SIL claims not to have them and that she is only required to give him an accounting (through the HUD-1) once all is said and done.

I’ve been looking at the California laws around this, and have found this:

“Upon reasonable request by a beneficiary, the trustee must provide the beneficiary with a report of the information relating to the assets, liabilities, receipts, and disbursements of the trust, the acts of the trustee, and the particular terms of the trust that are relevant to the beneficiary's interest.” California Probate Code §16061.

As I read this, however, a report does not necessarily mean the original documents.

My questions for the collective Mustachian mind:

Have any of you dealt with an issue like this?
Are the actions of the realtor ethical?
Are there closing costs associated with the payoff of a reverse mortgage?
Is it time to lawyer up?

There’s not much left to the estate, especially once it’s divided among four beneficiaries, so the cost benefit is debatable. Your answers and insight are much appreciated!




Psychstache

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Re: Settling MIL's Trust - Seeking answers and advice
« Reply #1 on: February 23, 2015, 09:46:45 AM »
Could she be referring to the closing costs of the sale of the house? 19K on a sale of 365K doesn't seem too ridiculous (well, yes it does in a sane world, but the reality of real estate is what it is).

Without knowing anything else about SIL, I would stick to the old adage:

Never attribute to malice that which is adequately explained by stupidity.

It would seem like she found a Realtor out of convenience instead of interviewing and finding a quality candidate and got a 'meh' deal.

AH013

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Re: Settling MIL's Trust - Seeking answers and advice
« Reply #2 on: February 23, 2015, 10:17:02 AM »
1) I have not

2)  What your SIL's realtor did is a clear breach of fiduciary duty.  It is not at all appropriate.  Only if there were multiple offers and her father's happened to be the highest would it satisfy an arm's length transaction.  Based on the sale occurring "a few days later", I'm not entirely sure  an appropriate level of marketing and a good faith search for an independent buyer was performed.  However, as Psychstache noted, this seems more like SIL is an idiot and the real malice may be with the RE agent.  However, the RE industry is rife with hobbyists who get into the business because they're a bored SAHM (not saying everyone is, but its a popular SAHM part-time gig), so not everyone in the industry understands the fiduciary obligation and doesn't understand that what they did was basically steal wealth from their client in a BS deal like this.  I'd raise it as a concern.  At a minimum she may waive some of her commission (she's collecting on both ends, so going from 5%-3% would be appropriate especially if a half-assed buyer search was performed) to avoid an investigation once she learns how NAR (National Association of Realtors) would view her dealings. The deal may also be unwound and a true buyer may yield closer to the market value with a more qualified & ethical realtor.

3)  Yes.  5% RE commission alone would be roughly 19k.  Plus there is a payout quote fee, legal fees, stamp taxes, concessions, etc.

4)  Not yet.  Have your DH position his request to SIL that he knows its stressful for her and that the whole process could benefit from a second pair of eyes to ensure both he & SIL handle it to ensure mom gets what she wants.  She should have no issue whatsoever sharing any and all documentation with your brother regarding anything related to the estate -- executor or not, they're both family.  If she still stands on "legally I don't need to show you squat", then you have a problem, especially if they had a good relationship before and the prospect of an unjustly enriched inheritance is messing with her. 

ShoulderThingThatGoesUp

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Re: Settling MIL's Trust - Seeking answers and advice
« Reply #3 on: February 23, 2015, 10:21:41 AM »
From the information here it sounds like there's a good chance SIL didn't know what she was doing. Estate conflicts can cause permanent divisions between siblings, as I've seen with my father's family, and I can't imagine it isn't worth attempting to approach this cooperatively or simply ignoring it.

Lookilu

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Re: Settling MIL's Trust - Seeking answers and advice
« Reply #4 on: February 23, 2015, 10:33:42 AM »
My thanks to you for your thoughtful insights.

To clarify, SIL is claiming that there are closing costs--to the tune of $19k--attached the payoff of the reverse mortgage to the lender. That's a separate issue from the 5% commission and other fees related to the sale of the house. We understand the real state fees and aren't disputing those. It's the sudden steep rise in the anticipated payoff amount that we question and are concerned by her lack of cooperation and willingness to show rather than just tell.

SIL has always had tremendous financial shortfalls/disasters/crises due essentially to idiocy that dear departed MIL and FIL bailed her out of at great personal cost. She and other SIL have formed a united front of ignorance and stubbornness against DH and DH's twin brother. (As something of a bystander, it has been like watching a psychological case study of reversion to childhood behaviors. Sadly, the SILs seem to have never left these patterns far behind.)

AHO13, thank you so much for sharing another approach we might take with this. SIL loves playing the victim, so this may appeal to her sense of long-suffering self-pity. 
« Last Edit: February 23, 2015, 04:44:33 PM by Lookilu »

Chrissy

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Re: Settling MIL's Trust - Seeking answers and advice
« Reply #5 on: February 23, 2015, 11:07:18 AM »
So, the estate will have $59,000 as it stands now, from the information you gave.  It will be split amongst the 4 sibs, except the executor will get an additional 10%, so your husband will receive $13,275.  However, the estate could have had ~$35,000 more but for the bad real estate deal and another $19,000 if not for the predatory lender ($54,000 additional).  And that would've meant another ~$12,150 in your pockets. 

Okay, well, that's not an insignificant sum, but it's at the level that I would debate pursing the matter.  Remember, your SIL is screwing herself out of more money than anybody else, since she's the executor and stands to gain the most.  So, take comfort in that.

Lookilu

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Re: Settling MIL's Trust - Seeking answers and advice
« Reply #6 on: March 08, 2015, 01:28:29 PM »
Update:

So after a couple of weeks of the silent treatment, SIL/executor is back in touch. Some gems from the conversation with DH:

SIL: "I don't have to tell you anything. That's what my lawyer says."
DH (very calmly): "That's not true. If your lawyer is telling you that, he's giving you very poor advice. Beneficiaries need to be notified of everything being done to or with the estate."
SIL: "There's not an estate. It's just the house and some stocks."
DH (speaking very gently, as you would with the slow and/or disturbed): "I know that we tend to think of a $50 million mansion when you hear the word 'estate,' but an estate is anything you leave behind, so yes, there is."

Kudos to DH for keeping his cool in the face of So.Much.Stupid.




MooseOutFront

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Re: Settling MIL's Trust - Seeking answers and advice
« Reply #7 on: March 08, 2015, 02:08:45 PM »
Yes.  Just seems like a case of stupid. My MIL got a lawyer and went rounds with her sister over their parents' estate and much of it was this type of conversation.  Her SIL is extremely ignorant and ornery, and as executor she was bound and determined to comply with whatever interpretation of the least amount of transparency as she could get a lawyer to agree with.  It even involved her selling the cotton farm left in the estate to her own son; who knows how close to market value that transaction was.  At the end of the day after forced review of the full accounting of the estate she didn't really steal anything, but they don't speak anymore. 

In your case I would do exactly as your husband is and just stay on top of what the executor is required to do and what compensation they're entitled to from doing it and then just let the dust fall where it may.