Dear Liz: My parents created a living trust in 1999 and deeded their residence into the trust. Later, they sold that home, moved to another state and put their new residence into the same trust.
In 2014, my father was diagnosed with dementia. He died in 2020. During his illness, he destroyed most of the critical information related to the trust document, such as the attorney’s name and the trust document itself.
My mother relied on my father for all things financial. She is now 89 (bedridden but mentally sharp) and in need of funds to fix her house up for sale and to provide for her caregiving.
We went to the county recorder, but they could provide no advice and will not complete a property tax deferral without a copy of the trust document.
My credit union also will not fund a home equity line of credit without the trust document. Any recommendations in addition to seeking out an estate attorney?
Answer: Return to the county recorder’s office, retrieve the deed and check to see who requested the document be recorded, suggests Jennifer Sawday, an estate planning attorney in Long Beach.
Many attorneys put either their own name or the firm’s name in that field, she says. If you can identify the attorney and they’re still in business, you can contact them to see if they might have a copy of the trust.
Keep in mind that lawyers generally aren’t required to keep such copies. The attorney’s job is to properly prepare and deliver estate planning documents, Sawday says.
Once those originals are delivered, it’s the client’s responsibility to keep and safeguard them.
If a copy can’t be found, your mother’s legal options will be heavily dependent on the state law where she now lives, Sawday says. For example, in California, people can petition the court to establish the terms of a trust.
Attorneys sometimes use this process when a trust is discovered after someone has passed away, but the original document can’t be found, Sawday says.
An estate attorney can advise your mother about her options.
Estate planning should be an ongoing process. Any major life event, including a move to a new state or a diagnosis of dementia, should prompt a review of the documents.
Even without major changes, estate plans should be checked every three to five years and beneficiary designations reviewed annually. Many people resist paying for such reviews, but the cost of correcting a mistake can be considerably more.
Dear Liz: You recently answered a question from a person who inherited their father’s IRA in 2010 and learned they faced significant penalties for failing to withdraw the money over the subsequent 10 years.
But given how well the market has done over the last 16 years, is it possible they will end up with even more money despite the penalties than if they had withdrawn the funds as required?
Answer: No. The penalties are hefty enough that even a bull market shouldn’t tempt someone into ignoring them.
By the way, the original letter writer wasn’t required to drain the inherited IRA within 10 years.
That requirement for most nonspouse beneficiaries has only been in place since the SECURE Act of 2019. Before then, inheritors were typically allowed to stretch withdrawals over their own lifetimes — but they were still required to make annual withdrawals or face 50% penalties.
The SECURE Act reduced those penalties to a 25% excise tax on the amount that hadn’t been withdrawn. The penalty can be reduced to 10% if corrected within two years.
Liz Weston, Certified Financial Planner, is a personal finance columnist. Questions may be sent to her at 3940 Laurel Canyon, No. 238, Studio City, CA 91604, or by using the “Contact” form at asklizweston.com.
