I trust my sister, but think she is sometimes driven by sentiment rather than practicality. I am one of four, and the sister who lives closest to my mom is handling finances for her. Mom is 93, in decent health, and currently in assisted living.
That is the big picture. There is a buildup of funds in my mom’s checking account, due to regularly replenished income that did not get spent. She has other money in savings too, about $1 million.
My sister wants to make a distribution of the excess checking-account money — not to me and my siblings equally, but to my mom’s grandchildren, giving each grandchild an equal amount. That’s $50,000 to each of the grandchildren.
My mom is not involved in this decision because she has delegated signing authority for the account to this sister and my brother. We do not want to involve her in this, although my sister has tried to lobby her a bit in favor of the grandchildren.
Mom and Dad always wanted their estate to treat all their children equally, and the grandchild distribution would not accomplish that. I do not have children, only stepchildren, and they would not be part of this distribution.
My brother, who also signs checks, contends that the money should go to the four siblings, who can gift the money to their children if they wish. That is also my position. The remaining sibling is abstaining from the discussion.
My sister disagrees, and believes that our mom loves her grandchildren and would want the money to go to them. My mom is still considered legally competent, though as a practical matter this is debatable.
My money-managing sister is doing pretty well, aside from this episode, and I want to stay on good terms with all my siblings. How do we approach and define this for future money distributions?
<STRONG> <EMPHASIS> <STRONG> <EMPHASIS> <STRONG>You can email The Moneyist with any financial and ethical questions related to coronavirus at firstname.lastname@example.org, and follow Quentin Fottrell on <INTERNET LOCATION="EXTERNAL" URL="https://twitter.com/Quantanamo">Twitter.</INTERNET></STRONG> </EMPHASIS> </STRONG> </EMPHASIS> </STRONG>
It’s a deft sleight of hand for a co-signer to authorize withdrawals of $50,000 to their and their other siblings’ children rather than take care of the day-to-day running of your mother’s finances. I understand that estate planning is foremost among your four siblings’ minds, but putting pressure on your mother to agree to this is not within the purview of responsibilities for this role.
Thankfully, your brother is also a co-signer, and assuming they both have to authorize withdrawals, there is a safeguard in place. If your mother wants to distribute her assets equally among her beneficiaries — grandchildren are not considered beneficiaries if their parents are alive — her wishes should be respected. At best, it’s sharp practice. At worst, it’s opportunistic.
So what now? Some co-signers require permission from the account holder to make withdrawals, others may not. Check the rules on this arrangement with your mother and brother. Hold a family meeting to discuss the parameters of this arrangement, and talk to your mother — and, if necessary, the bank — about these limits and how no one should be put under pressure.
A discussion worth having with your mother: For tax year 2021, the estate tax exemption is $11.7 million, and your mother has a $15,000 annual gift-tax exclusion per donee (gift recipient). This annual federal gift tax exclusion allows your mother to give away up to $15,000 to as many family members or friends as she chooses without it counting against her $11.7 million lifetime exemption.
There are other potential potholes down the road. If your siblings are also co-owners of this bank account, the money in that account will automatically become their property when your mother dies. What’s more, the money in that account could be used to pay debts incurred by your siblings if they were involved in a lawsuit and/or if they divorced.
Your sister’s role as co-signer is to help manage your mother’s finances; make sure bills are paid on time, including rent or mortgage payments and other insurance policies the owner of the account may have; and, above all, look out for the welfare of the account owner — not figure out how to self-deal and pass money on to her own children.
(This story was updated to clarify the rules around the federal gift-tax exclusion.)
<STRONG>Check out <INTERNET LOCATION="EXTERNAL" URL="https://www.facebook.com/groups/moneyist/">the Moneyist private Facebook</INTERNET></STRONG> <STRONG>group, where we look for answers to life’s thorniest money issues. Readers write in to me with all sorts of dilemmas. Post your questions, tell me what you want to know more about, or weigh in on the latest Moneyist columns.</STRONG>
The Moneyist regrets he cannot reply to questions individually.
More from Quentin Fottrell :
• My married sister is helping herself to our parents’ most treasured possessions. How do I stop her from plundering their home? • My mom had my grandfather sign a trust leaving millions of dollars to two grandkids, shunning everyone else • My brother’s soon-to-be ex-wife is embezzling money from their business. How do we find hidden accounts? • ‘Grandma recently passed away, leaving behind a 7-figure estate. Needless to say, things are getting messy’