Creating a trust to protect inheritance

[tuatara]

Jurisdiction

Texas

My mother has dementia. I have her power of attorney and have managed her expenses, taxes, and investments for years. I am also her sole heir.
Is it possible to create a trust for my mother's money while she is living? I want to do this because my husband is an inveterate spendthrift, and I want to protect my inheritance so that we cannot touch the principal except under extraordinary circumstances. Without a trust dictating how the money can be used, it will be depleted within a few years.

Thank you for your help.

 

[Mark_A]

I doubt that creating a Trust is the correct solution to this problem, and is very problematic since any Trust document your mother signs would likely not be considered as valid given her dementia. In Texas (and probably every state), a person with Power of Attorney cannot create a trust unless the power to do so is explicitly stated in the Power of Attorney document.

Given that you have Power of Attorney, I don't understand why you don't have virtually complete control of the finances until she dies (and then upon that event it would fall to the personal representative if a different person). Note that if a Trust is created, the person with Power of Attorney has no authority over the Trust, unless that person is also the Trustee.

Exactly how does you husband have the ability to spend or invest the money if you have Power of Attorney?

 

[army judge]

Without a trust dictating how the money can be used, it will be depleted within a few years.

If it is your inheritance, normally/legally your spouse isn't entitled to receive a penny of your inheritance.

Texas law reveals:
Inheritances are generally considered separate property, meaning they belong solely to the individual who received them.

However, if inherited assets are commingled with marital property or used for joint expenses, they may lose their separate status and be treated as community property during a divorce.
Additional resources:

Texas Inheritance Laws: A Comprehensive Guide

Learn how Texas inheritance laws impact property distribution with or without a will. Understand spousal, children’s, and family inheritance rights. Read more.

www.hchlawyers.com

Inheritance Overview

What are your rights of inheritance in Texas? This page discusses the inheritance rights of a spouse, children, parents, siblings and more distant relatives.

www.texasinheritance.com

Can a holder of a Texas power of attorney create a trust using the principal's money? In Texas, the answer is no, he cannot. The law dealing with trust requires that, in order to create a trust, the person who creates the trust, the settlor (the principal in this case,) must have the requisite intent to create a trust. A trust can be created "only if the settlor manifests an intention to create a trust."

The statute that defines the powers held by an attorney-in-fact provides that if the principal has created a trust prior to his giving a power of attorney, the agent is authorized to transfer the principal's property to that trust. The court's have interpreted that section as denying the attorney-in-fact the right to create the trust for the principal but only to add to one already created by the principal himself. Thus, if the principal has created a trust and then gives someone a power of attorney, the attorney-in-fact can take the principal's money and property and put it into the trust that the principal created. 230 3d 197, 170 3d 777.

Update:

In 2017, the Texas legislature added §751.031(b)(1) to the Estates Code. That section provides that an agent has the power to take certain actions if specifically authorized to do so in the POA such as to "create, amend, revoke, or terminate an inter vivos trust." So, if the power of attorney states that the attorney-in-fact can create a trust, he can. The cases cited above would be overruled when he is granted those powers in the instrument. Most powers of attorneys don't state that the attorney-in-fact can created trusts so the cases above are still good when the power of attorney is silent on the issue.

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By Robert Ray a Board Certified attorney. The foregoing information is general in nature and does not apply to every fact situation. We handle litigation involving inheritance disputes. We don't prepare wills. We don't file wills for probate or distribute estates except when we are contesting a will or protecting a will from a contest. We handle a select few cases on contingency. Don't use a comment to ask a personal question about an inheritance issue because your name and comment will be public. To ask a litigation question and to protect your privacy, click the red button to the right.

Can Texas power of attorney create a trust using the principal’s money?

Definitions: The principal is the person who gives the power of attorney. The agent or attorney-in-fact is the person to whom the power is given e.g. the hold

www.texasinheritance.com

 

[Mark_A]

If it is your inheritance, normally/legally your spouse isn't entitled to receive a penny of your inheritance.

Texas law reveals:
Inheritances are generally considered separate property, meaning they belong solely to the individual who received them.

However, if inherited assets are commingled with marital property or used for joint expenses, they may lose their separate status and be treated as community property during a divorce.

Since her mother is still alive, no one has inherited anything yet. Given that the OP is (apparently) the only one with Power of Attorney for her mother, it is unclear how her husband has any access to, or say so, about how her mother's funds are used before her mother dies.

 

[army judge]

Since her mother is still alive, no one has inherited anything yet. Given that the OP is (apparently) the only one with Power of Attorney for her mother, it is unclear how her husband has any access to, or say so, about how her mother's funds are used before her mother dies.

One would have to be an idiot to even consider inheriting ANYTHING, from another, living human being.


Intuitively, perhaps one spouse is weaseling, yapping, beguiling, or bullying the other into comingling ALL assets into a community property bucket.

Should one submit to such entreaties, one might eventually be extremely regretful.

 

[Mark_A]

One would have to be an idiot to even consider inheriting ANYTHING, from another, living human being.


Intuitively, perhaps one spouse is weaseling, yapping, beguiling, or bullying the other into comingling ALL assets into a community property bucket.

Should one submit to such entreaties, one might eventually be extremely regretful.

It's possible that her husband wants to spend money on her mother that OP doesn't approve of, given her medical condition, or that her husband wants to control how the money is invested (without spending it) and she wants to make safer investments. If the husband is actually taking money from her mother's estate for their personal use (husband, OP wife, and their children) while the mother is still alive, that is completely improper and illegal.

We need some explanation of how it is that her husband is having any control of how her mother's money is being spent or invested while her mother is still alive, given that she (the daughter) is the only person with Power of Attorney. If the husband some how has access to her mother's accounts (bank accounts, investment, etc), the OP should probably take the Power of Attorney document to a new bank and new brokerage and move all the money and investments to the new accounts without giving the husband any access to the new accounts.

 

[army judge]

We need some explanation of how it is that her husband is having any control of how her mother's money is being spent or invested while her mother is still alive, given that she (the daughter) is the only person with Power of Attorney.

There is no, we, mate.

I have nothing more than A MINUTE passing interest after reading what's posted here.

I don't mind attempting to answer a question or two. At my age, after what I've seen and experienceed, details bore me.

I'd rather keep myself calm by reading a clever mystery novel, listening to some sweet, soul music from the 1960s, or Charlie Rich, Glenn Campbell, Ronnie Millsap, Kenny Rogers, Mel Tillis, and many more.

 

[army judge]

As Super Moderator you may need to have more than a "MINUTE passing interest" in this case, since you may end up having to move this thread to the divorce section of this forum.

I know what I am. I know what I can do. You're about to discover PRECISELY what I'm doing.

Goodbye.

Far too many rules broken by you, mate!!!!

 

[Tax Counsel]

My mother has dementia. I have her power of attorney and have managed her expenses, taxes, and investments for years. I am also her sole heir.
Is it possible to create a trust for my mother's money while she is living? I want to do this because my husband is an inveterate spendthrift, and I want to protect my inheritance so that we cannot touch the principal except under extraordinary circumstances. Without a trust dictating how the money can be used, it will be depleted within a few years.

Thank you for your help.

If your mother is still mentally competent then she can create a living trust for you or have the trust for you created out of her will (known as testamentary will). Your inheritance is not community property unless you do something that converts it to community property. You can also create a trust yourself and put your inheritance into it yourself and that likely will work just as well. But you need a lawyer's guidance in setting it up and to get advice how to avoid the trusts becoming community.

Take note that the exact language of the trust and how you treat the trust assets matter both for asset protection and for federal tax purposes.

 

[zddoodah]

Is it possible to create a trust for my mother's money while she is living?

Assuming the POA gives you the necessary authority, you, in your capacity as your mother's agent, may create a trust of which she is the trustor and transfer her assets into the trust. You probably will want to look into an irrevocable trust and should retain the services of an estate planning attorney.