'She always worked part-time in a grocery store or at stock-clerk jobs until COVID. He does Instacart and similar deliveries for work.'
Dear Quentin,
I'm 71 and widowed, with no other family besides a sister, who is 67, and brother-in-law in another state. Our relationship is good unless there's money involved.
My sister has a learning disability, and she has been taken care of her entire life. It is unfortunate that she was never able to finish high school. She always worked part-time in a grocery store or at stock-clerk jobs until the pandemic. He does Instacart and similar deliveries for work. He refuses to get a different, better-paying job, which would be hard to do with only a high school diploma and resistance to working full-time. His only work experience has been in retail.
He is terrible with money, spending every dollar. For example, a $100,000 insurance policy from our uncle was squandered in less than a year. They live in a two-bedroom condo in a very desirable area, which our late mother put in a trust for her, as she knew they wouldn't be able to survive otherwise. For the first 20 years, they lived there rent-free until the trust left by our mother ran out.
They now grudgingly pay what amounts to about a third of comparable area rents to cover taxes, insurance and monthly condo fees. I am the trustee. My brother-in-law is not amused by this arrangement, to say the least, and wants me to sell the condo and give him the money to "invest." No way that's going to happen, as I was entrusted by our late mother to do everything I could to keep a roof over my sister's head.
Contemplating an annuity
Considering the situation, I am most concerned with how to protect my sister for the rest of her life. When I pass, hopefully not in the too-near future, I will divide half the sales proceeds of my house among various charities and small amounts for friends, and half of my estate will go to my sister. I could potentially leave her $500,000. Putting that in a bank account is out of the question.
Although annuities have high fees, this is the only idea I can think of. Can an annuity be set up to stipulate that no early cashing out is possible? Alternatively, I'm considering a gift to a well-established charity, with the charity buying the annuity and just sending her the check each month. It would be an immediate payment upon purchase of the annuity, and payable for my sister's lifetime.
The only remaining item in the trust is the condo, which will be given to my sister upon my death, at which point the trust will be dissolved. Due to our respective ages and her better health, I believe she will outlive me. I am generally financially educated and have always been chosen as executor and trustee of all family businesses. But I don't want to make a mistake here. Leaving her an annuity is the only plan I can think of.
The Sister
Dear Sister,
That lost $100,000 could save your sister $500,000.
You can learn from the mistakes of the past. Not giving your sister cash or funds that can be easily accessed or liquidated will help protect her from further financial exploitation or mismanagement by her husband. Whether he is incompetent, unlucky, stubborn or simply reckless when it comes to money, he should not have access to your sister's inheritance. In addition to the choices you outlined - annuities and a charitable trust - I favor a special-needs trust. It's more flexible and gives you or the trustee more control.
An attorney will help ensure that your sister's condo remains secure in a trust. Like a dog let loose in a sausage factory, her husband seems intent on finding and devouring any assets that he can get his hands on. Not everyone starts out in life with the same advantages (or disadvantages), so it's hard to criticize him for working as a delivery man for Instacart, especially without knowing more about his background and his story. But people who are looking to make a quick buck often feel financially stretched, and that's when mistakes occur.
Avoiding the five-year lookback
Remember, if your sister is now or at some point becomes a Medicaid recipient, there is a five-year look-back period for the program to review whether an individual divested themselves of assets in order to qualify for benefits. Medicaid is a needs-based program: To be eligible, a person must have no more than $2,000 in countable assets, which includes bank accounts and investments, and no more than $2,829 a month in income. In that case, one option would be a special-needs trust overseen by a charitable organization.
If your sister is a Medicaid recipient and received a $500,000 inheritance from you, she would have to report it to her state Medicaid agency. "Medicaid will view the inheritance either as income and/or assets, depending on when the inheritance was received and how long it has been since receipt," according to the American Council on Aging. "While a Medicaid beneficiary generally has 10 calendar days to report the receipt of an inheritance, this timeframe could be shorter or longer, depending on the state."
Managing a special-needs trust
According to the Special Needs Alliance, a legal-planning and advocacy organization for people with disabilities, trustees must handle disbursements carefully, "ensuring they do not jeopardize the beneficiary's access to critical government assistance like Social Security Insurance and Medicaid. Special-needs trust funds can cover expenses that improve the beneficiary's quality of life, such as medical care not covered by Medicaid, adaptive medical equipment, home and vehicle modifications, and recreation."
Setting up an irrevocable trust before the five-year look-back period removes assets from your legal ownership. A Medicaid Asset Protection Trust protects the assets of a person who wishes to apply for Medicaid, as long as this is done before the look-back period. Such a trust can be legally and financially complicated, however, and Medicaid can challenge it. These trusts can include stocks and bonds, bank accounts and CDs, as well as secondary properties such as vacation homes and rental homes. But with a MAPT, the person gives up control of those assets.
Annuities, red tape and fees
People who are worried about the stock market, President Donald Trump's tariffs and the prospect of a recession in 2025 have been drawn to annuities (perhaps encouraged by their advisers) in search of safe havens. For the third year running, U.S. annuity sales set an all-time record, according to the Limra Secure Retirement Institute. Total annuity sales hit $432.4 billion in 2024, 12% higher than the record set the previous year. Lower interest rates in the second half of the year undermined demand for fixed-rate deferred-income annuities, it said.
Annuity fees can be as much as 10% of the value of the contract. "Typically, the more complex the annuity, the higher the commission," Annuity.org says. "The commission on a 10-year fixed index annuity ranges from 6% to 8%." Annuity costs can include commissions, administrative fees, mortality expenses and surrender charges. Early withdrawal fees are punitive. If you withdrew $20,000, for instance, you could pay 5% of that or $1,000, which applies to the entire annuity withdrawal amount. You also incur a penalty if you withdraw before age 591/2.
Proceed confidently, if cautiously, with the help of legal counsel.
You can email The Moneyist with any financial and ethical questions at qfottrell@marketwatch.com, and follow Quentin Fottrell on X, the platform formerly known as Twitter.
The Moneyist regrets he cannot reply to questions individually.
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My sister has a learning disability and her husband squandered $100,000. How do I protect her after I'm gone?
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