Dear Liz: My mother recently died at the age of 93. My sisters and I are her beneficiaries, and all of us are in our 60s. Unbeknownst to us, one of her assets is a “dynasty trust,” established in 1964, that can only be used for “care” and “education.” The lawyer never told us this and we could have used the trust to pay for her assisted-living care, all of our college education costs, and the college education costs of our children.
According to the trust, the restrictions don’t end until 21 years after our deaths. Two of us have two children each, and one sister has no children. None of the grandchildren plan to have children of their own. With these terms, and assuming we live into our early 90s, the grandkids will be in their late 70s before they can access these funds. Is it possible to “break” this trust so that we can make use of these funds while we are all alive and able to use the funds effectively?
Answer: Dynasty trusts are designed to pass wealth down through multiple generations. They’re irrevocable, which means the person who created the trust gives up control of the assets.
That doesn’t mean the trust can’t be changed, says Los Angeles estate planning attorney Burton Mitchell. He recommends getting a complete copy of the trust and asking an experienced trust and estate attorney to read it. The trust may include language allowing an early termination. If this is truly a dynasty trust, “back doors” to allow changes are usually built in, Mitchell says.
If not, there may be a way to terminate or modify the trust by agreement of the beneficiaries.
If all else fails, you may be able to go to court to modify the trust provisions based on changed circumstances, provided all beneficiaries agree, Mitchell says.
Dear Liz: Recently, you advised someone that it was OK to cancel a credit card. When someone responded saying they did just that and got a 4-point hit on their credit rating, you again stated it was nothing more than a short-term glitch and not to worry.
And you call yourself a “certified” financial advisor? You have no idea what you are talking about. Maybe you should confine your answers to what you know. Just who are you “certified” through?
If a cardholder chooses to cancel a credit card, they have to be specific and firm with the card issuer that THEY canceled the card. The cardholder also has to demand that the card issuer send them, in writing, a letter stating that effect. Card issuers have no problem canceling cards. However, card issuers will post on credit reports that THEY canceled the card, which makes the cardholder look like a bad credit risk, whether that is the case or not. That will be posted on the cardholder credit reports for years. Which in turn, allows current and future card issuers to the cardholder to increase their interest rates and/or deny them higher credit limits or even a credit card. That makes it more challenging for cardholders to get decent rates on mortgages, auto loans and more.
You know nothing about credit cards, much less the credit reporting agencies. Stop giving people false information.
Answer: Your email address indicates you may be in the business of providing financial advice to others. If that’s the case, it’s critical that you keep up to date. Much of what you’ve written either isn’t true or hasn’t been true for decades.
The credit scoring formulas used by lenders don’t distinguish between accounts that are closed by the consumer and those that are closed by lenders. There’s no need to add a note to your credit reports explaining the decision was yours. No one would likely read it anyway, as lending decisions are highly automated.
You can learn more about credit scoring at a number of reputable financial sites, such as NerdWallet or Bankrate. Experian, one of the three major credit bureaus, also provides solid information for consumers. And you may be able to find my book “Your Credit Score” in your local library or online. Initially published in 2004 and updated four times, it was one of the first books to explain credit scoring to the public.
As for the certified financial planner designation, it’s offered by the CFP Board of Standards and is one of the more rigorous certifications financial advisors can get. You can learn more at https://www.cfp.net/.
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.
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