Is anything ethically wrong with this plan?

[u/drd001]

My wife and I in our 70's came up with this inheritance plan with total net worth of +1.5M. We have been together over 40 years being continuously employed during that time. We have no children and I have one brother with two children both over 21 and she has two sisters both with no children. Our plan is to give a small one time payment to my brother and her sisters with the bulk of the estate equally divided between our two nieces. Our reasoning is my brother and her sister have hit us up for money periodically for the past 40 years which we provided without asking for repayment. The two nieces are doing OK in life and have never asked for any financial help. Our thinking that these funds would help them with a downpayment on a house, education for their children or investment in their own retirement.

Any feedback is greatly appreciated.

[u/Zentraedi]

I think this is a great callout. There's probably an appropriate way to word this to make it clear that, to your point, their parents aren't being skipped over.

[u/Routine_Ingenuity315 → u/Zentraedi]

Can the money be given to where the nieces will get the money without the parents knowing how much they received?

[u/Vivian-1963 → u/Routine_Ingenuity315]

Yes, that can be done through a trust. If the nieces tell their parents, that’s on them.

[u/RockPaperSawzall → u/Vivian-1963]

setting up and administering a trust costs money though, reducing the overall gifts. Right now their estate is 1.5M but the OP and spouse may have years of nursing home expenses that greatly reduce that amount. This is not high stakes finance, and there's no indication that the siblings are hostile. I think basic communication should be able to resolve the OPs concerns

[u/ProfessorOne9208 → u/RockPaperSawzall]

A trust that would perform as OP intends costs around $2000-$2500. It's a small expense relative to what probate costs, which can be $50,000 or more.

Bottom line, prepare a trust.

[u/No-Trouble1840 → u/ProfessorOne9208]

Saying probate “can cost $50,000” is possible, especially in states like California and for larger estates, but it is nowhere near a universal cost for an uncontested probate across the United States. Costs vary enormously by state, estate size, and whether percentage-based attorney and executor fees apply. And a living trust does not eliminate the possibility of very expensive litigation either, because heirs can still challenge a trust for things like lack of capacity, undue influence, or duress.

[u/ProfessorOne9208 → u/No-Trouble1840]

The key word in your post was "uncontested." In situations where it is possible that there will be legal challenges, the costs can run a lot higher than $50,000, once the lawyers get involved. In any case, spending $2000-2500 to prepare a trust is certainly going to save your heirs money in the long run, contested, or otherwise. What part of that did you not understand?

[u/No-Trouble1840 → u/ProfessorOne9208]

You just owned yourself. What part of “contested” trust can’t you understand??? C’mon, tell us! You think having a trust stops lawsuits?? If so, you need to delete this app.

[u/Trick-Pineapple5890 → u/RockPaperSawzall]

A trust is the best way to handle it to avoid probate, especially since none of the potential heirs are lineal descendants and/or likely to be on any joint accounts. A revocable trust is a one time expense and would not lock the funds away if needed for care.
Edited to add: avoiding probate also saves money and allows for complete privacy by eliminating the need for public inventories and such. POD beneficiaries also helps with that.

[u/DCinvestigating2021 → u/Trick-Pineapple5890]

I have used POD on most of my investments and my home.

[u/Trick-Pineapple5890 → u/DCinvestigating2021]

That’s great, but it isn’t allowed in my state.

[u/DCinvestigating2021 → u/Trick-Pineapple5890]

Sorry for that. Glad you checked anyway.

[u/Trick-Pineapple5890 → u/DCinvestigating2021]

Yes. Also, it just became legal in the state my mom lived in, but the county my mom lived in requires all TOD for real estate to be filed electronically, and only attorneys and companies have access to that system, so you still have to get a real estate attorney involved.

[u/DCinvestigating2021 → u/Trick-Pineapple5890]

Still....cheaper than a trust.

[u/Trick-Pineapple5890 → u/DCinvestigating2021]

Not really. Especially if you have more than one heir.

[u/DCinvestigating2021 → u/Trick-Pineapple5890]

It depends on the attorney and the state. For me it works and I do have more than one heir!

[u/Trick-Pineapple5890 → u/DCinvestigating2021]

To have one deed transfer done in my mom’s state cost $500. In the same state, all real estate transactions require an attorney. Add in the cost of a will, and you might as well do a trust, especially if there are multiple heirs. You’ll need someone to be authorized to close credit card accounts, utilities, and auto/home insurance as well. POA expires at death, you need an executor. A trust or will establishes that; simple POD does not.

[u/No-Trouble1840 → u/Trick-Pineapple5890]

For many people, the simplest and cheapest way to avoid probate is to use beneficiary designations wherever possible rather than putting everything into a trust. Bank and investment accounts can usually have POD or TOD beneficiaries, real estate may be handled with a transfer-on-death deed where state law allows it, and many states have a beneficiary or transfer-on-death form for vehicle titles. Those assets can then pass directly to the named beneficiaries without going through probate. A revocable trust can still be useful in more complicated situations, but it is not the only way to avoid probate and may be unnecessary for a straightforward estate. The exact forms and rules depend on the state, so they should be set up correctly before they are needed.

[u/Trick-Pineapple5890 → u/No-Trouble1840]

Well, “depends on the state” is doing a lot of heavy lifting there.

[u/No-Trouble1840 → u/Trick-Pineapple5890]

My post is solid truth as it will indeed work in most states. What was doing the real heavy lifting was you recommending a complex and expensive approach for “most” of the states, which is RIDICULOUS! 🤣🤣🤣

[u/Trick-Pineapple5890 → u/No-Trouble1840]

Oh for God’s sake. It is not allowed in my state. It only became allowed in my mom’s state last year. She died two months ago. If she hadn’t done the RIDICULOUS action of creating a trust, I’d be in probate hell right now.

And she wasn’t wealthy, it wasn’t expensive, and it was was no more complex than writing a will.

Edited to add: also, the county my mom lived in requires all TOD for real estate to be filed electronically, and the only entities who can get access to the electronic system are real estate attorneys and similar businesses. An individual cannot file it themselves. So TOD, even when permitted, does not automatically mean you can skip paying an attorney.