Exemption Trust, Survivors Trust and distribution

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Latest post 11-26-2009 12:45 PM by majesty. 8 replies.
  • 11-25-2009 4:40 PM

    • majesty
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    Exemption Trust, Survivors Trust and distribution

    In CA, when the first spouse dies, 50% of the undivided community real estate is to be placed into an Exemption Trust and the excess, if any, into the Marital Trust, with 3.5 million going into the Exemption Trust (current fed exemption amount allowed).  The other 50% of the community property goes into the Survivors Trust which is revocable by the Survivor. The primary purpose for all the Trusts is to guarantee the health, maintenance  etc of the surviving spouse.  Everyone wants to avoid probate, hiring attorneys, etc., for now, everyone is working together to save money.

    As I understand this, upon death of the first spouse, the Exemption Trust becomes irrevocable, as does the Marital Trust. It appears that the language of the Living Trust allows for the Trustee to determine which real properties will be placed into the various Trusts in order to obtain maximum federal exemptions, and provide for the needs of the Survivor, etc.
       
    Question:

    Since the Exemption Trust is irrevocable, if the Trustee is “certain" that there is more than sufficient funds to take care of the Survivor Health, etc, can the Trustee distribute to any of the heirs all or part of the real property and/or other assets in Exemption Trust at any time, with or without the permission of the Survivor?  If not, what if the Survivor does not have capacity to act?   Or is it typical that there is no distribution to any of the heirs until the Survivor dies and all matters are wrapped up before distribution of any of the assets to the heirs. 

  • 11-25-2009 4:54 PM In reply to

    • Drew
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    Re: Exemption Trust, Survivors Trust and distribution

    Were I the trustee I'd consider an early distribution IF you made it to my advantage to do so--thus defendable and in interest of trust to do so----so offer me how much less you will accept  for early distribution and I'll sort out if and how I want to proceed further.  Put it in writing as form of an offer ! Don't try to answer for me.

     

    But that justs me.



  • 11-25-2009 8:31 PM In reply to

    • majesty
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    Re: Exemption Trust, Survivors Trust and distribution

    Ok, here is my offer.

    Dear Trustee,

    I would like to make an offer that will enhance mom’s psychological well being, and caretaking, and  also generate a net gain in the estate that would benefit for all the other heirs.

    As you know, our father wanted to keep his home in the family, and had planned to change the Living Trust accordingly so that my family could live in his home.  However, since this change was not done prior to his accident, you are to inherit our parents home and plan to eventually sell the home.     

    I believe that the following offer provides a sensible and favorable solution for everyone concerned. 

    We had been talking to dad about obtaining a larger home so that all the boys would have a place to live.  Since I will apparently not be able to inherit my parents home, I would like to obtain an early distribution of our home from the Exemption Trust in order to be able to exchange our home for a home of approximately the same value, with 2 more bedrooms, which would be located closer to mom.  The homes closer to mom are substantially less expensive then those where we live, thus, an even exchange of our small home for a home that has enough bedrooms to accommodate our large family is possible. This would accomplish the following:

    1) Provide the two adult children living with mom the certainty that they have a place to live in the foreseeable future, since there is no real property provision for them in the Living Trust.  I believe it is in the best interest for mom’s psychological health not to have worry about what is going to happen to her grandchildren.  In addition, without this certainty, the psychological well being of the two adult children might be affected, which could generate a negative unconscious influence over time, that could impact on the quality of caretaking that they are currently providing for mom.    

    2)  The two adult children would then be able to move their personal belonging (and other furniture that might be given to them) to the new house. I would also be able to move my large arbor and other items that are stored in at my parents’ house.  Thus, if and when our parents’ home is to be shown to perspective buyers, the upstairs would be clean and appear more spacious, perhaps generating higher offers.   

    3) Since I have been unable to drive due to my recent heart attack and other physical problems,  and am dependent upon my husband to drive, living in a home closer to Mom would make it easier for my husband and I, and our two other adult children living with me, to visit mom more often. The more often that family members can visit mom, the better for her psychological well being / health.      &amp...

    4) If the proceeds from the sale of our home is not enough to cover the cost of the new home and a small mortgage is required, I would like to also receive an early distribution of some of the rental income from the apartments that I will inherit, or obtain a loan from the estate that provides monthly stipend to pay the mortgage.  Since the apartment rental income is currently an income producing asset for the estate, I would, of course, refund the estate the amount of money that I would have been earned had the rental income been earning money market rates, plus, I would pay interest and money market rates, thus, providing a net gain for the estate.  These payments would start and be paid to the estate when I start receiving the the rest of rental income from the apartments when it is distributed to me.

    Again, the above would insure that mom’s psychological well being, health and caretaking would be enhanced, and the estate would generate a net gain for the benefit for all the other heirs. I would like to start packing and looking for another home, as soon as possible.  Please advise if the above is acceptable, and if not, the reason.    

  • 11-25-2009 9:37 PM In reply to

    • Drew
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    Re: Exemption Trust, Survivors Trust and distribution

    Just my laymans rambles--from my days at B school.

    Dear Offer:

    Your proposal is most difficult to quantify or understand in context of how it benefits trust which is the eyes we are charged to look at it with.

    You indicated you wished to recieve benefits now in lieu of possible uncertain current living arrangements or  uncertain future benefits .

    It is beyond the trusts  scope to addrees what if any new home you might seek or whether you keep or sell any assets you may get  or how you manage same.

    Please present us with a clear  written offer which spells what you seek now in terms of a specific asset  or assets  and/or a specific income flow  in lieu of  any and all other current or future benefits  from the ABC trust, BCD trust,  ABC estate or BCD estate  and state in your offer that the offer shall remain valid for  60 days or whatever  you period you chose --while the trustees consider and evaluate your offer .

     

    XXX



  • 11-25-2009 11:40 PM In reply to

    • majesty
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    Re: Exemption Trust, Survivors Trust and distribution

    OK, I think I understand.  You want a simple dollar and cents offer that does not take into consideration the  health and maintainance of the Survivor, or for that matter, what the Survivor wants, as if the transaction was between two "unrelated" people that did not care what impact it might have on the Survivor, as long as it can be legally defended as being in the best interest of the trust (which is suppoe to be for the best interest of the Survivor).  I will try to accomodate.

  • 11-26-2009 12:01 AM In reply to

    • majesty
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    Re: Exemption Trust, Survivors Trust and distribution

    I think I have a better way.  If the Trustee wants to try to evict me, I think she had better think twice and come up with her own creative way to help me to help mom.  Since mom still has capacity, when she finds out that sister wants to evict me, then she might just revoke her 50% share of the Trust, and cut her sister out completely, and just give me the home now...end of story. 

    Also,  I think I can more then establish the fact that my father's intent was that I live here for the rest of my life without paying rent. The trustee helped prepare his taxes, and if he didn't like it, then he should have done something about it.  Since the Trust is over 15 years old, I beleive that it could be established that it was fathers intent beyond a shadow of doubt. It is not easy to include everything you want for your children in a Living Trust.  Based upon the correspondance that I have with my father is,  there is no doubt what his intention was.  I will take my changes with a judge.  

    In the meatime, I will take a copy of the Living Trust (excluding references names, etc) and obtain a several  free consultations with attorneys in order to obtain there opinions, until I find one that is a bull-dog who is hungry and willing to work with me on a contigency with payment upon distribution of the assets.       

  • 11-26-2009 1:28 AM In reply to

    • majesty
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    Re: Exemption Trust, Survivors Trust and distribution

    Dear Trustee, 

    In order for the estate to obtain credit for $1500 in monthly rent income from the home that I live in, which I am to inherit, I will pay 1% more than the govt us treasury note as the interest rate for a loan of $18,000 which will pay the rent for the next 12 months.  For each subsequent 12 month period thereafter, I will borrow an additional $18,000, plus interest, and it will be applied as credit for rent, until such time that you are able to distribute the home and apartment to be.   At that time, I will authorize you to sell one of the properties at fair market value so that the loan can be paid in full, or obtain my own loan to pay the debt using on of the properties.&n...

    Anyhow, you get the idea.

    Even if I had to pay a double the current T-bill rate, at about 3.5%, after 10 years, the total amount of interest paid would be about $38K, plus the $180K paid in rent for a total of amount $237K benefit to the Trust.   I highly doubt my mom will live for 10 years since she has already been hospitalized several times.   

      
       

     

  • 11-26-2009 12:16 PM In reply to

    • majesty
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    Re: Exemption Trust, Survivors Trust and distribution

    I am confused about the status of Trustee.  If mom retains 50% ownership of estate, and Living Trust states that sister Trustee is to be the Trustee when mom dies or has no capacity to act, then isn't mom still the Trustee?

    Does "no capacity to act" mean she is incompendent? If sister Trustee has POA, based upon letter from doctor that she is too old to handle her financial matters, does that mean that sister Trustee is the acting  Trustee on behalf of mom, or does she have full power as if she was the only Trustee?  

    In either case, if obtain a written witnessed statement from mom that states she wishes that I remain in my home rent free until such time that the home is distributed to me and I obtain title, will that solve the problem.  What is the best way to stay in my home rent free until it is distributed, without having to pay rent.  

  • 11-26-2009 12:45 PM In reply to

    • majesty
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    Re: Exemption Trust, Survivors Trust and distribution

    If I am suppose to inherit the home that I am living in according the the Living Trust, and I cannot pay the rent that the Trustee requests, what happens if I move out of the home and live with my mother, or another relative?  

    If there is not adquate rental income from all the other properties to take care of Survivor mom, and Tru... has right to sell any of the several properties, then, can Trustee single out my home and sell it (which, btw, provides real estate agent friend commissions). 

    If there is sufficent cash, then doesn't the Trustee have to make repairs to the property in order to rent it in order to maximum monthly rental income?  What if the home requries significant work (pumbling, air conditioning, new roof, carpets, etc) costing 30K or more in order to make it suitable for renting?
    (If I am suppose to inherit this property, wouldn't this be to by advantage to have the home upgraded?) 

    If the property is sold, how am I compensated at the time of distribution if only the property I was to inherit was sold, but none of the other properties specifically given to the other heirs, as stated in the Liviing Trust, were not sold? 
       

       

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