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Posted by Dick Adams on October 8, 2007, 7:11 am
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gotosteve@gmail.com
> When opening an account my bank asked me if I wanted to add
> someone ITF or In Trust For. What are the legal implications
> of this? They said I could add as many people as I like.
> What if the one named is sued? Can they go after my account?
> Are there tax implications for them being that they ask for
> the trustee's SS#?
I'm taken aback by the fact that they would ask you such a
question! It would be reasonable for them to ask you for
the name and SSN of someone "in case of death".
"In Trust For" makes you the trustee, not the owner, and it
has significant legal and tax implications.
I am srossposting to misc.taxes.moderated where the tax
implications may be explained.
Dick
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Posted by Deadrat on October 9, 2007, 8:39 am
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rdadams@panix.com (Dick Adams) wrote in
> gotosteve@gmail.com
>
>> When opening an account my bank asked me if I wanted to add
>> someone ITF or In Trust For. What are the legal implications
>> of this? They said I could add as many people as I like.
>> What if the one named is sued? Can they go after my account?
>> Are there tax implications for them being that they ask for
>> the trustee's SS#?
>
> I'm taken aback by the fact that they would ask you such a
> question! It would be reasonable for them to ask you for
> the name and SSN of someone "in case of death".
>
> "In Trust For" makes you the trustee, not the owner, and it
> has significant legal and tax implications.
I think that while the trustee is alive, he's the effective owner, since
the trust formed is revocable. For instance, the IRS doesn't care about
ITF designations during the trustee's lifetime, and the trustor/trustee
will have interest reported under his SSN and will pay any taxes due on the
interest.
Once the trustee dies, there are certainly implications for probate, and
there can be tax implications.
Have I got this wrong?
>
> I am srossposting to misc.taxes.moderated where the tax
> implications may be explained.
>
> Dick
>
>
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Posted by mm on October 13, 2007, 8:23 am
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>rdadams@panix.com (Dick Adams) wrote in
>
>> gotosteve@gmail.com
>>
>>> When opening an account my bank asked me if I wanted to add
>>> someone ITF or In Trust For. What are the legal implications
>>> of this? They said I could add as many people as I like.
>>> What if the one named is sued? Can they go after my account?
>>> Are there tax implications for them being that they ask for
>>> the trustee's SS#?
>>
>> I'm taken aback by the fact that they would ask you such a
>> question! It would be reasonable for them to ask you for
>> the name and SSN of someone "in case of death".
>>
>> "In Trust For" makes you the trustee, not the owner, and it
>> has significant legal and tax implications.
>
>I think that while the trustee is alive, he's the effective owner, since
>the trust formed is revocable.
Perhaps it has to be labelled as a revocable trust. My mother's trust
for my brother, for which I am the successor** trustee, is called the
Jane Mommy Revocable Trust. It's still called that even though my
mother has died, and it's not revocable anymore.
I give him whatever money he requests, but I think by leaving as much
as possible in the trust it is safe from divorcing wives.
Although wouldn't it be anyhow, since he didn't *earn* the money, but
inherited it? Does it matter if it is a community property state or
not?
**My mother, Jane Mommy, was the original trustee.
> For instance, the IRS doesn't care about
>ITF designations during the trustee's lifetime, and the trustor/trustee
>will have interest reported under his SSN and will pay any taxes due on the
>interest.
>
>Once the trustee dies, there are certainly implications for probate, and
Doesn't the trust money pass outside of probate?
>there can be tax implications.
>
>Have I got this wrong?
>
>>
>> I am srossposting to misc.taxes.moderated where the tax
>> implications may be explained.
>>
>> Dick
>>
>>
If you are inclined to email me
for some reason, remove NOPSAM :-)
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Posted by Stuart Bronstein on October 14, 2007, 12:41 pm
Please log in for more thread options mm wrote:
>>I think that while the trustee is alive, he's the effective owner,
>>since the trust formed is revocable.
>
> Perhaps it has to be labelled as a revocable trust. My mother's
> trust for my brother, for which I am the successor** trustee, is
> called the Jane Mommy Revocable Trust. It's still called that
> even though my mother has died, and it's not revocable anymore.
What was described is an informal trust. There is no documentation
except the bank records saying that it is X's account "in trust for
Y." The general view by courts is that this scheme does not really
set up a current trust, and in fact transfers no ownership rights at
all currently. When X dies the account can be transferred to Y
without the need of probate, but that's pretty much it.
> I give him whatever money he requests, but I think by leaving as
> much as possible in the trust it is safe from divorcing wives.
> Although wouldn't it be anyhow, since he didn't *earn* the money,
> but inherited it?
No, it belongs to him legally, so his creditors can get at it. If
that is your goal you might be able to set up a spend-thrift trust.
The beneficiary has no legal right to demand any of the funds from
the trust, and his creditors have no rights in trust funds, either,
until after they are given to the beneficiary. Some states don't
allow spendthrift trusts to avoid all creditors, though (e.g. alimony
or child support may be an exception).
> Does it matter if it is a community property state or not?
It might, depending on the facts.
>>Once the trustee dies, there are certainly implications for
>>probate, and
>
> Doesn't the trust money pass outside of probate?
Generally but not necessarily. As you noted in a community property
state if the surviving spouse claims to have superior rights that
might have to be determined by a probate court.
Stu
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Posted by mm on October 16, 2007, 5:45 am
Please log in for more thread options On Sun, 14 Oct 2007 12:41:15 -0400, Stuart Bronstein
>mm wrote:
>
>>>I think that while the trustee is alive, he's the effective owner,
>>>since the trust formed is revocable.
>>
>> Perhaps it has to be labelled as a revocable trust. My mother's
>> trust for my brother, for which I am the successor** trustee, is
>> called the Jane Mommy Revocable Trust. It's still called that
>> even though my mother has died, and it's not revocable anymore.
>
>What was described is an informal trust. There is no documentation
>except the bank records saying that it is X's account "in trust for
No, no, the trust document is several pages long. (It's been 12 years
and I forget how long.)
>Y." The general view by courts is that this scheme does not really
>set up a current trust, and in fact transfers no ownership rights at
>all currently. When X dies the account can be transferred to Y
>without the need of probate, but that's pretty much it.
>
>> I give him whatever money he requests, but I think by leaving as
>> much as possible in the trust it is safe from divorcing wives.
>> Although wouldn't it be anyhow, since he didn't *earn* the money,
>> but inherited it?
>
>No, it belongs to him legally, so his creditors can get at it. If
No, it doesn't. That was the whole point. I'm embarrassed to indicate
the original motive, even though I'm almost anonymous here, but my
brother is a doctor who lives in the state with the highest rate of
malpractice suits in the country. And he is in a specialty with a
high rate of malpractice suits. And a doctor he worked with was sued
for malpractice before my brother went to work with him**
**And rightfully so, since he (not my brother) killed a healthy child
by allowing the nurse (or someone with even less training) to decide
how much anesthesia to give the child based on her words "When I
worked for Doctor Smith, we used this much." which apparently could
not have been true, since none of Doctor Smith's patients died. The
child's mother was a lawyer, but I doubt that made much difference,
since anyone would have sued. Well maybe she sought out or saved the
evidence better. I presume the parents won, but I don't know how
much.
AFAIK, my brother has never hurt anyone, and has not ever made a
mistake even that could have hurt someone. (Well I guess that's not
too likely in 43 years, but he's the most conscientious guy I know.
And the most conservative, unegotistical doctor I know, based on
things he's said when I've been sick.)
>that is your goal you might be able to set up a spend-thrift trust.
>The beneficiary has no legal right to demand any of the funds from
>the trust, and his creditors have no rights in trust funds, either,
>until after they are given to the beneficiary.
That's the rule regarding this trust now. I give him what he wants
because he's big enough to run his own life. In fact he's older than
I am. But the trust doesn't require it. He's not even named in the
trust iirc. Hmmmm. I wonder what happens if I die before giving him
everything. Well maybe he is named. (I get the trust and my mother's
will mixed up.) I'll go check tomorrow.
Well, I think after he retires, which is soon, he'll know if he
injured anyone, but I guess he'll wait a while until the statute of
limitations runs on those he didn't actually injure, and then he'll
take all the money.
But now I'm wondering about his wife, who IS a spendthrift, and
whether he should protect the money from her, in case she decides to
divorce him. Since it's like an inheritance -- maybe it's not really
an inheritance because the trust interfered -- does it matter if they
live in a community property state or not? She's still not entitled,
is she, even to half?
I should see a lawyer. The lawyer who wrote the will (and the trust
maybe) I thought was difficult to deal on some things, and he didn't
even approach me after my mother died to handle her estate. Would
that have been a violation of ethics, considering he already worked
for her? I thought a lawyer, when I asked him to send the will to
the state office of wills, would say something like "Of course. I'll
send them today. Do you need any help with the trust?" Is that a
violation of legal ethics?
> Some states don't
>allow spendthrift trusts to avoid all creditors, though (e.g. alimony
>or child support may be an exception).
>
>> Does it matter if it is a community property state or not?
>
>It might, depending on the facts.
Oh, ok. Forget the question above.
>>>Once the trustee dies, there are certainly implications for
>>>probate, and
>>
>> Doesn't the trust money pass outside of probate?
>
>Generally but not necessarily. As you noted in a community property
>state if the surviving spouse claims to have superior rights that
>might have to be determined by a probate court.
What about earlier, from my mother to the trust?
My gosh, do I have to worry about gift tax when the trust gives him
money? No one said anything about that!
>Stu
If you are inclined to email me
for some reason, remove NOPSAM :-)
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