Trust - getting out of 1/5 ownership

Have the properties been appraised, and does the trust documen cover contigencies such as you mention?

If the other four siblings are willing to own the assets, sell one of the properties and use the proceeds to buy out the "wants out sister". No money out of pocket. Details need to be worked out, it is unlikely to come out exactly even. Maybe there is one property the sister is willing to hold an interest in.

Pretty important to review the trust docs to find out what's permitted. It may be structured in a way that one sibling is simply not permitted to pull out with cash. And it may have been done that way on purpose. The deceased may have wanted to leave incoming producing assets with no option to invade the corpus.

Did the trustee say WHY the trust couldn't buy out their share?

If there's no cash, that's a no brainer - no money is no money.

If the trust prohibits it, that would be odd, but possible.

If the trustee doesn't want to do it, well it may suck but if the trustee has that discretionary authority then it really sucks.

So I'd get more info from the trustee before I did anything more. Ask for a copy of the trust document - as a beneficiary you may have a right to at least see it.

I know you can forfeit your interest in a partnership. I know you can disclaim any part, in full or in part, of an inheritance - though I'm not sure about the timing. If you inherited a 1/5 interest this year you can absolutely disclaim, but if you got it 2 years ago it may be too late.

You may be able to sell your share on the open market - for example, I might be interested in buying a 1/5 interest in a vacation home in the Outerbanks if the price was right (example ONLY, I don't really want it). The prospect of the other 4 being in bed with me may be sufficient to loosen up the trustee.

You may be able to sell you share to another beneficiary privately. If your rich sister wants it and can pay you for it, that may work.

Most all of your options will be outlined in the trust document. Get that, read it, then get back to us.

Gene E. Utterback, EA, RFC, ABA

You're basically saying, "We don't like the specific assets that we inherited. So at the potential expense of my siblings, I want to retain my wealth, but convert it to a more appealing type of asset". The trust will dictate the answer to your question, but generally speaking, the answer to your question is "no, you can't".

One of the primary purposes of using trusts is to remove ownership of those assets from the beneficiaries' estates. You can't be sued, divorced, manipulated, taxed, etc... out of things you don't own. Just like you can't make decisions about my house (because you don't own it), you likely can't make decisions about the trust assets (again, because you don't own those either).

It is also incredibly unlikely that you can force your siblings to "buy out" your share of the trust. Again, you're not an "owner" of the trust, you're just a beneficiary. Furthermore, if you were able to force a buy-out, you'd essentially be able to distribute the trust at any time. And again, this entirely defeats the purpose of the trust (i.e. liability protection and tax sheltering).

I recommend requesting a copy of the trust and taking it to an attorney (for translation). Chances are, the trustee is allowed to buy/ sell trusts assets and may even be required to do so if the beneficiaries unanimously agree. But it is highly unlikely that you (alone) can force the trustee to do anything. Trustee discretion is one of the basic tennets of trust law.

I'm curious as to why these assets are a PITA. Are they creating "phantom income" that is being distributed to the beneficiaries (and thus taxed)?

Again, this is all generally speaking.