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.
snipped-for-privacy@panix.com (Dick Adams) wrote in news: snipped-for-privacy@4ax.com:
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.
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.
Doesn't the trust money pass outside of probate?
If you are inclined to email me for some reason, remove NOPSAM :-)
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.
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).
It might, depending on the facts.
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.
No, no, the trust document is several pages long. (It's been 12 years and I forget how long.)
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'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?
Oh, ok. Forget the question above.
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!
If you are inclined to email me for some reason, remove NOPSAM :-)
MM, did you forget you're not the OP in this thread? IMO Stu, and Deadrat, were both responding in relation to OP, who asked about setting up a bank account with "in trust for" in the account name, which would in fact be an informal Totten trust. Stu was not responding to your situation, except to point out to you that your comment (about the need to label or document the trust other than through the bank documents) was going down a tangent that had nothing to do with OP's question. He was _not_ IMO telling you that your "mommy trust" was an informal trust, as you seem to have taken him to mean.
And I point this out here only to try to avoid more of the inevitable confusion, of the "who's on first?" variety, that ensued in the rest of your post (which I snipped) and will continue to ensue in this thread as long as you, and others, mix up the discussion of OP's informal bank account trust with discussion of your heavily documented, formal trust for benefit of your brother.
Mandatory legal content: Mr. Moderator, this post is about how easily different parties can have widely differing linguistic interpretations of the same contract, statute, sentence or paragraph, and the value of both clear expression by the drafter and careful, analytical review by the recipient of exactly what was said, in making sure that all parties are on the same page as to what was meant. While pregnant ambiguities and plausibly-deniable misunderstandings can be useful in international diplomacy and in flirting, IMO the only thing they do when found in any other kind of possibly legally binding context is create the basis for full employment for lawyers, who have to wrangle over what was really meant. But for the needs of the clients, clarity is a virtue.
Cheers,
-- This posting is for discussion purposes, not professional advice. Anything you post on this Newsgroup is public information. I am not your lawyer, and you are not my client in any specific legal matter. For confidential professional advice, consult your own lawyer in a private communication.
MM, did you forget you're not the OP in this thread? IMO Stu, and Deadrat, were both responding in relation to OP, who asked about setting up a bank account with "in trust for" in the account name, which would in fact be an informal Totten trust. Stu was not responding to your situation, except to point out to you that your comment (about the need to label or document the trust other than through the bank documents) was going down a tangent that had nothing to do with OP's question. He was _not_ IMO telling you that your "mommy trust" was an informal trust, as you seem to have taken him to mean.
And I point this out here only to try to avoid more of the inevitable confusion, of the "who's on first?" variety, that ensued in the rest of your post (which I snipped) and will continue to ensue in this thread as long as you, and others, mix up the discussion of OP's informal bank account trust with discussion of your heavily documented, formal trust for benefit of your brother.
Mandatory legal content: Mr. Moderator, this post is about how easily different parties can have widely differing linguistic interpretations of the same contract, statute, sentence or paragraph, and the value of both clear expression by the drafter and careful, analytical review by the recipient of exactly what was said, in making sure that all parties are on the same page as to what was meant. While pregnant ambiguities and plausibly-deniable misunderstandings can be useful in international diplomacy and in flirting, IMO the only thing they do when found in any other kind of possibly legally binding context is create the basis for full employment for lawyers, who have to wrangle over what was really meant. But for the needs of the clients, clarity is a virtue.
Cheers,
-- This posting is for discussion purposes, not professional advice. Anything you post on this Newsgroup is public information. I am not your lawyer, and you are not my client in any specific legal matter. For confidential professional advice, consult your own lawyer in a private communication.
Ok, that changes everything. If there is a written trust, you have to look at its terms. But chances are it's considered a completed gift, and belongs to the beneficiary (the in trust "for" person) at the moment the money is put into the trust, and the trustee can't use it except for the beneficiary.
If you die first the chances are the trust calls for appointment of another trustee. It may already name someone, or they might have to go to court to have someone appointed.
Chances are it can be protected from the wife, even in a community property state. But you'd really need to take the trust document to a local lawyer who can analyze it properly.
No, it's not a violation of ethics. But especially during times of grief lawyers have to be very careful not to do anything that would look like improper solicitation.
It depends on the rules of the state. It is unlikely to have anything to do with whether it's a community property state or not.
I don't understand what you mean.
Probably not, but the trust document needs to be reviewed to be sure.
But for income tax purposes, if the trust has taxable income and that income is distributed to the beneficiary, the trust gets an income tax deduction, and the beneficiary recognizes that income on his income tax return.
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