CATF

Trustee of a living will being sued

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I was the successor trustee of a relative's trust after he was declared incompetent by his doctor.  A family member plans to sue me because he did not like his share of the trust after the relative died.  There was no income involved only the assets.  Suppose that he can get the will and trust set aside and I have to pay him what he wants.  Is that money than deductible on my personal income tax?

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In a will and trust of 2007 he and I were named as the contingent beneficiaries in case the primary predeceased.

 The primary did predecease and my relative was furious for a lot of reasons with him.  So in 2011 he had a new trust and will drawn up.  In the old papers he would have received 50% of the proceeds of the sale of the house.  In the new trust and will the house and some other assets were grouped together.  He got 10%.  Basically 35K instead of 150K.  He claims that the 2007 documents should hold because the relative was incompetent and could not legaally sign the 2011 documents.  However, our relative was not declared incompetent by a doctor until 2014.

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11 hours ago, CATF said:

I was the successor trustee of a relative's trust after he was declared incompetent by his doctor.  A family member plans to sue me because he did not like his share of the trust after the relative died.  There was no income involved only the assets.  Suppose that he can get the will and trust set aside and I have to pay him what he wants.  Is that money than deductible on my personal income tax?

 

He should sue you before the trust is distributed and if he wins the result would simply be a different distribution of those assets. You would have no federal income tax deduction as a result of that. Has the trust and estate already been distributed?

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20 hours ago, CATF said:

A family member plans to sue me

 

There is no "plans to sue" there is only sue or not sue.

 

Until you've been served a summons and complaint I suggest you ignore his hot air and not get into any discussions about the trust.

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He through his lawyer sent me a demand letter for 150K and an accounting of all accounts.  My relative died in mid Dec., 2016.  If the money etc. is not delivered by end of April, 2017  he instructed his lawyer to file a case in court. 

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On 4/19/2017 at 11:25 AM, CATF said:

 

I was the successor trustee of a relative's trust after he was declared incompetent by his doctor.

 

 

Based on this statement that you were (past tense, so I assume you no longer are) the trustee of this trust, I am going to ignore the statement in the subject header of your post regarding the "[t]rustee of a living will being sued."  That statement makes no sense because living wills do not have trustees.  Nor is a "living will" the same thing as a trust.

 

 

On 4/19/2017 at 11:25 AM, CATF said:

A family member plans to sue me because he did not like his share of the trust after the relative died.

 

Does this mean anything more than that this person has expressed displeasure to you?

 

 

On 4/19/2017 at 11:25 AM, CATF said:

Suppose that he can get the will and trust set aside and I have to pay him what he wants.

 

I will decline your invitation to "suppose" this because it makes little sense for numerous reasons.

 

Here's a question for you:  Did you follow the applicable state laws to a "T" in your administration of the trust?  Did you give notice of the intended distributions and then wait the amount of time provided by statute before making an distributions?  Did this disgruntled beneficiary take legal action to object to the intended distributions?

 

P.S.  "Tax_Counsel" asked you a hugely relevant question that you didn't answer.  Please answer questions we ask.  We ask them because they're important to the issue(s) raised by your post.

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Yes,I should have said a revocable trust not "living will" in the title.  Upon the death of my relative I distributed the funds with 6 weeks according to the terms of the trust.  No distributions were made prior to his death in December except to pay for his funeral and other debts (according to the terms  of the trust).  I believe I followed what I should do.  My understanding is that distributions and accounting is only called for if distributions are made to beneficiaries before the grantor trustee dies.  I did not tell the disgruntled  beneficiary about it because he yells, curses, shouts and makes no sense - it is his modus operandi.  I did inform the other beneficiaries by phone (they represented  - along with me 90% of the fund's assets) and they had no problems.  As a matter of fact, I  hurried all of this along because dis. rel. is always short on cash (all trust assets were cash) and I thought he would want it ASAP.

I hope I have answered all the questions.

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3 hours ago, CATF said:

My understanding is that distributions and accounting is only called for if distributions are made to beneficiaries before the grantor trustee dies.

 

Your understanding is not correct. Under Illinois statutes, the trustee must make an accounting to the beneficiaries at least annually and also at the time the final distribution and trust termination is to be made. See 760 ILCS 5/11(b) with respect to the requirements for an accounting at the final distribution and termination of the trust. This is required of all trusts, not just trusts in which the grantor is still living.

 

4 hours ago, CATF said:

I did not tell the disgruntled  beneficiary about it because he yells, curses, shouts and makes no sense - it is his modus operandi.  I did inform the other beneficiaries by phone (they represented  - along with me 90% of the fund's assets) and they had no problems.

 

That suggests to me that you did not follow the requirement to provide the necessary notice and accounting at the time you made that final distribution of the trust. That could create a problem for you if the disgruntled relative prevails and it turns out that you did the distribution incorrectly.

 

I’m guessing that you did not consult an Illinois trust attorney prior to distributing all the trust assets. It would be a good idea to consult an attorney now to review what you did and see what, if anything, you ought to do to rectify any mistakes you made in handling the trust. If you violated your duties as trustee of the trust you might be personally liable for that to the persons who got short changed as a result of it.

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 No one has been shortchanged.  I can prove via receipts where every penny has gone to. The only beneficiary who is ranting is the disgruntled one.  He seeks to set aside the 2011 will and trust and revert to the 2007 trust, in which he would receive more and the others less (by the way I also would receive more!).  He claims that the relative was incompetent to sign the will and trust in 2011. 

Why should beneficiaries receive an accounting if the grantor of the revocable trust is still alive?  

Edited by CATF
wanted to add more

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I just went to the statute

(a) Every trustee at least annually shall furnish to the beneficiaries then entitled to receive or receiving the income from the trust estate, or if none, then those beneficiaries eligible to have the benefit of the income from the trust estate a current account showing the receipts, disbursements and inventory of the trust estate.  A current account shall be binding on the beneficiaries receiving the account and on such beneficiaries' heirs and assigns unless an action against the trustee is instituted by the beneficiary or such beneficiary's heirs and assigns within 3 years from the date the current account is furnished. - See more at: http://codes.findlaw.com/il/chapter-760-trusts-and-fiduciaries/il-st-sect-760-5-11.html#sthash.rZ42OA0o.dpuf

The trust was completely in cash - checking and savings.  It has been just 4-5 months since relative died.  No one at anytime was receiving any income.

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You did not read (a) carefully. Every beneficiary who was entitled to receive income from the trust or, if none, every beneficiary entitled to get the benefit of the income from the trust was due an accounting. It doesn’t appear to matter if there was actually any income in the trust. It simply matters who would get the income or benefit from the income (e.g. by having the income increase their distribution down the road) if there had been any.

 

Moreover, you did not read (b). You distributed all the assets from the trust after 6 weeks according to your posts. That effectively terminated the trust. You needed to make an accounting to the beneficiaries at that time, which evidently you did not do. It is (b) that is likely to be the biggest problem for you. Again, I recommend you consult a trust attorney ASAP to review what you did and see if you screwed up anything here and if you did, see what you might be able to do now to fix it.

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