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Steiny

Dissolve a trust

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My Grandmother's trust was formed in Oregon. She passed away in 2002. Her 3 children are the beneficiaries of the trust. One of her children is the trustee. At this point in time, the beneficiaries of the trust (all of them) would like to dissolve the trust. There is one piece of commercial still in the trust that the beneficiaries would like to transfer out of the trust to a corporation. The commercial property does not have any debt. There is a lawyer that my Grandmother used to put together her trust. The beneficiaries do not wish to use that lawyer.

 

My question is this. Once the property is transferred/re-titled in the name of the corporation, does any sort of legal document need to be filed with the court to dissolve the trust.? If so, does anyone know where I can get such a legal document? 

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Trusts are private. Nothing has to be filed with any court to dissolve it.

 

According to Oregon trust statute 130.195 "a trust terminates: If no purpose of the trust remains to be achieved."

 

https://www.oregonlegislature.gov/bills_laws/lawsstatutes/2013ors130.html

 

Once the trustee has transferred the property and all of the terms and conditions of the trust have been complied with, the trust automatically terminates with no further action required.

 

It would be a good idea to consult a trust or real estate attorney for the proper deed form. You should be able to do that for a nominal fee to make sure it gets done right.

 

Here's a deed transferring property from a trust to a husband and wife. I haven't found one specific for a corporation. With a little creativity you can modify it to transfer property to a corporation if you want to risk going that route.

 

http://www.uslegalforms.com/or/OR-024-78.htm

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Hi Steiny,

 

Your next course of action might depend on the type of trust your grandmother established (check out FindLaw's article discussing the different types of trusts). While it's not always required that you go to court to terminate a trust when you have the approval of all beneficiaries, I believe Oregon generally requires court approval to terminate irrevocable trusts. You should consult with a local trusts lawyer to help you assess the situation and decide what should be done next. Good luck!

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The commercial property does not have any debt.

 

I assume you mean that the property is owned free and clear by the trust and is not subject to any encumbrances.  Correct?

 

 

 

My question is this. Once the property is transferred/re-titled in the name of the corporation, does any sort of legal document need to be filed with the court to dissolve the trust.?

 

No, but you appear to be putting the cart before the horse.  Just because all of "the beneficiaries of the trust . . . would like to dissolve the trust" doesn't necessarily mean it's legally appropriate to do so.  The beneficiaries should be consulting with a local trust attorney about whether this is legally appropriate/possible and whether it's a good idea from any number of perspectives, including taxes.

 

 

 

Here's a deed transferring property from a trust to a husband and wife. I haven't found one specific for a corporation. With a little creativity you can modify it to transfer property to a corporation if you want to risk going that route.

 

Just to clarify, the risk would be that the OP would be practicing law without a license, which is a crime.

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True, but the risk I was thinking about is the OP getting the paperwork wrong and costing himself and the others a great deal of money.

 

Since the OP apparently is not a beneficiary, it seems that he/she is not likely at risk of losing any money.  I agree that the OP playing attorney could cost the beneficiaries a lot of money.  Whether, under OR law, the beneficiaries would be deemed to have assumed the risk by foolishly allowing the OP to do this for them or whether they would have a viable legal claim against the OP for screwing something up is something about which I'm not sure.

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I assume you mean that the property is owned free and clear by the trust and is not subject to any encumbrances.  Correct?

 

Yes, that is what I meant. Sorry for not using proper terminology and confusing you. 

 

 

No, but you appear to be putting the cart before the horse.  Just because all of "the beneficiaries of the trust . . . would like to dissolve the trust" doesn't necessarily mean it's legally appropriate to do so.  The beneficiaries should be consulting with a local trust attorney about whether this is legally appropriate/possible and whether it's a good idea from any number of perspectives, including taxes.

 

The lawyer who made the trust for my Grandmother has said on more than one occasion that we should dissolve the trust. I take that to mean it is legally appropriate to do so. In regards to the assets of the trust, I mentioned that there is one piece of commercial property in the trust. There was also a house in the trust that was recently sold. So moving an asset to like the remaining piece of commercial property to a corporation should not be a problem and will leave the trust with essentially zero assets and liabilities rendering it effectively useless. There may be some tax issues with regards to the transfer of the property to a corporation but we will consult with an accountant on that and not a trust attorney. 

 

 

Just to clarify, the risk would be that the OP would be practicing law without a license, which is a crime.

 

I apologize as I do not know what an OP is. My Grandmother's trust has 3 beneficiaries, her 3 children. One of those children is the trustee and handles all of the financial and administrative duties. I am really not sure who you think is illegally practicing law. 

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Trusts are private. Nothing has to be filed with any court to dissolve it.

 

According to Oregon trust statute 130.195 "a trust terminates: If no purpose of the trust remains to be achieved."

 

https://www.oregonlegislature.gov/bills_laws/lawsstatutes/2013ors130.html

 

Once the trustee has transferred the property and all of the terms and conditions of the trust have been complied with, the trust automatically terminates with no further action required.

 

It would be a good idea to consult a trust or real estate attorney for the proper deed form. You should be able to do that for a nominal fee to make sure it gets done right.

 

Here's a deed transferring property from a trust to a husband and wife. I haven't found one specific for a corporation. With a little creativity you can modify it to transfer property to a corporation if you want to risk going that route.

 

http://www.uslegalforms.com/or/OR-024-78.htm

 

Thank you very much for your comments. It seems to me to be fairly simple process. The bigger issue the beneficiaries have is contemplating the setting up of the new corporation. What type of Corp. Which state? By-laws, and how to have it set up when these beneficiaries pass away and their heirs interests. 

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I apologize as I do not know what an OP is. My Grandmother's trust has 3 beneficiaries, her 3 children. One of those children is the trustee and handles all of the financial and administrative duties. I am really not sure who you think is illegally practicing law. 

 

 

"OP" = original poster -- i.e., you.  Your comments suggested to me that you are seeking to engage in acts that might constitute the practice of law ("might" meaning that I cannot tell with certainty, but your post raises a red flag).

 

 

 

we will consult with an accountant on that and not a trust attorney.

 

I'm not sure who "we" are since your posts have indicated that you are neither the trustee nor a beneficiary.  In any event, this is entirely the trustee's call.  If he/she does not wish to retain an attorney, he/she will do so at his/her own risk.

 

 

 

The bigger issue the beneficiaries have is contemplating the setting up of the new corporation. What type of Corp. Which state? By-laws, and how to have it set up when these beneficiaries pass away and their heirs interests. 

 

Another excellent reason to consult counsel.

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"OP" = original poster -- i.e., you.  Your comments suggested to me that you are seeking to engage in acts that might constitute the practice of law ("might" meaning that I cannot tell with certainty, but your post raises a red flag).

 

OK, I understand.  Maybe I missed the rules somewhere and if so I apologize, but do you really think it is necessary to try to figure out if someone is trying to practice law illegally? If I do a probate for say a parent, which I am legally allowed to do so, I question whether you should be trying to determine if I have the legal right to do so unless that is the specific question I am asking. Or I could be the trustee of the trust in this situation but maybe I did not want to say so. 

 

 

I'm not sure who "we" are since your posts have indicated that you are neither the trustee nor a beneficiary.  In any event, this is entirely the trustee's call.  If he/she does not wish to retain an attorney, he/she will do so at his/her own risk.

 

For the record, I am not the trustee of this trust. My mother was a beneficiary of the trust but she passed away. As one of two of my mother's heirs, I want to make sure that my interests are a little more solidified in regards to what my mother was entitled to. And please understand, that there is no disagreement between any of the two remaining beneficiaries of this trust nor my sister and I. What happened was this. When my mother passed away, I handled her probate. There was nothing (asset wise) in my mother's name. There were a few bills (paid off). During the probate process, I encountered some fuzziness in listing my mother's assets. The only asset I listed was her interest in her mother's trust. The question is legally is her interest in her mother's trust really an asset? Some might say yes, some might say no. I listed it as an asset because I did not want to get in trouble legally. I played it safe. 

 

When doing the probate, it came time to fill out some documents indicating if there was property and the ownership changed.  There was no name change since the property was still in the name of my Grandmother's trust. It really made doing the probate a little weird meaning all it seemed like the process was an exercise in finding what debts my mother owed out there. In hindsight, I am not sure I even should have done a probate for my mother. 

 

Now prior to starting the probate, I met with the trust attorney and he said the trust should be dissolved. He has made this suggestion on several occasions in the past but it was never done. Had the trust been dissolved and the property re-titled into a corporation, then I (and my sister) would have inherited my mother's shares in the corporation.  So now, there is talk about dissolving the trust. Long term I think it is best to put it into a corporation. Other principle family members are going to pass away and having the property in a corporation may make their estate issues cleaner. Of course, how that would impact the corporation is whole different story. Hopefully we can set this up so it makes it easier on everyone in the future.

 

 

Another excellent reason to consult counsel.

 

Time to break out the power tools. 

 

 

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OK, I understand.  Maybe I missed the rules somewhere and if so I apologize, but do you really think it is necessary to try to figure out if someone is trying to practice law illegally? If I do a probate for say a parent, which I am legally allowed to do so, I question whether you should be trying to determine if I have the legal right to do so unless that is the specific question I am asking.

 

So...if, as I were walking along the street, you came up next to me and started asking me directions, and if, while doing so, you were about to walk into the path of a bus moving ag 40 mph, you wouldn't want me to tell you because it wasn't the specific question you asked?

 

When you post on a message board, you don't get to dictate what sort of answers you receive.  When you post on these message boards (and pretty much any other legal message board I have seen), if you post facts that suggest you might be engaged in the unlicensed practice of law, folks will point that out.

 

As far as you being allowed to "do probate for say a parent," I have no idea what you mean by "do probate."

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"There may be some tax issues with regards to the transfer of the property to a corporation but we will consult with an accountant on that and not a trust attorney."

Uhm, I wouldn't consult an accountant unless that person has some serious accreditation in tax-related matters.  Naturally, what the trustee does isn't up to a vote (though it is up to challenge if done improperly).  Since it appears the trustee may or may not have been disregarding the terms of the trust -- it's unclear why this trust has existed for 11-12 years -- can't know if trustee has a clue what his/her obligations are.

 

"... but do you really think it is necessary to try to figure out if someone is trying to practice law illegally?"

I'm on board with PG's comments that inspired this follow-up.

 

"If I do a probate for say a parent, which I am legally allowed to do so, I question whether you should be trying to determine if I have the legal right to do so unless that is the specific question I am asking."

Just for the edification of others, we can't know whether someone's actions involved doing things that equated to unlawful practice of law.  (As a practical matter, in a family situation, one need only primarily worry about getting in hot water on that score if other heirs complain about X ... even an irrelevant X ... and it comes to light.  Sure, it's possible that a third party would report you, but not likely.)

 

"Or I could be the trustee of the trust in this situation but maybe I did not want to say so."

If that's true, then the advice would definitely be "consult a [well-vetted] trust attorney."  Your post alludes to the misimpression that someone's not only morally but legally obligated to consult with an attorney hired by granny/the grantor of the trust.

 

"As one of two of my mother's heirs, I want to make sure that my interests are a little more solidified in regards to what my mother was entitled to."

But this has nothing to do with any of the questions you asked that I can see.  :)

 

"And please understand, that there is no disagreement between any of the two remaining beneficiaries of this trust nor my sister and I."

Good.  Hopefully no one will later question what's been going on all this time either, or why it took over a decade to address the trust's terms.  Hopefully the trustee has been addressing trust income and returns, etc. properly.   :)

 

"There was nothing (asset wise) in my mother's name. There were a few bills (paid off)."

Well, she may not have owned stuff like, say, a car titled in her name.  Naturally, as you (later) point out, she had assets insofar as her interest as beneficiary of the trust, but the trust agreement may indicate her interest passes to you/sister or even someone else in the event of her death.   A beneficial interest in a trust wouldn't be part of her probate estate, because she doesn't control it (just as a bank account titled jointly with right of survivorship, where her ownership interest would terminate with her death).  If her clothes, furniture, other personal belongings (no bank account, I presume) were worth less than $75k, there'd be no need for probate (this is easily-identified information).  Anyone who coughed up their own dough to cover her estate's debts did so unnecessarily (and if anyone used $$$ from proceeds of a life insurance policy payable to them, that was also legally unnecessary ... if arguably or actually the right thing to do morally).

 

"The question is legally is her interest in her mother's trust really an asset?"

I trust this is a rhetorical question, given what you went on to say. :)

"When doing the probate, it came time to fill out some documents indicating if there was property and the ownership changed."

Property owned by your MOTHER, not a trust (the question resolves around what property that may have been owned by her and someone else as, say, joint tenants w/ right of survivorship, etc. where her ownership passed to the other party(ies) at the moment of her death).

 

"It really made doing the probate a little weird meaning all it seemed like the process was an exercise in finding what debts my mother owed out there. "

Yep.

 

"In hindsight, I am not sure I even should have done a probate for my mother. "

The info on Oregon small estates is pretty clear that if her estate was worth less than $75k, you could've spared yourself worrying about "probate" process as such.

 

"Long term I think it is best to put it into a corporation."

We can't know what your thinking is here and it's not at all clear that you have sufficient knowledge base to make an informed decision.  We also can't know what the trust says.  For all we know, the trustee's obligation was to sell the trust assets and make distributions/divvy up the dough 12 years ago.  Do you all want to continue owning property together?  If so, then I'd talk with a business attorney about what ownership vehicle is best given the goals, e.g. limited liability partnership, limited liability company or some other form of corporation (of which there are many).

 

"Other principle family members are going to pass away and having the property in a corporation may make their estate issues cleaner. "

And now you're contemplating OTHER folks estate plans, which is a bad idea and none of your business.  What you all can collectively ponder is the structure of any investment entity to hold the property and how decide on ownership issues in the event of death (or incapacity).

 

Once more, for all we know, this trust should've been addressed over a decade ago ... which is pro'ly why the attorney has said several times it should be dissolved.  Presumably he's read the trust agreement and knows that the trustee should've done X a bunch of years back.

I think someone's making things more complicated than they ought to be, and missing a bigger forest for smaller trees.  The notion that the goals will be reached and plan executed properly without a competent attorney strikes me as highly debatable.

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There are several ways to accomplish what you want, and each of them has different potential benefits and drawbacks, as well as different potential tax consequences. It may not even be necessary to dissolve the trust. The trust may be able to simply contribute the property to the corporation in exchange for stock of the corporation, with the result that the trust then would be the owner of the corporation. Consulting a trust attorney and a tax attorney prior to doing anything would be a very good step to take here. 

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