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officerripley

Trust Turned Over to Probate Court

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Residing in northeastern Calif., my brother & I are co-successor trustees in a trust that the trustors were our mother & stepfather (both deceased). Upon the death of the remaining trustor, a debtor owed the trust about $50K in the form of a promissory note for real property which note had aged enuff to become forecloseable. Before my brother & I could foreclose, however, the debtor filed bankruptcy (orig. Chap. 13, now converted to Chap. 7). The debtor has continued to make monthly payments (of usually $500) in agreement with the bankruptcy requirement but still owes the trust about $45K.

 

My brother & I are both elderly & in below-average health & were told by the atty. who wrote the trust that due to the way the trust was written & that now that both trustors are deceased that another co-successor trustee cannot be added. (My brother & I wanted to add his son & sole heir.)

 

So finally to my question: since it's beginning to look as if my brother & I will both be dead before the debtors finish paying off the trust, will the trust then be turned over to the Probate Court? And if so, might the Court decide to just cancel the trust since it's such a small amount that's still owed?

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1 hour ago, officerripley said:

a debtor owed the trust about $50K in the form of a promissory note for real property which note had aged enuff to become forecloseable.

 

Please clarify this.  I assume the note was secured by a deed of trust against a piece of property.  Correct?  Also, foreclosure isn't permitted unless there's a default.  Was the borrower in default of his payment obligations under the note?

 

 

1 hour ago, officerripley said:

My brother & I are both elderly & in below-average health & were told by the atty. who wrote the trust that due to the way the trust was written & that now that both trustors are deceased that another co-successor trustee cannot be added. (My brother & I wanted to add his son & sole heir.)

 

That doesn't entirely make sense.  It may be that the two of you cannot remain as trustees, with a third person also being appointed as co-trustee.  However, you cannot be forced to remain as trustees, and the trust must contain a provision about what happens if you and/or your brother are no longer able or willing to serve as trustee (unless the attorney who wrote the trust screwed up).

 

 

1 hour ago, officerripley said:

since it's beginning to look as if my brother & I will both be dead before the debtors finish paying off the trust, will the trust then be turned over to the Probate Court?

 

I'm not sure what you mean by "turned over to the [p]robate [c]ourt."  Assuming the trust has a provision about what happens if/when you and your brother resign/die, then there'd be no need for the probate court to become involved.

 

 

1 hour ago, officerripley said:

might the Court decide to just cancel the trust since it's such a small amount that's still owed?

 

No.

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1) Yes, the note was secured by a deed of trust against a piece of property (a 4-acre lot).

2) Yes, the borrower was in default since the note specified that it was to be paid off by a certain date (it was not) & if not, the balance was due in full & if not paid in full (it was not), the note then specified that foreclosure could happen.

3) The trust says only that a co-successor trustee may resign only if the remaining co-successor trustee agrees & signs off to that effect; nothing is said in the trust about what happens if neither co-successor trustee is alive or able to serve. I had just heard that if that happened, the trust would then be turned over to a probate court judge since there'd still be money coming in to the trust.

 

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17 hours ago, officerripley said:

The trust says only that a co-successor trustee may resign only if the remaining co-successor trustee agrees & signs off to that effect; nothing is said in the trust about what happens if neither co-successor trustee is alive or able to serve. I had just heard that if that happened, the trust would then be turned over to a probate court judge since there'd still be money coming in to the trust.

 

I'm going to guess that the trust appointed your parents as the initial co-trustees and that, once they both died, you and your brother became co-trustees.  If it doesn't have any provision about a further successor trustee, then the lawyer who prepared the trust made a mistake, and yes, the probate court would have to appoint a further successor trustee.  As far as one of you resigning, regardless of what the trust says, you can't be forced to remain as trustee.

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Okay, good to know, pg, thanks. (I wonder who the court would appoint as a further successor trustee, maybe an atty.? Because the 3 remaining inheriting trustees in the trust are even older than my brother & I & spread out all over the U.S.; one is completely bedridden in a nursing facility, 1 is legally blind & cannot travel by air due to a heart condition, and 1 is mentally unstable & on a *lot* of medication.)

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10 minutes ago, officerripley said:

I wonder who the court would appoint as a further successor trustee, maybe an atty.?

 

Depends on the circumstances and how the matter comes before the probate court.

 

 

10 minutes ago, officerripley said:

Because the 3 remaining inheriting trustees in the trust are even older than my brother & I & spread out all over the U.S.

 

I assume you mean beneficiaries, not trustees.

 

Ultimately, it's impossible to predict what might happen if/when you and your brother resign/die.  However, to the extent you care what happens after you resign or die, you might want to discuss with a local trust attorney about petitioning the court to allow you and your brother to jointly appoint a new trustee.  If the other beneficiaries agree to this, it would be a very simple process.

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Thanks so much, pg, for all the great info. about this; sound like my brother & I have some decisions to make about this.

 

And to anyone else reading this & considering having a trust done, take it from me: think long & hard about having the trust done by a generalist attorney rather than a *trust* attorney; even if the trust attorney charges more (& if they do, I don't think it'll be that much more), sounds as if it'll be very worth it in the long run to use the *trust* attorney.

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