Missing Trustee

[tranquility]

i will do some more reading on it. i will be the sole trustee when my mom dies, but my sisters and i will all be equal beneficiaries. and the trustee is held up to ascertainable standards.

Ascertainable standards is more of a tax issue to make it so the entire amount is not a present gift to a skipped generation. (5 and 5 powers is the cool slangy way to say it from Crummy.) I believe the activity today is more around statutory "decanting".

In your case, I don't think merger would apply. Most of what I've read seem to talk of a single person. *A* beneficiary can become the trustee and merger will not occur. Only when *all* beneficiaries become the trustees would we have merger. I believe, but am not completely certain that if the trust has specific property going to a specific beneficiary, who then becomes trustee, merger may occur to the specific property. But, this would not be a problem in a trust which gives percentages to each.

 

[TrustUser]

hi tq,

i have done some reading on a few states. they all seem to define the d of m with a sole trustee and bene.

here is a quote from a site -

The rationale behind the merger doctrine holds that when the trustee is the only beneficiary, the trust is no longer needed to carry out the intention of the settlor.

me again - i just dont see how they come up with that. it just simply isnt true. the trust is indeed needed to carry out the instructions of the settlor.

lets say that i am an only child, and inherit a trust. my parents may have wanted to provide a retirement plan for me, instead of simply giving me the assets.

if the trust terminates because of d of m, and i own the assets outright, i now can do whatever i want, and disregard what my parents may have wanted. my parents should not be forced to name a different trustee, if they have confidence in me being able to carry out the trust instructions.

as the trustee, i am still legally bound to carry out the instructions from the trust.

i simply think that this rationale is poor thinking.

another thing i am coming up with is when there are remainder beneficiaries ?

in the basic type of "family trust" that i am talking about, each bene will have his own benes, so there is almost always gonna be remainder benes.

i know there are some states that do not enforce perpetuity laws, so a typical family trust could last forever. but more than likely would be terminated once the number of benes was too large for the trust corpus, such that it would not be worth it any more.

if you take any typical living trust, the grantor, trustee, and lifetime beneficiary are almost always the same. but it does name remainder beneficiaries.

i cant see how that differs from a family trust who has one initial child as a bene, but that child has benes of his own ?

in any case, i plan to do some more reading to see if i can get a better handle on it. at least at this point, i am confident that if the d of m applies in any particular case, there always seems to be just a sole trustee/bene.

 

[tranquility]

I'm sorry you disagree with the basic theory of trust law. Perhaps you should start a club who will petition the legislature who will change that which has been since 1066. (When William the ******* became William the Conqueror.)

 

[anteater]

I'm sorry you disagree with the basic theory of trust law. Perhaps you should start a club who will petition the legislature who will change that which has been since 1066. (When William the ******* became William the Conqueror.)

So he's the little ******* we have to blame for all this?

I knew his dad. A real devil he was.

 

[tranquility]

It's good to be king.

For one thing, it changes your name from one who is without known father, to one who has won the battle.

 

[TrustUser]

i wouldnt say trust law, perhaps one tenet of trust law.

 

[TrustUser]

hey tq and ant,

who says old trustuser wouldnt make a good attorney ? LOL

take a look at this south carolina link

SC Judicial Department

here is a quote from it, which certainly substantiates what i was "feeling".

The equitable doctrine of merger is not one to be applied with rigidity. Equity will not apply merger if serious injustice would result or if the settlor’s intent obviously would be frustrated.” Bogert, supra, at § 129. “The merger of an equitable title into the legal title will not be permitted when the result would defeat the intention of the grantor or testator or the holder of the estates. Thus, equity will not recognize a merger or union of the legal and equitable estates in the same person if this is contrary to the intention of the parties and a merger would be to destroy a valid trust, and will prevent the merger of an equitable and a legal estate to work substantial justice.” 28 Am.Jur.2d Estates § 429.

Trustee contends that, because Church has expressed its desire to disclaim its interest under the testamentary trust, Trustee would become the sole beneficiary of the trust. Both legal and equitable title would merge and vest solely in Trustee, which would then hold legal title to the trust assets.

The State argues that Testatrix intended to provide an ongoing annual benefit for Trustee and Church. Furthermore, even if Church no longer existed, Trustee would still be required to comply with the terms of the trust and distribute the annual income for the benefit of the children cared for by Trustee.

We conclude, based on our enforcement of the terms of the trust as explained in Issue I, there is no merger of legal and equitable interests. Trustee, as holder of legal title to the assets, has the duty of complying with the terms of the trust – managing the assets and distributing the annual income to the beneficiaries (itself and Church). The merger doctrine will not be applied so as to defeat or frustrate the intent of Testatrix as revealed by an interpretation of the provisions of her will and testamentary trust as a whole.

me again - this helps to substantiate my "point of view" that as trustee, one is legally bound to the trust document.

so if parents want the trust preserved and the income from it to give to child as a pension type of account, the merger doctrine cant just frustrate the parent's wishes by disregarding the trust, and giving it to the child as his own.

 

[tranquility]

Merger issues usually come up when a creditor wants to get money from the trust. The trustee/beneficiary says, "the money is not mine, it is the trusts and you can't reach it." Yet, because of merger and against the wishes of the grantor, the assets are often reached.

However, as I have said, the specific facts and the specific state are necessary.

 

[TrustUser]

yea, that is the main reason my real estate acquaintances use title holding trusts (tht).

but in light of this current discussion, i dont see why they work.

TO ME, a trust is a declaration of what the grantor wants done, and should be honored as such.

i dont know how familiar you are with thts, so for discussion sake, let me explain. usually just one property is placed in each trust. the grantor and lifetime beneficiary are the same, but it often will name a remainder beneficiary.

while the trustee is different from the beneficiary, the trustee does nothing without the direction of the beneficiary. in practice, the trustee does nothing but sign the sales documents, when sold.

for all intents and purposes, it is just a glorified way of owning the property outright.

if one looks at the goal of doctrine of merger (is there really a difference between legal and beneficial ownership), this common use of the tht really fails, while the "pension plan trust" does not.

thanks for the interesting conversation back and forth.

 

[tranquility]

TO ME, a trust is a declaration of what the grantor wants done, and should be honored as such.

Yet, when the grantor is gone and the beneficiary and the trustee are the same, who would have standing to object? Even if merger were not the rule, it would be the practicality.

 

[TrustUser]

you are correct, the sole trustee/bene would probably be able to get away with something.

however, i still dont find that to be a reason to nullify the trust, and the wishes of the grantor.

with the "pension" trust, many children are old enough and wise enough to see the huge advantage in it for themselves. the fact that a sole trustee could override, does not at all mean that he would want to. within a properly done trust, those funds are highly protected from creditors of the benes, and are not subject to estate tax again, until transferred to the individual.

let's face it. me and my sisters, if we all agreed, could take the money and run. no one would be complaining if we all agreed.

i think the d of m would be hard to enforce anytime that the trust document is instructing the trustee to do something different than what the bene could do if the bene owned it outright.

of course, i am not a lawyer, and this is my opinion - based upon our conversation, and my recent research.

i am glad that we had this conversation, because it gave me an excuse to really do some research on it. before, it was only something i had a bit of understanding about.