Not sure what is fair.

[OHRoadwarrior]

A Trustee illegally taking trust assets would not be embezzlement?

http://en.wikipedia.org/wiki/Embezzlement

You can if the C-corp actually needs capital for something valid. Lets say that the C-corp makes widgits and gets an order that is 10 times higher than any other order and needs capital to buy the materials to make the widgits. Its perfectly valid to loan the C-corp money and to get repaid in a fairly short amount of time (when the corp gets paid for the widgits) You will also note from the original post that the OP made her loan to the trust 5 years ago.



I don't disagree that shennagains can happen. Or even that its possible that the whole thing was not quite proper even if no shennagains were intended.

My point was that a beneficiary making a loan to a trust is not inherently improper and definitely being paid interest on that loan is not inherently improper either. Neither of course would be embezzlement, as OHRoadwarrior stated.

 

[LdiJ]

A Trustee illegally taking trust assets would not be embezzlement?

http://en.wikipedia.org/wiki/Embezzlement

Receiving interest on a loan is not and never will be, embezzlement.

It hasn't even been established yet that anything improper occurred at all.

 

[OHRoadwarrior]

Receiving interest on a loan is not and never will be, embezzlement.

It hasn't even been established yet that anything improper occurred at all.

More importantly, OP is seeking the FA seal of approval on their actions, to present to the sibling as a reason to accept the situation as is. It has not been established nothing improper has NOT OCCURRED.

 

[LdiJ]

More importantly, OP is seeking the FA seal of approval on their actions, to present to the sibling as a reason to accept the situation as is. It has not been established nothing improper has NOT OCCURRED.

No, the OP wasn't seeking that at all. The OP was seeking different information that both Tranq and I basically agreed about...that any loan should come off the top before the trust was distributed.

 

[OHRoadwarrior]

No, the OP wasn't seeking that at all. The OP was seeking different information that both Tranq and I basically agreed about...that any loan should come off the top before the trust was distributed.

You are free to interpret it that way. Clarification has been made for posterity.

 

[tranquility]

No, the OP wasn't seeking that at all. The OP was seeking different information that both Tranq and I basically agreed about...that any loan should come off the top before the trust was distributed.

Well, if it was a valid loan within the trust's purposes having a fair rate of interest that did not benefit any beneficiary unduly and...any of a number of things, yes. The trust cannot distribute what is not theirs. (His? Its?) Debts must be paid before the trustee distributes all the funds else the trustee may end up having to repay debts.

I am still wanting to raise shields here for a number of reasons. The switchy-switchy post loan "gift", the outside of the trust return of interest paid, the purpose of the loan and the very muddled facts set my alarms tingling. This whole thing sounds sketchy to me--even more so with the OP seemingly gone.

 

[LdiJ]

Well, if it was a valid loan within the trust's purposes having a fair rate of interest that did not benefit any beneficiary unduly and...any of a number of things, yes. The trust cannot distribute what is not theirs. (His? Its?) Debts must be paid before the trustee distributes all the funds else the trustee may end up having to repay debts.

I am still wanting to raise shields here for a number of reasons. The switchy-switchy post loan "gift", the outside of the trust return of interest paid, the purpose of the loan and the very muddled facts set my alarms tingling. This whole thing sounds sketchy to me--even more so with the OP seemingly gone.

That really doesn't bother me so much. I think that a lot of people who suddenly got accused of embezzling funds would decide that it was better to stop posting on an internet forum and go get legal advice out in the real world. Also, lots of people don't live their lives on the internet and might easily not come back to a message forum for a day or two, or even longer. I think that we tend to forget that when we assume a negative reason for an OP not to respond.

I completely understand your point that there may be some things here that raise potential issues. However in my opinion, if there are any issues here it was not due to anything nefarious, but more likely due to naivete. It seemed like a good idea for the trust to buy another property...maybe even a really good deal came up. The trust didn't have enough cash but OP had some that came from the parents that was solely hers and loaned it to the trust, with a proper loan done. Later, sister fussed that the OP really shouldn't have had that 25k as her sole property and OP decided to be a good sister and agree, which then raised the issue of the interest payments and who should have received what.

Now they are distributing the trust, and instead of selling the properties and distributing cash, they are distributing properties, which don't have equal values, so they are trying to sort out the whole thing and figure out who owes who what.

 

[tranquility]

It seemed like a good idea for the trust to buy another property...maybe even a really good deal came up. The trust didn't have enough cash but OP had some that came from the parents that was solely hers and loaned it to the trust, with a proper loan done.

Why? What benefit would one get by doing this through the trust? Many trusts I see would not allow such speculation. If there was a good deal and the trust had cash, distribute the cash and let sisters form a partnership with OP adding the extra capital.

I agree embezzlement is not the likely claim and thought the term unfortunate. I also agree there is probably some naivete here as well. But, with 4 properties in the trust, isn't it time a professional is brought on board? I believe it is highly likely the OP is the trustee. Else, why would she be worrying about what sister feels is fair? Buying properties, loaning money, getting interest as a 1/2 beneficiary as well as a trustee looks bad. Could it be OK? Sure. But, this screams for the sister to have someone review things to make sure there was not a fiduciary breach in some way. Maybe it was all done for everyone's benefit and everyone DID benefit so there is no reason to look at the potential of a breach. That is certainly what is sounds like from what the OP is saying and the generous gift. We won't even talk about how the interest was taxed. I mean, if it actually was a gift back when "loaned", shouldn't sister have been reporting the interest OP is not going to turn over?

We could go on, but it is all just speculation so I won't. Without more facts, there is simply no way to tell the propriety of events. However, if I were a betting man, I'd bet I could find something wrong in how things were handled. The only issue for me is, did the OP benefit over the sister and/or were the events that occurred legal under the terms of the trust or the business judgment rule?

 

[TigerD]

Just a side observation -- not relevant to the insightful discussion:

In my experience, generally when people ask for help because they aren't sure what's fair, they are pretty sure what is fair and just don't want to do it.

That's all.

DC