Attempt to circumvent an ILIT by claiming there was never a trust

[Doratheexplorer]

What is the name of your state (only U.S. law)? CA
I was named on the application for an insurance policy as the trustee. The policy was taken out on my mother, and the beneficiary is an ILIT. She is now trying to change the beneficiaries herself and claims the ILIT was never created. No one has a copy of the ILIT, but the name and date is listed on the policy application as the day before the policy was signed. The insurance co has said that a court order needs to be obtained to establish ownership and they have frozen the policy. Do I have a case? Can someone simply pretend a trust doesn't exist when they don't like the terms? Doesn't this make her guilty of trying to circumvent a trust? Is there a penalty for that? Will the court see this for what it is and agree that there was a trust and that I should remain as trustee and owner? I would like to be able to sell the policy because it is too expensive and should never have been bought in the first place.What is the name of your state (only U.S. law)?

 

[tranquility]

Who owns the policy?

If mom, the trust was never funded and she can change the beneficiary to who she wants.

If the ILIT, then the trustee would be in violation of the trusts terms if the beneficiary was changed.

The point of an ILIT is that it is an expensive way (But, less costly than estate taxes.) to get money out of the insured's estate. If all that happened is that the ILIT was listed as a beneficiary, such a plan doesn't work as the amount is considered part of the estate.

 

[justalayman]

If you are the trustee, where is your copy of the trust?

It sounds like mom intended to set up an ILIT but failed to do so.

Can someone simply pretend a trust doesn't exist when they don't like the terms?

why would she not like the terms. It would be she that determined what the terms are when creating the trust.

I would like to be able to sell the policy because it is too expensive and should never have been bought in the first place.

Huh? Too expensive for whom? Mom is who should be paying any premiums or expenses (via payment to the trustee (you) who should be making the necessary payments from the trust account)

Will the court see this for what it is and agree that there was a trust and that I should remain as trustee and owner?

owner? You are not the owner. The ILIT is the owner.You may be beneficiary of the trust but you are not the owner of anything.

 

[Doratheexplorer]

Well, she wants to change the beneficiaries of the trust, and I am listed on the policy as the owner (trustee) and I signed as such. When she wanted me to resign as trustee, I asked to see a copy of the trust and she refused to provide it.She has been paying the premiums herself. I have no interest in changing the beneficiaries, I wish them to remain the same. She never provided me with a copy of the trust and now claims there never was one, except, she attempted to get my name removed from one by an attorney who refused to do so. When that scheme failed she just went back to the insurance company and said she never did make a trust so it's her policy. But that is untrue. I think I am considered to be the owner for the last 20 years by the insurance co. All paperwork was sent to her address but in my name. Now all correspondence is coming to me, as I changed it to my own address. I also was able to cap the amount of insurance payable, as it was about to increase. Do you think I will be successful in court? Otherwise I may be liable for gift tax, if I gave it to her, plus other beneficiaries could possibly sue me for doing so.

 

[tranquility]

Are you sure you're not the successor trustee?

Because, if you are the trustee of the trust, you signed something. If the original trustee, a copy of the trust. If a successor trustee, an accession page of some sort. If the former, you had a copy of the trust in your hands. Heaven forefend if you are the poor son-of-a-gun who became the trustee BEFORE seeing a copy of the trust. Who would do such a crazy thing?

If YOU became the fiduciary, YOU are responsible for everything in the trust. Even if someone else does it. EVEN IF SOMEONE ELSE DOES IT.

I suggest an attorney if you really believe you are the trustee. There is nothing we can do.

Failing to protect the trust is a breach of your fiduciary duties. To be so lacking in any attempt to do your job, the other beneficiaries would be able to sue you and get treble damages. In fact, if you're talking with her through this without being able to do your duties, if someone gets cheated, it could be criminal.

Get an attorney.

 

[Doratheexplorer]

Well, thanks, I do have an attorney and we will be getting a court order to determine unequivocally that I am (the ILIT) the owner and then I will most likely sell the policy, splitting it between each beneficiary. That would be the prudent thing to do at this point, otherwise there will be nothing- as no one can afford to pay the prohibitably expensive premiums. I do not want to see anyone cheated if I can help it, but it's already cost me a lot of money in lawyer's fees.
Just thought I'd check to see if anyone had any other ideas/angles i hadn't considered. It is my error for never demanding a copy of the trust when I signed it, but it was a long time ago- my mother is very controlling, and it wasn't ever discussed- it had been out of my mind up until recently, when she wanted to alter the beneficiaries and the insurance co wouldnt allow her to do that. Not even the ins. co. has a copy of the trust- and they should.

 

[curb1]

If no one has a copy of the trust, there might not be a trust. Keep us posted, this is interesting. If a tree falls in the forest and no one hears it, does it make a noise?

 

[justalayman]

Well, thanks, I do have an attorney and we will be getting a court order to determine unequivocally that I am (the ILIT) the owner and then I will most likely sell the policy, splitting it between each beneficiary.

you need to speak with your attorney to determine what you can do. You also need to keep in mind any tax implications of your actions. You seem to think you have free reign to do anything you wish as the trustee. You don't. There are limits.

having a copy of the trust is going to be important as well.

 

[Doratheexplorer]

I understand the tax implications of me giving this policy back to my mother- would be detrimental to me!- I would owe a gift tax as a result, therefore I would end up being the one penalized, through no fault of my own. (however, it would not ultimately be that much as this policy has almost no cash value built up- being the type of policy it is) She however has paid large premiums and must continue to do so, to keep policy in force, which she insists on doing even though it makes no sense at this stage.
And yes, there was a trust- she didnt put a document in front of her lawyer and ask him to "white-out" my signature on it, for no reason. It's just that she no longer wants the same beneficiaries anymore and knew there was no way to go ahead and change them herself- the ins co wouldnt let her do so- because... there is an ILIT listed as the beneficiary and I am listed as the owner/trustee.
But that is always the question I have had -" why, doesn't everyone then,.. who creates a trust- and then decides years later, that they no longer like the terms, just decide it never existed?" and just throw it in the garbage? If it's that easy to do? I get that, under normal circumstances someone else would have a copy- namely (1) the trustee (me!) and (2) at least the lawyer who wrote it up and then (3)the ins co. who accepted it as the beneficiary on an expensive policy. But unfortunately, that isn the case here- she never provided a copy to anyone at the time, and it was forgotten about. And I cannot find out who her attorney was.... so its a dead end basically. That is why, in light of the discrepancy- the ins. co has requested a court order that will determine who the owner is- I have been the owner for these past years according to the ins co.- hopefully the court agrees going forward. I think the determining factor is what you list on the application for insurance- that is binding and a contract and becomes part of the policy. But thanks all- and I will let you know what the outcome is, but its hard to believe this isnt more common... unscrupulous people must want to make inconvenient trusts and wills disappear all the time.

 

[curb1]

What is your relationship with your mother? It seems pretty strained.

 

[tranquility]

I'm just glad the OP is represented. I suspect his plan will not work. He will be prevented from cashing out the policy (if it isn't a term policy) by the grantor. She can force the trust to be enforced. Since ILIT is for those with big money, I bet she has attorneys to help enforce it

 

[anteater]

I'm just glad the OP is represented. I suspect his plan will not work. He will be prevented from cashing out the policy (if it isn't a term policy) by the grantor. She can force the trust to be enforced. Since ILIT is for those with big money, I bet she has attorneys to help enforce it

I wonder if the OP is thinking of trying to do a life settlement since...

...this policy has almost no cash value built up..

 

[tranquility]

No matter the plan, if it does not follow the trust's terms, he can be stopped by whoever has standing. (The beneficiaries and mom--at least.)

 

[Doratheexplorer]

My mother does not feel she needs an attorney although I urged her to get one as soon as this issue arose. Instead, she has followed the advice of one of my siblings who she has financially supported(and bankrupted her as a result of their gambling). I had a decent relationship with her up until now but I reside on the other side of the country. My sibling has also prevented me from communicating with her directly by telephone in order to resolve this. However, numerous emails exist that re-iterate her desire to ask me (and she refers to me as the trustee of the trust) to alter the beneficiaries for her, since only I can do it, or to resign as trustee. Which, as I said I refused to do. But like I said, every time I asked to see a copy of it, she would ignore me. She even refers to the trust in emails to my attorney. And then, when it is clear she isn't getting her way... She then says," oh, I was mistaken, I never did make a trust", Nevermind." So that will be hard to walk back going forward. Also, hasn't she defrauded me by getting me to sign an insurance contract where I am listed as the owner and trustee? And hasn't she lied on an insurance application as a result? And isn't that wrong as well? When you sign an application you attest to the truthfulness of the contract, but she now claims her agent filled in all the info for her and she really didn't know what she was doing. This is all a ruse to get her policy back in her control. But she gave that policy away in a trust when she signed that application years ago.

 

[tranquility]

Mom doesn't need an attorney, you do. By thinking you were defrauded in some way and by focusing on irrelevant facts, I wonder if you really are represented.

What's the change mom wants to make? Are you being cut out?